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
md
July 11th, 2012
11:26 am
Uh Oh and aqua……although the left loves that red state welfare talking point, one would be wise to understand the dynamics of military base spending in relation to same as well as spending on medicare……….and then understand that many of the elderly move to red states to retire…..a good number from blue states………..and Medicare is the top expenditure.
a dad
July 11th, 2012
11:27 am
Taking break so thought I’d check back. Bruno, no, I work however long is required to get the job done. Sometimes its M-F, sometimes its 7/7 depending on what’s going on. Amvet, I used to think you were a receipient of DADT (and you may still have been) and just have an axe to grind, but judging from your absolute lack to see beyond the obvious, conversing with you is pointless, so perhaps you got booted from whatever service you were as a matter of lack of intellect. And no way junior, you don’t scare me in the least. Feel good about yourself if you think I do. Guess I’ll just stick to more intelligent debate with Adam and AquaG. Oh well, back to work. Ammie – you should try it.
Uh Oh
July 11th, 2012
11:28 am
md
Seeing that my father is retired and I served 5 yrs in the US Army. It might be wise for you to know that before assuming what I know or do not know
But do carry on
AmVet
July 11th, 2012
11:32 am
Just one and I’ll concede that one to you………..
False equivalence. That has nothing to do with the point that I made.
Poor tib says I misrepresent Jefferson by quoting………………. Jefferson.
Three times.
While he comes up with a big fat goose egg by way of factual reply.
Unless two unprovoked personal insults count!
Hysterical.
It seems inevitable.
He is gonna be a three strikes and you’re out kinda guy…
Uh Oh
July 11th, 2012
11:32 am
md
Tell us about your militarty service to this country.
Uh Oh
July 11th, 2012
11:33 am
military
@@
July 11th, 2012
11:38 am
Rafe:
AmVet sports third-party jockeys.
Since Nader’s out, AmVet’s 9:31 would indicate he’s supporting http://www.voterocky.org/ for President and Bullwinkle for Veep.
“@@” @ 11:09
zzzzzzzzzzzzzzzzzzzzzzz
td
July 11th, 2012
11:39 am
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.
I do not think all conservatives are ok with it but what to do about the situation? It seems you are advocating the government needs to step in and right regulations or put caps on pay or whatever. I am totally against this idea. It is up to the owners of the corporation (stack holders). If they do not like what the CEO’s pay and benefits are then they can vote with their pocketbook.
@@
July 11th, 2012
11:41 am
Just curious. Is db short for dirtbag?
md
July 11th, 2012
11:42 am
“that was always intended as a pay-as-you-go old age *insurance* program.”
And look at it now……..far from a pay-go system, it’s become a coverall system.
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
11:43 am
Why is it that some posters cannot stay on the SUBJECT at hand, yet continuously deflect towards asking what another posters PERSONAL information is (Uh Oh, that means YOU)
Doesn’t matter who someone voted for, doesn’t matter if they served in the military, doesn’t even matter about adjusting figures for inflation, because percentages don’t care about actual dollar amounts from one year to the next in statistics.
The topic is PROGRESSIVE TAXES, Uh Oh, NOT what other people do.
Got it?
And it looks like we have a name-jacker with @@ this morning.
@@
July 11th, 2012
11:43 am
Alrighty din! I’ve been called worse.
Hillbilly D
July 11th, 2012
11:44 am
sfd
I agree that Social Security was intended as a “pay as you go” insurance program but it’s gotten so far away from that over the years, in different ways. Things have been added to it and as you say, it’s become a place to grab funds (ie: borrow from) over the years. It’s been a long time ago but I read somewhere that when it was originally set-up, if they’d stuck to the plan and not started “borrowing” from the fund, which they did very early on,the fund was projected to be self-sustainable by the year 1948. Of course, there’ve been demographic changes and such, since then but it’d be in much better shape than it is now, in my opinion.
I remember D’Amato and others in the late 70’s, early 80’s pushing for that. My mind is a bit hazy on what the rates were before then and I’m a bit lazy, today, to look it up. If memory serves, though, it was a good bit different from today. That’s one of those places where my old rule comes into play. The rule is: Anytime a public figure is pushing something, the first question to ask is, what’s in it for him/will he personally profit from this? All too often, a particular politicians self-interests just happen to coincide with what he/she thinks is best for the country, in my experience.
Uh Oh
July 11th, 2012
11:44 am
Tiberius
You are a name caller and it is prohibited
So spin all you like
Just don’t sue me, bro
md
July 11th, 2012
11:45 am
“Seeing that my father is retired and I served 5 yrs in the US Army. It might be wise for you to know that before assuming what I know or do not know”
The assumption is made based on you post of the basic red state blue state nonsense in regards to the actual dollars spent and what they are spent on………if you don’t like the assumption, don’t post the nonsense………
Kyle Wingfield
July 11th, 2012
11:46 am
stands @ 11:25: You don’t remember correctly. In fact, the top capital gains tax rate has almost always been lower than the top tax rate for wage income. One of the sharpest decreases in recent history came under Clinton in 1997, when the top rate was cut by 8 percentage points (or more than 27%). Revenues from the tax increased and surpluses — the ones liberals love to talk about as if they owed to Clinton’s higher income-tax rates — ensued.
Btw, the “individual buy-in for Social Security” that you mention is one reason many conservatives talk about the tax burden in terms of the income tax: The FICA tax is supposed to be something individuals pay in direct exchange for retirement and health benefits. Of course it doesn’t really work that way — you pay the tax now to fund retirement and health benefits for today’s seniors, with the implicit promise that younger people will do likewise when you retire — but then again, liberals typically don’t like to acknowledge that, either.
Uh Oh
July 11th, 2012
11:46 am
Tiberius
And if I want to ask Kyle a question, I will do so
So stop huffing, puffing and calling others names
Have a great day
Interested Observer
July 11th, 2012
11:46 am
“In 2009, Americans paid lowest tax rates in 30 years to federal government…”
http://www.washingtonpost.com/business/economy/in-2009-americans-paid-lowest-tax-rates-in-30-years-to-federal-government/2012/07/10/gJQAWc5bbW_story.html
Kyle Wingfield
July 11th, 2012
11:46 am
Uh Oh @ 11:19: I linked to the CBO report, which is where I got my numbers. It may or may not have the numbers you’re looking for.
Aquagirl
July 11th, 2012
11:48 am
I think the new rules have upset a certain namejacker. Somebody pass Kyle the can of whoop@$$.
I used to think you were a receipient of DADT
What the hell is that? And is it some kind of intended insult? I was a “recipient” myself because I didn’t have to pick up the slack for gay people who would have been kicked out of our unit if we hadn’t hidden them from the witch hunts.
And seeing as how they served honorably you’re a recipient too. Over a million dollars in tax money was invested in those people’s training, so the benefits go beyond the intangible “willing to serve when so many bigots aren’t.”
Bruno
July 11th, 2012
11:48 am
So, were you happy with your Peachtree time? Was it your first PT? Seem to recall it was.
sfd–Thanks for the inquiry. Actually, that was my 15th Peachtree Road Race. Because it was PB’s first, we set an easy pace and finished in about 1 hr 10 mins. We had a great time and look forward to next year.
How about you?? Any P’tree tees in your closet??
Uh Oh
July 11th, 2012
11:49 am
Kyle
Thanks I will check it out. While it may not be relevant to you and your overall point, it would put the numbers in more perspective for me to look at the info you provided along with wages adjusted for inflation over the same period.
Thanks again
@@
July 11th, 2012
11:50 am
Kyle:
Although I may have issues with your new rules, please know that I think you are, in no way, an idiot.
I’ve got some errands to run so I’ll be leaving for now. Anything posted under my name is not I.
Kyle Wingfield
July 11th, 2012
11:52 am
The faux @@ — and another, earlier impostor @@ I also found — have been banned.
AmVet
July 11th, 2012
11:52 am
Uh oh! (Not the cool blogger!)
Dad’s home!
Looks like Tib will have to answer for his unprovoked personal insults and the name-jacking troll are toast…
Uh Oh
July 11th, 2012
11:53 am
Kyle
Good job
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
11:55 am
Ask away, Uh Oh, ask away. Don’t be surprised if you don’t get the answer you’re looking for, because it is IRRELEVANT to statistical analysis.
Bruno
July 11th, 2012
11:55 am
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?
Mark V–The bigger question is what you and your elected Lib officials propose. I think most conservatives are unconcerned with what the top earners make as long as those in the middle and at the bottom are living comfortably. And, as I stated earlier, by any objective measure you choose, we’re all living pretty well, even with the current economic slowdown.
Kyle Wingfield
July 11th, 2012
11:55 am
Interested Observer @ 11:10: Take it up with the CBO. And practically every economist.
stands for decibels
July 11th, 2012
11:55 am
the top capital gains tax rate has almost always been lower than the top tax rate for wage income.
thank you for the chart. I see now that in the early days, capital gains were taxed much lower than the highest income tax brackets.
you pay the tax now to fund retirement and health benefits for today’s seniors, with the implicit promise that younger people will do likewise when you retire — but then again, liberals typically don’t like to acknowledge that, either.
That’s a bizarre thing to post. I’m well aware of how SS is funded, and has been funded throughout its history; my favorite pundits who write about this topic — folks like like Duncan Black, Digby, Sam Seder, and of course Paul Krugman — are well aware too.
Uh Oh
July 11th, 2012
11:56 am
md
End of day red states lead for the most part lead in money taken in vs money going out. Not all red, but look at the top 10 or 20.
While you make a few points, you provide no statistical analysis to back up your assertion in terms of it accounting for what percentage or dollars you attribute to the states being up side down.
So be careful when you speak of nonsense.
Uh Oh
July 11th, 2012
11:57 am
Thanks Tib
Since you act at times as if you run this blog, it so great to have your blessing
Stop calling people names
md
July 11th, 2012
11:57 am
“Only the most servile of Americans are not repulsed by this sovereignty-sellout.”
And I disagree……as corporations ARE people……every single decision made by a “corp” is made by a “people”…….WE are corporations……employees, managers, owners, and shareholders……..
And WE pay corporate tax………corps pay expenses, and set the prices WE pay accordingly……
And WE always have the choice of what we want to buy………….
Bruno
July 11th, 2012
11:58 am
Lets see the ultraliberal George W gave seniors on Medicare free drugs with no funding source and Medicare Advantage that included free gym memberships and other goodies. Think seniors will give up this ultra liberal give away for the sake of the US budget under Romney or the Tyan budget???
Also a liberal governor of Massachussetts got together with Ted Kennedy to bilk Medicaid out of 8 and half billion dollars of waivers for excess payments to Massachusetts so it it could provide free health care to all who could not afford private insurance. I am sure if elected Romney will end that give away.
A certain Republican icon who was president in 1986 passed legislation to provide free emergency room care to all including illegals with no funding source. I am sure Republicans are ready to cut that along with nonpublic funded Obamacare.
fair and balanced–Good post @ 9:55. I doubt if it’s much consolation, but there are many of us on the right side of the aisle who are consistent in their views of government giveaway programs, and didn’t just start complaining once Obama and the Dems seized power. Not that they haven’t given us much more to complain about……..
Kyle Wingfield
July 11th, 2012
11:59 am
ragnar @ 10:39: Not arguing in favor of it, just pointing out the facts to the progressivists in their own terms.
stands for decibels
July 11th, 2012
11:59 am
ramblin’ off topic a bit–
Any P’tree tees in your closet??
just a couple so far. Used to be a regularly scheduled family reunion would conflict–more recently, I’ve had some application snafus, and haven’t bothered.
I got a little spoiled, in that I had run a qualifier those two years, and was guaranteed to get into a seeded group. They don’t do that any more (or don’t seem to–maybe they’ve changed more recently) and not to sound like a snob, but I’d prefer to be nearer the front than with the more casual folks.
(I mean, as long as I’m capable of doing a sub 50 or sub 55 qualifier, that is.)
Show all the numbers
July 11th, 2012
12:02 pm
In 1979 the bottom quintile brought home 16, of the total after tax income in 2009 they brought home 6.2% of the total income
http://www.cbo.gov/publication/43373
Lil' Barry Bailout (Revised Downward)
July 11th, 2012
12:02 pm
“Anyone feeling trickled on ?”
——–
No.
Just another example of simple answers to stupid questions. Come up with something original and try again.
Interested Observer
July 11th, 2012
12:02 pm
RE: “…liberals typically don’t like to acknowledge that, either.”
I’m a liberal, and like all liberals I know, I’m well aware that my payroll taxes fund today’s entitlement beneficiaries. I have no problem acknowledging that, nor does any other liberal I know or read.
AmVet
July 11th, 2012
12:04 pm
Kyle, no comments whatsoever about Tib’s unprovoked personal attacks at 10:51? (read all of the relevant preceding posts and you will agree)
To wit…
People with working brains know you for the intellectually-bereft debater you are.
You’re a liar, AmVet, and the worst thing is, you know you’re a liar, but you don’t even care.
Hmmmm……..
JDW
July 11th, 2012
12:04 pm
AquaGirl wrote “The Tax Foundation has a list.”
The real interesting thing about that list is that of the top 25 “Parasites States” 19 voted Republican in 2008. Hummmmmm…..
Kyle Wingfield
July 11th, 2012
12:05 pm
Show @ 12:02: None of that contradicts my concluding statement: “If there is a problem with income inequality in this country, it’s not the tax code’s fault.” After all, the share of the tax burden on the bottom quintile — indeed, on every quintile but the top one — has fallen even more sharply.
And note that, in pointing out these facts, I am not arguing for putting more of the tax burden on the bottom 80%. That is the logical conclusion only if you think the first and last answer to our problems is to raise taxes.
md
July 11th, 2012
12:05 pm
“While you make a few points, you provide no statistical analysis to back up your assertion in terms of it accounting for what percentage or dollars you attribute to the states being up side down.”
I’ve posted links before, but I’m still looking for charts that show migration numbers in comparison to medicare payouts……you are more than welcome to find some to refute as I continue to look.
The point being, just looking at those charts that show what states give and get are meaningless if one doesn’t know how the expenditures are distributed. My earlier posts downstairs quoted an official from the same tax foundation in aquas link that stated medicare was the main driver……and if one wants to venture down to FL and look at all the northern tags, one would realize it must have some truth to it.
Interested Observer
July 11th, 2012
12:06 pm
Kyle Wingfield @ 11:55: Actually, I would say the same back to you. Take it up with the CBO. And practically every economist.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/43373-AverageTaxRates_screen.pdf
Tiberius - pulling the tail of the left AND right when needed
July 11th, 2012
12:06 pm
“Any P’tree tees in your closet??”
A bit off topic, but why do they run a 10k race in the middle of the summertime in one of the hottest places in the nation?
Other places do their marathons in much cooler weather.
Lil' Barry Bailout (Revised Downward)
July 11th, 2012
12:07 pm
Why aren’t the poor doing more to reduce income inequality?
Probably because they’re satisfied with life as it is, where checks just show up without any effort.
Uh Oh
July 11th, 2012
12:09 pm
Kyle
Personally I think we need a combination of cuts and tax increases. Phase in the Clinton rates over 2 yrs. Phase out the EITC. As well as cost cutting measures.
Too bad either party will buy into it. At least not enough individuals to pass anything of substance
How Inciteful Is That!
July 11th, 2012
12:09 pm
Kyle,
The bottom eleven percent of 2009 returns (or about 15 million returns) covered filers with AGI’s of less than $7000. If Republicans tax their collective AGI’s ten percent, that would give them another 5.5 billion dollars to give to the wealthiest in the next round of tax cuts. Does that sound good to you. That plus the payroll tax that comes out of wage earnings should be enough to appease the one percenters until the following year and then Ryan can do it all again. Death to millions by a thousand tax cuts for the one percent. Is that a plan or what!
stands for decibels
July 11th, 2012
12:10 pm
but why do they run a 10k race in the middle of the summertime in one of the hottest places in the nation?
because…well, those doughnuts they set out for the runners?
You feel like you’ve honestly earned one, that time of year.
Lil' Barry Bailout (Revised Downward)
July 11th, 2012
12:11 pm
Page 24 of the above CBO link…the higher your income, the higher your overall tax rate.
Bite it, America-hating, free-market-fearing libtards.