Background Paper: Computing Effective Tax Rates on Capital Income
Report
This background paper explains and documents the effective tax rate calculations presented in the October 2005 CBO paper Taxing Capital Income: Effective Rates and Approaches to Reform.
In its October 2005 paper, Taxing Capital Income: Effective Rates and Approaches to Reform, CBO used the framework of effective tax rates to determine how heavily and uniformly the federal government taxes capital income and how that taxation would be affected under several scenarios for reform. The effective tax rates computed in that paper were built on methods developed for earlier studies; this background paper documents CBO’s application of those methods. The first section presents the methodology used to compute effective tax rates; the second section describes the data used to implement the methodology. The appendix is a user’s guide to an Excel workbook of spreadsheets for computing the effective tax rates in the paper.
