Sorry, Obama: The tax code is already more progressive than pre-Reagan
Given the discussion about President Obama’s desire to raise taxes on “the rich” — i.e., families earning more than $250,000 a year — it’s rather convenient that the Congressional Budget Office yesterday published its latest look at earnings and taxes paid by income level. It tells us a couple of worthwhile things.
First, as I mentioned in a comment yesterday evening, it tells us the U.S. tax code is already rather progressive. Here are the numbers I posted yesterday in chart form; note that “federal taxes paid” includes not only income taxes but social-insurance taxes, corporate taxes (which, after all, are ultimately paid by individuals) and excise taxes for 2009, the most recent year the CBO has examined:
So, even when we include the payroll taxes for Social Security and Medicare, which disproportionately hit lower-income workers, the U.S. tax code is already sharply progressive. What liberal/progressivists have yet to tell us is exactly how much more progressive they think it should be.
Well, sort of. We do have an idea of what they think it should be, at least for starters, in the form of Obama’s raise-taxes-on-the-rich proposal. Part of his usual argument for raising taxes on the rich is that we’ve been going down the wrong path for the past three decades — which is shorthand for: since Ronald Reagan was elected and sharply lowered marginal income-tax rates.
Conveniently, the CBO’s report includes data going all the way back to 1979. So, how did things change over the course of 30 years?
One of the ways the Organization for Economic Cooperation and Development (or OECD, the Paris-based club of industrialized nations) measures tax-code progressivity is by calculating the ratio of the tax burden to income earned for each income group. For example, if one quintile earns 20% of the income and pays 10% of the taxes, its ratio would be 10/20, or 0.50. The higher the ratios for the upper-income groups, and the lower the ratios for the lower-income groups, the more progressive the tax code. By this measure, the OECD has determined the U.S. has the most progressive tax code in the industrialized world.
When we compare the 2009 ratios for these income groups to the 1979 ratios, this is what we get:
So, by this measure used by the OECD, the U.S. tax code has gotten significantly more progressive, from top to bottom, since the days of Jimmy Carter.
For another comparison, I looked at 2000 (the peak of the Clinton years) and 2007 (the peak of the Bush years). Despite the Bush tax cuts, the ratios for 2007 were almost identical to those of 2000: just three-thousandths of a point less progressive for the top 1%, and more progressive for all the other income groups.
If there is a problem with income inequality in this country, it’s not the tax code’s fault.
– By Kyle Wingfield
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565 comments Add your comment
Gimme Gimme Gimme
July 11th, 2012
4:29 pm
I see the “Percenter’s” are out today. They are as crazy as the Birther’s.
Never mind that you paid 4 times as much in taxes as I did, you aren’t contributing your fair share! LOL
They really are entertaining, please don’t stop.
getalife
July 11th, 2012
4:31 pm
We need revenue from jobs.
We need demand from the middle class because they have jobs.
Jobs, baby, jobs.
Remember what you ran on in 10?
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
July 11th, 2012
4:31 pm
gitmo- I know this is probably above your pay grade but taxes rates dropped because incomes dropped. Nothing to celebrate about, my man.
Kyle Wingfield
July 11th, 2012
4:31 pm
Fred @ 4:24: I wasn’t “pulling” any comments — I was publishing them out of moderation (which, again, applied to all commenters that day). It’s actually against AJC policy for me to delete a comment. The website gremlins sometimes eat people’s comments — it happened to me once today — but why did you choose to assume the worst?
Uh Oh
July 11th, 2012
4:32 pm
Barry
Jamie Dupree’s take on the maneuvering that went on this morning.
http://blogs.ajc.com/jamie-dupree-washington-insider/2012/07/11/democrats-block-senate-vote-on-bush-tax-cuts/
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
4:33 pm
“talking to getaclue is a useless proposition.”
I suggest you re-read Kyle’s new rule # 2 in it’s entirety, Fred:
“2. Anyone who refers to another commenter by anything other than the handle the latter uses will receive a ban of at least one week. This may sound like an extraordinary measure, but it is the source of most of the recent commenter fights — and, more generally, has long been a catalyst for breakdowns in commenter civility. For example, adressing “ScamVet” instead of “AmVet” would result in a ban. A shortened version of the handle may be acceptable (e.g., “yuze” instead of “yuzeyurbrane”) but only if there is no obvious intent to insult. As I will be the sole judge of that intent, I recommend you err on the side of not being too cute.
Maybe Kyle will cut you some slack due to the newness of the rules, but if not, buh-bye!
Kyle Wingfield
July 11th, 2012
4:33 pm
@@ @ 4:23: I believe the conservation-use requirements were tightened up as part of the tax reform bill the Legislature passed this year, but I don’t recall the details, or whether that was in an earlier version of the bill.
getalife
July 11th, 2012
4:34 pm
Andy,
Yeah, your ilk lost 9 million jobs so……….
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
July 11th, 2012
4:34 pm
The House has overwhelmingly voted to repeal Obamacare, by a vote of 244-185. Five Democrats joined 239 Republicans to vote for repeal, making it a bipartisan vote. No Republicans voted against repeal.
Going, going, going……
Gimme Gimme Gimme
July 11th, 2012
4:36 pm
“Going, going, going……”
………………………………….nowhere.
How Inciteful Is That!
July 11th, 2012
4:38 pm
Kyle,
I made no claim that your posted numbers did or did not contain payroll taxes or business taxes. I did ask if you thought payroll taxes were progressive given that you were quick to emphasize the progressive nature of those dastardly income taxes, for those that pay them. Then, I also raised the issue of the Bush tax cuts and their impact on capital gains and qualifying dividend income as well as other issues regarding those lower income “moochers”, as you clearly imply with your post. What do you label zero federal income and payroll taxation on $80,000 of income. Progressive-Regressive perhaps. But if that’s all you’ve got… perhaps you’re simply upset that the OECD considers the use of income taxes as a means of addressing income inequality as some sort of sacrilige. You do like to avoid dealing with the whole truth.
Jefferson
July 11th, 2012
4:41 pm
The specific lie TD is , corps don’t pay corp taxes. They are the ONLY ones that pay them. I have never paid a corp tax and spend money day in and day out.
Cost of goods sold, is not my expense.
I have never bought a barrel or oil, but some would like to spin I have just because I buy gas.
Spin, baby.
getalife
July 11th, 2012
4:46 pm
I told my rep. we need a massive job project like the Internet, going to the moon and housing.
I suggest you tell your reps the same and to get over losing on the ACA bill.
Gimme Gimme Gimme
July 11th, 2012
4:48 pm
“I told my rep. we need a massive job project like the Internet, going to the moon and housing.”
Sounds like half of a good plan, the other half depends on how you are going to pay for it.
AmVet
July 11th, 2012
4:49 pm
Please, and do it over at our neigbor’s (sic) blog. They miss your “two step” (lies & loose lips)
Nope, you are not the lil queenie here.
Just a serial insulter.
Rule #5. More specifically: Any comment that refers to discussions on another AJC blog’s comments thread will be subject to removal. These comments only serve to distract from the discussion on this blog and to start fights among commenters. If you have something to say in another blog’s discussion, say it there.
By this measure, the OECD has determined the U.S. has the most progressive tax code in the industrialized world.
We also have one of the greatest income inequality ratings in the world. Right up there with Turkey, Mexico and Chile…
md
July 11th, 2012
4:51 pm
“But I’m not going to lie and call it “fair” or try to even pretend I’m pulling my weight. The tax code is designed to help the wealthy pay a lower percentage.
Oh and md? I NEVER write myself a paycheck. if I did that, I would have to pay SS and other payroll taxes. I just write a “dividend” check every once and a while. ”
Umm Fred…..the tax code is designed for everybody to pay a lower percentage…..hence what is called the EITC. And in case you aren’t aware, that little diddy is a payment from the gov’t to those that paid NO tax…….so get off your high horse.
As for the part about paying yourself no salary, I wouldn’t be tooting that horn too loud if you happen to have an S corp (C’s will be paying outside of personal return), especially if there is enough profit to pay a dividend, as the irs might not like that too much:
“if the S corporation shareholder provides services to the S corporation, he or she must receive an adequate or reasonable amount of compensation for these services.”
“If” you have an S, you may want to pay attention to the “must” part of that sentence.
Uh Oh
July 11th, 2012
4:51 pm
getalife
Kyle’s man Newt was going to have us living on the moon, but you didn’t like him.
Can’t have it all
AmVet
July 11th, 2012
4:53 pm
Flip made $22Million in 2010.
His effective tax rate?
14%.
Most of you working stiffs are paying a higher effective tax rate than that.
But go ahead, worry about his millions and not your hundreds…
@@
July 11th, 2012
4:53 pm
Kyle:
If I’m not mistaken that tightening was for properties under 10 acres. All that’s required is proof that the land is being used for agricultural purposes. Fairly easy to do.
There were abuses taking place. Undeveloped lots in subdivisions were among them.
Gimme Gimme Gimme
July 11th, 2012
4:55 pm
So Romney paid $3+million in taxes in 2010. That’s more than I paid in taxes to keep this country running.
I guess I should just say……..thank you Mr. Romney.
AmVet
July 11th, 2012
4:58 pm
To put it in perspective, Flip made $11,000 per hour. Most of you probably don’t make that much in a quarter.
Yet you obsess over protecting/sheltering his massive wealth instead of your own family’s miniscule wealth.
Someone please explain that trickled down theory to me!
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
5:00 pm
Jefferson @ 4:41. I’m sorry, but I just can’t be bothered anymore to try to debate someone who knows NOTHING about the corporate income structure.
I don’t know where you went to school but the lessons on business and the economy just didn’t take.
Skip
July 11th, 2012
5:02 pm
Growing trees counts as agricultural, everyone down here does it.You got a tree, you got a cut rate.
Gimme Gimme Gimme
July 11th, 2012
5:04 pm
Tiberius,
I don’t know you but let me give you a little friendly advice. Perhaps you don’t intend it but your posts come across as snarky and combative. Perhaps you could dial it down a notch and we can all learn something from each other through discussion.
Occasionally it is merited but not every post. Please take these words in the spirit it was intended. Peace.
@@
July 11th, 2012
5:06 pm
Per a previous discussion on Thomas Jefferson.
Thomas Jefferson was one of the greatest and smartest of all Presidents of the United States. Unfortunately, he wasn’t smart about money for his heirs. After his death, his estate Monticello and all his possessions, including 120 slaves, were auctioned off to help pay off $107,000 in debts (a fortune in 1826).
Sold after his death, altered and fallen into disrepair, Poplar Forest is today being restored by whom?
Corporations and big banks.
Ironic, ain’t it?
schnirt
Uh Oh
July 11th, 2012
5:08 pm
You don’t say?
Uh Oh
July 11th, 2012
5:09 pm
@@
Good and interesting information
md
July 11th, 2012
5:10 pm
“Yet you obsess over protecting/sheltering his massive wealth instead of your own family’s miniscule wealth.
Someone please explain that trickled down theory to me!”
It’s called having the honesty to admit that we all live here, we all choose everything we do,we all use the services provided, and we should all have some skin in the game……….
And then recognizing that there is a progressive tax system in place, that the tax code has built in “gifts” for just about everybody, and then take it from there………
@@
July 11th, 2012
5:10 pm
Uh Oh:
What do you plan on doing with it? Going to the state legislature in protest?
@@
July 11th, 2012
5:12 pm
I would imagine environmentalists are in favor of the conservation use covenant.
md
July 11th, 2012
5:13 pm
Here’s a question for you Am……why are you not rich?
Uh Oh
July 11th, 2012
5:14 pm
@@
What are you talking about? I just said it was good information.
But nice try at being a comedian.
AmVet
July 11th, 2012
5:17 pm
the tax code has built in “gifts” for just about everybody, and then take it from there
Yep, $1 for you $10 for me, $1 for you, $10 for me…
What part of Romney’s 14% effective tax rate do you not understand?
YOURS is almost certainly higher than that.
You should have chosen to be rich, huh?
LOL…
md
July 11th, 2012
5:19 pm
Unless it’s been changed, that agricultural designation comes with conditions. I believe it must be used that way for a specified period (10 years?) and if it is used for something else within that period (including sale for other use), then back taxes must be paid on what the rate would have been if not agricultural.
Lil' Barry Bailout (Unexpectedly Revised Downward--Again)
July 11th, 2012
5:20 pm
Fred ™
July 11th, 2012
4:25 pm
————————-
Republicans believe in freedom, including the freedom to invest their own money where they like.
Do you have a problem with Pelosi or Romney putting their money overseas?
I don’t.
Democrats do–except when they don’t (and they don’t when it’s one of their own).
Democrats: Hypocrites.
Fred: Jury is out.
@@
July 11th, 2012
5:22 pm
md:
You’re correct. If the buyer agrees to the conservation use, the discount continues. If not, the taxes owed are usually worked out in the sale.
md
July 11th, 2012
5:24 pm
“What part of Romney’s 14% effective tax rate do you not understand?”
The part about why it is 14% considering I have no idea what type of income it is.
Lower percentages are available to everybody depending on the type income, so without seeing what it is, I’m not going to be jumping up and down pretending to be upset about something I may be getting as well. Cap gains applies to an awful lot of people that aren’t necessarily wealthy.
That farm mom and pop bought for 30k 50 years ago is going to bankrupt some poor kid because of cap gain taxes……….or he has to sell everything to pay it. I don’t see that as right….do you?
Uh Oh
July 11th, 2012
5:25 pm
Kyle
“Democrats: Hypocrites.”
Would it be appropriate to either call the blooger ignorant or just naive about the Republican Party?
Seems there is a lack of knowledge. Whether it is unwilling or unable to grasp that bs takes place on both sides of the aisle, isn’t the point. The point is that it can’t be put one or the other
@@
July 11th, 2012
5:28 pm
The yard and house are assessed at fair market value. It’s only fair. 30 acres? 28 in conservation use, 2 at fair market value.
Uh Oh
July 11th, 2012
5:29 pm
As for how much Romney makes and what is religion is, I could careless.
He will have ample to time to make more money and go to church come the 1st Wednesday in November. At least until he ramps up his “Didn’t do AGAIN in 2012. See you in 2016″ campaign
md
July 11th, 2012
5:30 pm
“You should have chosen to be rich, huh?”
I am rich…..I have a beautiful wife and beautiful kids……it’s all gravy from there.
But actually, I don’t have as much as I would like to have, but you are correct….I didn’t choose the proper course to get there. And who’s fault is that? Mine of course.
For starters, I didn’t take school very seriously back in the day and it has haunted me in a lot of my choices. But make no mistake, my shortcomings were created by no one but myself………
How about you AM…..you choose to spend a lot of time on this time suck (choice), what have you done to better yourself and gain more traction in life??
People do choose to NOT get very far in life……and others choose a more successful path. It’s just human nature. (And yes, there is always an element of luck)
Lil' Barry Bailout (Unexpectedly Revised Downward--Again)
July 11th, 2012
5:30 pm
Uh Oh:Would it be appropriate to either call the blooger ignorant or just naive about the Republican Party?
—————————–
I’m not aware of any Republican hypocrisy on this issue. As I noted, Republicans believe in freedom. Democrats only believe in it for Democrats.
Democrats: Hypocrites.
AmVet
July 11th, 2012
5:33 pm
A LONG answer that doesn’t address the corruption and systemic game rigging in our now perverted capitalist system.
Kyle writes epistles on how we have the most progressive tax system in the world, yet when push comes to shove I can prove with one simple number – the most important number of them all – what a bunch of Oscar Meyer all of that posturing really comes down to.
Mitt’s effective tax rate on $22M/year – 14%
A married couple making $200K/year effective tax rate – 18.4%
Welcome to the plutocracy.
Uh Oh
July 11th, 2012
5:34 pm
Barry
There is much Republican hypocrisy. Whether you want to play semantics and narrow it to this issue or not
So I will just say IGNORANT…….
Lil' Barry Bailout (Unexpectedly Revised Downward--Again)
July 11th, 2012
5:35 pm
AmVet: A LONG answer that doesn’t address the corruption and systemic game rigging in our now perverted capitalist system.
———————-
Too true, but not in the way you imagine. The corruption and game-rigging are facilitated by and flat out committed by government.
@@
July 11th, 2012
5:36 pm
AmVet must be looking for a job. Is Kyle advertising for an assistant?
schnirt
Uh Oh
July 11th, 2012
5:36 pm
“As I noted, Republicans believe in freedom. Democrats only believe in it for Democrats.”
Liar. Based on ideological partisanship and not unbiased information. Since there we are not working off of an agreed upon set of rules for “freedom”, I call LIAR
Next
Lil' Barry Bailout (Unexpectedly Revised Downward--Again)
July 11th, 2012
5:37 pm
Uh Oh: There is much Republican hypocrisy.
———————–
Really? Who raised the issue of investing overseas? Not the Republicans. Who criticized Our President Romney for doing same? Not the Republicans. Who remained silent when it was learned that Nancy Pelosi invested overseas too? Democrats.
Democrats: Hypocrites.
Uh Oh
July 11th, 2012
5:38 pm
“The corruption and game-rigging are facilitated by and flat out committed by government.”
Guess that’s why K street cronies spend billions. They don’t know they didn’t even have to because government does it all.
There is no corruption in business. All done via the government.
WOW
Insights and more insights
You are full of nothingness when it comes to facts
md
July 11th, 2012
5:38 pm
“Mitt’s effective tax rate on $22M/year – 14%
A married couple making $200K/year effective tax rate – 18.4%”
And it is easy to draw simple conclusions with simple numbers…….but that doesn’t guarantee the correct conclusion.
As I said, our tax code applies to everybody equally……..without knowing what type income each has, drawing conclusions is mere speculation.