Tip of the Week: How Big A Tax Burden? (4/17/00)

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	How Big A Tax Burden? Financial Tip of the Week by Deloitte & Touche OnLine April 17, 2000

Tax bills grow, but by some measures, the burden is falling.

See our archive of previous tips on your money, your taxes and your financial plan.

When it comes to taxes, the glass is half full. Or half empty.

According to a recently released study by the Tax Foundation, a nonpartisan, nonprofit organization, the total tax burden of a median two-income family dipped below 40 percent in 1998. The bad news: the $26,756 the typical two-earner family paid in local, state and federal taxes was the highest ever.

The study found taxes claimed 39.0 percent of the median two-income family's total income of $68,605, down from 40.9 percent in 1997 and from an all-time high of 41.5 percent in 1996. The median one-income family shelled out 37.6 percent of its 1998 income of $36,579, down from a high of 38.6 percent in 1997.

Big as the dollar signs may be, the study found the decline brought federal taxes, as an inflation-adjusted percentage of total income, in line with where they were in 1955 for the median family. The study credited the Taxpayer Relief Act of 1997, which brought relief through credits such as the Per-Child Tax Credit and the Hope and Lifetime Learning Education credits, with reducing the federal burden.

Despite federal relief, however, median earners found themselves paying more in state and local taxes. While state and local taxes took only 3.2 percent of the two-earner and 3.3 percent of the one-earner family's income in 1955, they gobbled 13.1 percent and 15.0 percent, respectively, 30 years later. Payroll taxes for Social Security, Disability Insurance and Medicare represent a much bigger hit than they did in the '50s as well.