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Perceptions and Realities of Average Tax Rates in the Federal Income Tax: Evidence from Michigan

Charles L. Ballard and Sanjay Gupta

Abstract:

We asked a random sample of the Michigan population to identify their average tax rate in the federal individual income tax. We find that 84.9 percent of respondents overstate their actual average tax rate, many by very large amounts, with the mean/median overstatement exceeding 11 percentage points. All demographic groups have substantial overstatements. Regression analysis indicates that, all else equal, average income-tax rates tend to be overstated to a greater extent by (1) those who believe taxes on households like theirs should be lower, (2) those who get tax-preparation assistance, and (3) those who believe tax dollars are spent ineffectively.

Citation

Charles L. Ballard and Sanjay Gupta (2018), Perceptions and Realities of Average Tax Rates in the Federal Income Tax: Evidence from Michigan , National Tax Journal, 71:2, pp. 263-294

DOI: doi.org/10.17310/ntj.2018.2.03

Additional Materials

Online Appendix