How to think about inequality

August 27, 2012

barticles:

“According to CBO, the top 1% of earners now pay 40% of all federal taxes, compared to less than 20% in the 1970s. Today, according to research by the OECD, income taxes in America are the most progressive among the rich nations of the world; as the Wall Street Journal’s Stephen Moore observed in February, the ‘richest 10% of Americans shoulder a higher share of their country’s income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden.’”

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- “How to Think About Inequality,” National Affairs

Or, to put that in slightly different terms, in the 70s, the top marginal bracket for income tax was 70%. Today it’s 35%. So despite a 50% rate decrease, the top 1% of earners get such an increasingly disproportionate share of the national income that the portion they pay in taxes has decreased.

(I assume at this point that we all know how to treat references to federal income-tax? We understand that this doesn’t count the regressive payroll taxes, which are an equivalently large income stream for the Federal government? The uberrich pay a miniscule amount of payroll taxes relative to their income. Complaining that they pay more in income tax is a bit like me complaining that I did all the dishes on a night when my wife did all the cooking. Technically it’s true, but nobody should take me seriously.)

(Oh. I also assume that everybody knows that comparing the percentage of the income-tax burden shouldered by the richest 10% can’t meaningfully be done in the absence of a comparison of the income of the richest 10%. Income inequality leads to a perception of income tax inequality.)