One-Income American Family. For our 1973 calculation, we apply the Tax Foundation’s estimate of the tax rate for a single-income family in 1975. This report has the only data we can locate that attempts to estimate the entire state, local, and federal tax burden on middle-income families, using a consistent methodology over the past forty years. Most other estimates only account for federal income taxes, which underrepresents the true tax burden on families, and most offer only current estimates, without historical context. In addition, this report differentiates between the tax burdens on two-income and one-income families, which is critical for this analysis. We have made a few minor adjustments to the Tax Foundation’s basic methodology. First, we have omitted employer-paid payroll taxes from both the income and the tax burden calculations. This does not change the comparison between 1973 and 2000 in any substantial way, but it prevents us from the need to gross up income by including the employer’s contribution to payroll taxes, only to have that income deducted on the tax side. Second, we use median wages for a fully employed male, rather than median income for a single-income family, as the basis for applying the taxes, in order to be consistent with our model—a married couple in which the male was employed. The results should be quite similar either way: In 1975, the Tax Foundation reported that the median income for a single-income family was $12,560; according to the U.S. Census Bureau, median earnings for full-time, year-round male workers was $12,934 that year—a difference of less than 3 percent—which would indicate that a family living on median earnings for a fully employed male would be in roughly the same tax bracket as the family living on the median income for all one-income families. Third, we have adjusted the Tax Foundation calculations by omitting imputed corporate taxes, again avoiding the problem of overstating income by including an imputed distribution from corporate profits only to have that amount then deducted in taxes. Imputed corporate income taxes are from Ed Harris, David Weiner, and Roberton Williams, “Effective Federal Tax Rates, 1979-1997” (Washington, DC: Congressional Budget Office, Tax Analysis Division, October 2001). We have not included any itemized deductions, since average tax burdens already account for average deduction levels, and there would be a considerable risk of double-counting a family’s deductions.
116 Bureau of the Census, Historical Income Tables—People, Table P-36.
117 BLS, Consumer Expenditure Survey, 2000, Table 1400. For methodology, see note 64 above.
118 Kristin Smith, Who’s Minding the Kids? Child Care Arrangements: Spring 1997, Bureau of the Census, Current Population Reports P70-86 (July 2002), Table 6, Average Weekly Child Care Expenditures by Employed Mothers of Children 5 to 14, Spring 1999. Day-care costs are calculated from average child-care costs for mothers employed full-time with a child aged five to fourteen, and preschool costs are calculated from average child-care costs for mothers employed full-time with a child under five.
119 BLS, Consumer Expenditure Survey, 2000, Table 1400. The calculation of health insurance and car costs was made in the same manner as the calculation for 1972/73; see notes 112 and 114 above.
120 Hintz, The Tax Burden of the Median American Family. For our 2000 calculation, we apply the Tax Foundation’s estimate of the tax rate for a two-income family in 1998, the most recent year for which this calculation was available. Because they own a more expensive home than their one-income counterparts in the early 1970s, the two-income family pays more property taxes in 2000, in addition to higher income taxes. See note 115 for an explanation of methodology.
121
TABLE Typical budget, four-person family
122 Only 52 percent of all families have a retirement account. Ana Aizcorbe, Arthur Kennickell, and Kevin Moore, “Recent Changes in U.S. Family Finances: Evidence from the 1998 and 2001 Survey of Consumer Finances,” Federal