Since the most recent tax reform was adopted in December 2017, this writer has been wondering what it really meant to average people.  My averages will be a bit on the high side, but when I ran across a 1995 tax table I decided to try running some tests.  Here are the results and I welcome comments and criticisms to my methodology.  I am happy to publish any comments or corrections that merit consideration.

My test case is a single person earning $100,000 in 2019.  To compare that fairly I need to adjust for inflation.  In 2019, the CPI ended just under 257.  In 1995, it was at 150.  I understand that for many, wage growth has not kept pace with the rate of inflation but forgive me, this is a blog and not a study in labor statistics.  However, if I stick we CPI, the person making $100,000 would have been making about $58,500 a quarter century ago.  So, with that qualification let’s do some math based on a single person:

  1995 2019
Wages 58,500 100,000
Standard deduction 3,900 12,200
Personal exemption 2,500 0
Taxable income 52,100 87,800
Federal tax 11,552 15,246
Tax rate on gross income 19.75% 15.25%


Social Security and Medicare are for these folks, about the same.  7.65% of earned income.  More on that later.

So we have good news right?  Federal taxes as a percentage of gross income have declined by 22.8% while employment taxes remain static.  Government is much more efficient to accomplish that, right?  Hmmmm….

In 1995, the economy was stable and growing.  Still, the government ran expenses of $1.5 trillion and the federal debt was $4.974 trillion.  Today, in a full employment economy and with a SP500 index 7x greater than 1995, we have federal expenses of $4.5 trillion.  Therefore, we spend 3x more than we did 25 years ago.  But wait, we should inflation-adjust that as well.  Fair point.  So federal expenses are just about twice what they were in 1995 after we adjust for inflation. Meanwhile effect tax rates are 23% lower.