a 12.4% Social Security tax on wages up to $117,000 (for 2013) and a 2.9% Medicare tax (a 15.3% total tax that is often split between employee and employer) is called a regressive tax on income with no standard deduction or personal exemptions but in effect is forced savings which return to the payer in the form of retirement benefits and health care. The Center on Budget and Policy Priorities states that three-fourths of U.S. taxpayers pay more in payroll taxes than they do in income taxes. The National Bureau of Economic Research has concluded that the combined federal, state, and local government average marginal tax rate for most workers to be about 40% of income. Income taxes Progressivity in the income tax is accomplished mainly by establishing tax "brackets" - branches of income that are taxed at progressively higher rates. For example, for tax year 2006 an unmarried person with no dependents will pay 10% tax on the first $7,550 of taxable income. The next $23,100 (i.e. taxable income over $7,550, up to $30,650) is taxed at 15%. The next $43,550 of income is taxed at 25%. Additional brackets of 28%, 33%, 35% and 39.6% apply to higher levels of income. So, if a person has $50,000 of taxable income, his next dollar of income earned will be taxed at 25% - this is referred to as "being in the 25% tax bracket," or more formally as having a marginal rate of 25%. However, the tax on $50,000 of taxable income figures to $9,058. This being 18% of $50,000, the taxpayer is referred to as having an effective tax rate of 18%. Starting in 2013, high income households will also pay an additional medicare surcharge of 0.9% on earned income, and 3.8% on investment income. The US federal tax system also includes deductions for state and local taxes for lower income households which mitigates what are sometimes regressive taxes, particularly property taxes. Higher income households are subject to the Alternative Minimum Tax that limits deductions and sets a flat tax rate of 26% to 28% with the higher rate commencing at $175,000 in income. There are also deduction phaseouts starting at $112,500 for single filers. The net effect is increased progressivity that completely limits deductions for state and local taxes and certain other credits for individuals earning more than $306,300. Effective income tax rates While the top marginal tax