Introduction

The major sources of information on the distribution of income and tax burdens in the United States are the annual Statistics of Income published by the Internal Revenue Service and the annual consumer population surveys conducted by the Census Bureau. Tax burdens were estimated by calculating federal, state and local taxes paid by each unit in the MERGE files and these were then weighted to arrive at totals for income classes, percentile groups, and the nation as a whole. The unit of taxation varies widely among different countries. Some tax individuals, others tax the family, and still others permit taxpayers to make the selection. The definition of the tax unit is important because it affects the progressivity of the tax system and influences major personal decisions, such as marriage and divorce. In principle, capital gains should be taxed annually as they accrue. In practice, they are taxed only when realised and at reduced rates.