Tax Burden Equal to 70% Rate Crushes Americans Unable to Pay It

About a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found.

Lowest quintile faces higher marginal tax rates than middle income earners.

While the median low-income American family may have a marginal tax rate of about 45%, there’s a large dispersion of experiences, depending on age, family size, location and benefits.

Just $1,000 in higher pay for a single mother in Oregon, in one example cited in Altig’s research, would result in a devastating loss of $15,000 in housing subsidies.

It’s called a marginal tax rate since the government extracts more money from low-income workers through higher taxes or reduced spending on benefits.

The richest 1 percent also face a high median lifetime marginal tax rate of roughly 50 percent, but they don’t face the housing, food and medical hardships endured by the poor.

Highest marginal tax rates for lowest income Americans.

Median lifetime effective marginal tax rates for the lowest wealth quintile, age 30-39, assuming full use of benefits.