Bracket Creep and Deadweight from California's State Income Tax, 1958- 1977.

摘要

This thesis shows that a combination of 'bracket creep' end legislated tax rote increases during the Edmund G. 'Pet' Brown end Ronald Reopen governorships caused individual marginal tax rates to increase as much as 655 percent. A person earning $25,555 in 1956 was in the three percent bracket for state income taxes. Assuming this person received no real pay raises, his inflation-adjusted income in 1977 was now $41,936 end his marginal tax bracket was 11 percent. This person experienced a 355 percent increase in real taxes paid. The deadweight loss calculations show how bracket creep ead legislated tax rate increases exacerbate deadweight loss. The more revenue the federal or state government tries to collect, the more deadweight loss society as a whole incurs. Using elasticities (of taxable income with respect to tax rates) ranging from .3 to 1.0, the incremental deadweight loss as a percent of incremental revenue collected from 10.6 percent for an elasticity of .3, to as high as 35.53 percent for an elasticity of 1.0. The deadweight loss calculations show that for every dollar in revenue collected, at least 10.7 cents to as much as 35.5 cents per dollar is lost to deadweight loss.