Wednesday, April 25, 2012

U.S. Taxes Are Low & Regressive

Excerpted from Just How Progressive Is The U.S Tax Code:

"In this post we examine the progressivity of the U.S. tax code and highlight two facts: the current U.S. tax system is less progressive than the tax systems of other industrialized countries, and considerably less progressive today than it was just a few decades ago."

"Over the last fifty years, tax rates for the wealthiest Americans have declined by 40 percent, while tax rates for average Americans have remained roughly constant. This is illustrated in the figure below."

"This decline in tax rates for the wealthy has coincided with an increase in income inequality, where most of the wage gains have been concentrated among a relatively small portion of the American people. For example, since 1979, earnings for households in the top 1 percent of the income distribution have risen by over 250 percent. At the same time, many households at the middle and bottom of the income distribution have experienced stagnating incomes or even declines in earnings (figure below, blue bars). This means that the very people who have received the biggest income gains in the past three decades have also seen the largest tax cuts (figure below, red bars)."

"But the reason why the share of taxes paid by the top 10 percent has increased is because their share of income has increased."

"In 1979, the top 1 percent of Americans earned 9.3 percent of all income in the United States and paid 15.4 percent of all federal taxes. While the share of income earned by the top 1 percent had more than doubled by 2007—to 19.4 percent—the share of federal tax liability paid by that group only increased by about 80 percent, to 28.1 percent. The share of taxes increased less for this group because high-income tax rates fell by more than the tax rates for everyone else—reductions that made the system less progressive."

No comments: