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
Tell us what you think about the site
Customer Care »
Vacation stops, manage subscriptions and more
AJC Services
Sections
Other Editions
Visitor Agreement | Privacy Statement
© 2013 The Atlanta Journal-Constitution
565 comments Add your comment
JohnnyReb
July 11th, 2012
8:56 am
I find most Moonbats (a term of endearment) posting on the AJC blogs has little if any concept that about 65% of employment in this country is at small businesses.
That the owners of those businesses usually have their company setup as an S-Corp, which means business income flows to their personal tax return.
So, we have a President and Party that thinks 65% of employers should pay more taxes to fund free health insurance for the under privileged. And, that same 65% of employers should pay a higher tax rate for no other reason than their AGI – that’s adjusted gross income – exceeds $250K.
We have record unemployment and the Left obviously thinks the way to increase employment is to take more money from the pockets of those who employ.
It’s not just politics – it’s idiotic – it’s insane – it’s so ridicoulous it exceeds my limited vocabulary to defile it.
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
8:56 am
“And most middle and lower class Republicans don’t seem to care one iota.”
Because unlike liberals, they don’t wallow in wealth envy.
Bruno
July 11th, 2012
8:58 am
counting the above mentioned “hidden” taxes,state,local,sales,property,excise,import,various mandates/ponzi schemes,insurance scams,etc………………………….it easy to see 80%+ of your income going to taxes.
Heyward–I fully understand the concept of “hidden taxes”. However, if your assertion were true, then the total tax take of the federal and state governments would be a much, much higher percentage of the total GDP than it is. According to this chart, the total tax take is estimated to be 26.9 % on the high end.
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP
Even if you factor in excise taxes which end up in the price of our products, you’re still no where close to the 80% figure you’re throwing around.
Again, I’m with you in spirit, but think you’re hurting the cause by making crazy assertions.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
8:59 am
President Obama is….. proposing that everyone receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.
Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No “class warfare.”
http://www.salon.com/2012/07/10/the_truth_about_obamas_tax_proposal/
Steven
July 11th, 2012
9:00 am
In your first chart, the “percentage of all pre-tax income” totals up to 150.6 and the “percentage of all federal taxes paid” totals up to 173.8.
Shouldn’t the they both total to the same thing (100) ?
GT
July 11th, 2012
9:00 am
Declared income in the US? Lets take Romney for an example of someone who doesn’t pay taxes. His off shore accounts are said to be 100 million dollars. He does not declare this money on his federal income tax, thus if all rich did that the 13.4% might look more like 50% of pretaxed income. So more than half his income is not reported nor is it taxed, especially by the US. And on his declared taxes he is paying less too than the rest of us.
How much more money is going out of the country now than in 1979 since much more of it is in the hands of the 1%. We have people now just up and not only putting their money out of the country but themselves. Many like this lady, Denise Rich, that just left for Europe leave after they have no productivity left which this country guards better than any in the world and only have their spoils. The rich treat their country about like they treat their spouses. And then they try to get out of any support.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:02 am
So, we have a President and Party that thinks 65% of employers
LOL, All those employers you are talking about don’t fall into that +$250,000 category.
Congress’s Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they’d pay additional taxes only on dollars earned above $250,000.
All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.
from my link above.
Joe The Plumber Too
July 11th, 2012
9:03 am
JohnnyReb, you are wasting good invisible ink trying to explain S Corps to the bedwetters, have tried for the past few years to no avail. They cannot comprehend how a small business works let alone how taxed we already are. I guess that comes from living off the government teet their whole lives, be it via employment or welfare.
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
9:04 am
“1) Clearly, as some like to tout, the rich don’t pay nearly all the taxes paid in this country.”
You don’t read much, do you, JDW?
As Kyle’s chart CLEARLY shows, the top 40% of people earn 70% of the income and pay over 86% of ALL taxes.
I suggest you familiarize yourself with the terminology “nearly”, as this clearly shows the “rich” ARE paying nearly all the taxes in this country.
“People that make large sums should pay equitable taxes.”
What is “equitable”, JDW? 85% of all taxes not good enough for you? Give us all a figure.
Bruno
July 11th, 2012
9:05 am
That the owners of those businesses usually have their company setup as an S-Corp, which means business income flows to their personal tax return.
JohnnyReb–No matter how you slice it or dice it, ALL corporate taxes end up being a form of double taxation since all of the employees and shareholders end up paying taxes on the monies they receive in salary and profit. Ditto for capital gains taxes. Moneys used by investors have already been previously taxed.
The question becomes how many times should we keep taxing the same revenue?? Somehow this point is never addressed when the issue of “fairness” is raised by the Lefties.
Bruno
July 11th, 2012
9:08 am
In your first chart, the “percentage of all pre-tax income” totals up to 150.6 and the “percentage of all federal taxes paid” totals up to 173.8.
Steven–In case your chart-reading skills are a little rusty, the first two entries, i.e. the top 1% and the top 10%, are repeated in the “Highest Quintile” entry. Since these two groups are counted twice, the total doesn’t = 100%.
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
9:09 am
“How much more money is going out of the country now than in 1979 since much more of it is in the hands of the 1%. We have people now just up and not only putting their money out of the country but themselves.”
Smart people might just take a look at the chart Kyle showed and understand WHY people are moving their money and themselves offshore.
Might be why high earners are abandoning NY state and Maryland with their high-income surtaxes.
They are all living proof of the old adage, “At some point, you’re going to run out of other people’s money”.
AmVet
July 11th, 2012
9:15 am
Because unlike liberals, the cons don’t allow facts to get in the way of their precious ideology.
It’s all good though, BP, Mattel, Verizon and Boeing LOVE you. As do 22 other major corporations who paid NOTHING to Uncle Sam for the past four years
Yep, that’s right tib, YOU pay more in federal withholding taxes taxes every single year than they do. COMBINED!
Howz that make you feel? Special? LOL.
Hell a teenage girl babysitting in the evenings few days a week pays more into this wonderful country than do these tax-dodging parasites.
And you rubes think this is capitalism.
Insane…
Rafe Hollister, suffering through Oblamer's ineptocracy
July 11th, 2012
9:15 am
I am with Bruno, all you will hear from the lefties is “fairness”. They will not define what “fair” is, but they claim to know it when they see it. That is the one trick pony that Oblamer depends on to get reelected, decry the unfairness in America.
The used to long for a fair chance at opportunity, but that has not worked out so well, as the prepared and dedicated continue to reap a larger share of the pie, so they now want fairness of outcome, so they do not have to compete.
Yesterday, just about every lefty poster said something about Romney’s flip-flops and or his changing positions over the years. Here is the biggest flip-flop of all time, IMO.
In 2010, when the growth rate was something like 3.8%, Oblamer said it was not a good time to raise taxes on anyone, as we were in an economic crisis.
In 2012, when the growth rate is less than 1.5%, Oblamer wants to raise taxes on people making over $250,000.
Sounds like the Flip/Flopper is occupying the WH.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:17 am
how many times should we keep taxing the same revenue
Every time it changes hands or is involved in a “transaction.”
Bruno
July 11th, 2012
9:17 am
His off shore accounts are said to be 100 million dollars. He does not declare this money on his federal income tax, thus if all rich did that the 13.4% might look more like 50% of pretaxed income. So more than half his income is not reported nor is it taxed, especially by the US. And on his declared taxes he is paying less too than the rest of us.
GT–You have a good point, but one that isn’t echoed by your Lib Congressmen who are in the position to actually do something about it by changing the law. Why?? Contrary to popular misconception, a substantial percentage (perhaps a majority) of the wealthy in this country are actually Democrat voters. As such, the Dems get a lot of mileage out of demonizing the rich without actually changing the rules of the game. We all saw that clearly with their renewal of the “Bush Tax Cuts” in Dec 2009 after spending the two previous years railing against them.
At some point, some of you Libs should consider making your elected leaders put their money where their mouths are. Until then, they’re playing you for fools.
http://www.youtube.com/watch?v=dXGa__ECvnM
Thomas Heyward Jr.
July 11th, 2012
9:19 am
Bruno————–
.
Heyward–I fully understand the concept of “hidden taxes”. However, if your assertion were true, then the total tax take of the federal and state governments would be a much, much higher percentage of the total GDP than it is. According to this chart, the total tax take is estimated to be 26.9 % on the high end.
.
———————————————————————————————————————
.
The GDP?
.
Your progressive credentials are secure along with Bookman, Krugman, and ORomney.
.
I’m out.
Bruno
July 11th, 2012
9:19 am
I am with Bruno
Rafe–My above song inclusion is dedicated to you ^^^^^^^^
Rafe Hollister, suffering through Oblamer's ineptocracy
July 11th, 2012
9:19 am
AmVet, good list, but you conveniently left out GE, chaired by Oblamer’s Competitiveness Chairman and chief fund raiser, Jeff Immelt. I’m sure Oblamer is real concerned about his buddy’s company paying no income tax.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:21 am
As Kyle’s chart CLEARLY shows, the top 40% of people earn 70% of the income and pay over 86% of ALL taxes.
Tib thinks the top 40% of American earners are the rich?
Bruno
July 11th, 2012
9:22 am
Your progressive credentials are secure along with Bookman, Krugman, and ORomney.
To the Libs–On the behalf of conservatives everywhere, I apologize for the ramblings of TH, Jr. He know not what he speaketh of.
Gotta run, will check back later.
Don't Tread
July 11th, 2012
9:23 am
“the cons don’t allow facts to get in the way of their precious ideology”
Brought to you by the dedicated minions of the Party of Bill Clinton, 0bama, Blago, Eric Holder, et al – you know, those people that don’t let facts (or ethics, or the rule of law, for that matter) get in the way of the Party ideology.
Bruno
July 11th, 2012
9:24 am
AmVet, good list, but you conveniently left out GE, chaired by Oblamer’s Competitiveness Chairman and chief fund raiser, Jeff Immelt. I’m sure Oblamer is real concerned about his buddy’s company paying no income tax.
Rafe–See my 9:17. It’s all about talking a mean game over in LibLand.
AmVet
July 11th, 2012
9:25 am
Hey I’ve got an idea!
Let’s increase the pentagon’s budget. Oh say to a trillion a year? Will that make the world respect us again? LOL!
But sadly, we’ will have to pretty much eliminate the federal government to pay for it.
Which will thrill BP et al.
(No more cops to watch them!)
Long live the plutocracy! (The one that Doomy thinks doesn’t exist.)
Rafe, so?
You think I like it that GE is a mega-parasite?
That is your bag.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:25 am
The only people who’d have to pay substantially more taxes under Obama’s proposal are those earning far in excess of $250,000 — and they aren’t small businesses. They’re the fattest of corpulent felines. Their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent.
In fact, most of these people’s income is unearned — capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton (the Affordable Care Act would add a 3.8 percent surcharge).
Robert Reich
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
9:26 am
“Yep, that’s right tib, YOU pay more in federal withholding taxes taxes every single year than they do. COMBINED!
Howz that make you feel? Special? LOL.”
Exhilarated, AmVet, exhilarated. Because I don’t give two hoots about what anybody else does, as long as I can take are of me and my own.
And NEVER at the expense of another.
You want equality at the point of a gun, go to a Communist country – oops! I forgot – there aren’t any successful ones around, are there? I wonder why that is . . . ?
You drool of wealth envy in each post you make. Ralph Nader got less votes than the Libertarian candidate did last time around. The support for your ideas and policies don’t even equal 1/10th of the oft-maligned Tea Party support for theirs, and I’ll take their ideas every day of the week and twice on Sundays over yours.
Out of touch doesn’t begin to describe you.
How Inciteful Is That!
July 11th, 2012
9:26 am
Tiberius continues to post. His opinion. For what it’s worth. Fact-free as it is.
Aquagirl
July 11th, 2012
9:26 am
Ah, taxes. This ought to test the new civility rules of the blog. Sorry if I disappoint any pugnacious admirers but I’m not sure I disagree with Kyle. Our tax code is quite progressive, Obama wants to raise taxes more for political reasons, and so forth. Lowering the tax burden would of course help everyone, but most of y’all overestimate what proportion is going to your whipping boy “parasites.”
The part I’d REALLY agree with is half of the last line…”if there’s a problem with income inequality in this country.” The attitude that there’s a bunch of leeches living off the top 1% ignores the decline in real wages for the middle class and the general slide towards CEO pay soaring over rank and file pay. It’s not the fault of the tax code but we better figure out a way to address the problem somehow. I’ve pointed out before that our government doesn’t work without a middle class, neither do most societies.
So here’s a bone for the angry folk: We need income redistribution. In conspeak that’s translated as “sending your tax dollars to ‘those people’” and y’all can’t get past that obsession. Not everyone is a top producer, that doesn’t mean it’s a good thing the guy working 8 ours a day is circling the drain. There’s a vast populace between Bill Gates and the Limbaugh stereotype of your section 8 parasite.
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
July 11th, 2012
9:28 am
I’m pretty sure that Beoing makes more than $250K a year but I could mistaken, I suppose.
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
July 11th, 2012
9:29 am
excuse me, Boeing….
How Inciteful Is That!
July 11th, 2012
9:30 am
Are Republicans such as Tiberius ready to give up their personal exemption and standard deduction so they can become larger contributors to the next Romney/Ryan tax cut for the wealthiest. Go for it.
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
July 11th, 2012
9:30 am
Kinda hard to demonize your local Ace Hardware, hahaha, I understand, but could we keep the discussion somewhat realistic?
AmVet
July 11th, 2012
9:31 am
Brought to you by the dedicated minions of the Party of Bill Clinton, 0bama…
Open mouth, insert both feet.
I voted AGAINST those men two out of three times.
This November will make three out of four.
Because you are Republican robot who voted for the Worst Ever twice, Saxby twice and every other human being with an R after their name, since you were old enough to find your way to the polling station, you think that everyone else opposed to your beloved gawdawful GOP is automatically a Democratic robot.
You have to much to learn about the Tweedledee and Tweedledum Parties…
http://www.voterocky.org/
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
9:33 am
Inciteful, I will refer you to this post, specifically points 1, 4 and 7
http://blogs.ajc.com/kyle-wingfield/2012/07/10/heres-the-deal/
Up your game, son.
JDW
July 11th, 2012
9:34 am
@Tiberius…”As Kyle’s chart CLEARLY shows, the top 40% of people earn 70% of the income and pay over 86% of ALL taxes.
I suggest you familiarize yourself with the terminology “nearly”, as this clearly shows the “rich” ARE paying nearly all the taxes in this country.”
So let me get this right…the top 40% of the people make 70% of the money and you want to tax the others…you just aren’t real smart are you?
BTW…nearly-very close to; almost
Proper Usage…86% of all taxes is not NEARLY all taxes.
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
9:35 am
Inciteful, once again, I am NOT a Republican.
I’m a Constitutionalist. You’re clearly not ready to debate that.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:36 am
So, CEO pay has NOTHING to do with how well a company does. A CEO can drive a company into the ground and then exit with a golden parachute.
And the CONS are ok with this.
But the rest of us, well, we better work harder and not be leeches. Forget about benefits, vacation days, affordable health care coverage. We just aren’t working hard enough!
How Inciteful Is That!
July 11th, 2012
9:36 am
Republicans like to complain about the horrors of social security and medicare and how we simply must get rid of those unfunded entitlements yet they never say a word about getting rid of the payroll tax–only the entitlement. Why is that.
How Inciteful Is That!
July 11th, 2012
9:38 am
Tiberius,
You do not debate. You proclaim your opinion to be fact. Wrongly of course. And if you vote Republican, you are Republican. You are Republican, Tiberius.
Uh Oh
July 11th, 2012
9:39 am
“Inciteful, once again, I am NOT a Republican.”
What would you is the percentage of times that you do not vote for a Republican?
stands for decibels
July 11th, 2012
9:42 am
If this is the case, then the only way to stop the trend would be to enact burdensome minimum wage laws which would artificially reward the less sophisticated workers. Either that, or artificially limit the top end by setting maximum salaries.
Do you see that as a viable solution??
Short answer–yes. Of course there’d be all kinds of qualifiers in there–I wouldn’t set a ceiling for wages, nor would I impose a crippling minimum wage. But I do think the upper incomes should be taxed higher, and I think a minimum wage should be set to enable a person to live decently and independently, if they put in an honest 40 hours a week.
So, were you happy with your Peachtree time? Was it your first PT? Seem to recall it was.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:43 am
once people have learned that Romney was willing to fire workers and terminate health and pension benefits while taking tens of millions out of companies, they are much more ready to understand that Romney would indeed cut Social Security and Medicare to give tax breaks to rich people like himself.
Rinse. Repeat.
JDW
July 11th, 2012
9:44 am
@Rafe…”They will not define what “fair””
It’s real simple, let me take you though it YET AGAIN because you don’t seem to get it.
Fair is when those making the most money pay a higher percentage of THEIR higher earnings in taxes than those making less money.
Measuring by quintile is useful data but policy needs to occur on an individual basis…let me give you a specific example.
In 2011 Mittens made $20.9 million and paid $3.2 million in taxes
FAIR, according to the 2011 tax chart, would have been about $7.2 million.
Finn McCool (The System isn't Broken; It's Fixed)
July 11th, 2012
9:45 am
If Tiberius isn’t a Republican then that means he approaches every voting booth with plans to vote for the best candidate no matter the party.
Is that true Tiberious?
GT
July 11th, 2012
9:47 am
The country is turning into crop farmers only in a crop farm the rich own and pay for the farm and the poor farm it.
The problem with Republicans going against big government is it gives the illusion that big government is the robber of freedom. Government big or small has little to do with the economic conditions of our times, it is the private sector that does. An exclusive club that private sector, unlike the American citizenship given to you at birth, this club decides who is in and who is blackballed. There are no rights and there is a black market government that totally controls a sold out federal government who has to survive at the mercy of this royalty same as the rest of the 99% of America. Like most private clubs the leadership is decided, like communist countries the vote is only for show. These hard economic times are caused by this underground system that takes care of its own and the rest of us are crop farmers. Look around and tell me it ain’t so.
Don't Tread
July 11th, 2012
9:47 am
Me a Republican robot? Hardly. I am not a member of the Republican party – never have been, never will be. My vote is based on whoever agrees more with my positions on the issues, regardless of party affiliation.
Doug B
July 11th, 2012
9:48 am
Including corporate taxes in your table skews the results, Kyle. That’s a separate class of entity. It should be treated as such.
AmVet
July 11th, 2012
9:48 am
Exhilarated, AmVet, exhilarated. Because I don’t give two hoots about what anybody else does, as long as I can take are of me and my own.
THIS is exactly the thinking behind the pro-crime GOP.
I am NOT a Republican.
BWAHAHAHAHAHA!
MarkV
July 11th, 2012
9:49 am
The fallacy of Kyle argument is crystallized in his concluding statement:
“If there is a problem with income inequality in this country, it’s not the tax code’s fault.”
The data Kyle presents, combined with the statistics of changes in income inequality in various developed countries, merely show that the progressivity of the US tax code still is not high enough to compensate for the increasing after-tax income disparity (a better word than the more usual “inequality”).
What Kyle is arguing is like saying that if a country spends more money to fight a particular disease than any other country, it shows that it spends more than enough, even if the disease keeps spreading.
If there is a problem of income inequality, and there is a problem of this inequality increasing, what does Kyle suggest to do about it, other than using the progressivity of the tax code?
stands for decibels
July 11th, 2012
9:50 am
oh, and not that I was ignoring this from Bruno–
I’ve never seen a comprehensive answer to the question of why we have such a large income disparity from top to bottom in our country.
I don’t think there is any one simple answer to that. You could go back to the weird compromises we made to form this Republic, wherein a Senate allowed dinky states to wield the same power as well-populated ones, and argue that this anti-small “d” democratic mindset permeated many legislative efforts that followed. But that’s just my birdseye view.