January 6, 2019

TAX WHAT YOU DON'T WANT:

Did the Rich Really Pay Much Higher Taxes in the 1950s? The Answer Is a Little Complicated. (JORDAN WEISSMANN, AUG 07, 2017, Slate)

American progressives like to remember the mid-20th century as a time when the only thing higher than a Cadillac's tail fin was the top marginal tax rate (which, during the Eisenhower years peaked above 90 percent for the very rich). Uncle Sam took 90 cents on the dollar off the highest incomes, and--as any good Bernie Sanders devotee will remind you--the economy thrived.

Conservatives, however, often try to push back on this version of history, pointing out that those staggeringly high tax rates existed mostly on paper; relatively few Americans actually paid them. Recently, the Tax Foundation's Scott Greenberg went so far as to argue that "taxes on the rich were not that much higher" in the 1950s than today. Between 1950 and 1959, he notes, the highest earning 1 percent of Americans paid an effective tax rate of 42 percent. By 2014, it was only down to 36.4 percent--a substantial but by no means astronomical decline.

Greenberg is not pulling his numbers out of thin air. Rather, he's drawing them directly from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman in which the three economists--all well-loved by progressives--estimate the average tax rates Americans at different income levels have actually paid over time. Their historical measure includes federal, state, and local levies--including corporate, property, income, estate, sales, and payroll taxes.

45% of Americans pay no federal income tax (CATEY HILL, 4/18/16, MarketWatch)

On average, those in the bottom 40% of the income spectrum end up getting money from the government. Meanwhile, the richest 20% of Americans, by far, pay the most in income taxes, forking over nearly 87% of all the income tax collected by Uncle Sam.

Rich people pay nearly 87% of all federal individual income tax in America

Income levelShare of total federal 
individual income tax paid
Average income tax bill 
per person
Lowest 20%-2.2%-$643
Second lowest 20%-1.7%-$621
Middle income4.2%$1,743
Second richest 20%12.9%$6,285
Richest 20%86.8%$50,176


Source: Tax Policy Center

The top 1% of Americans, who have an average income of more than $2.1 million, pay 43.6% of all the federal individual income tax in the U.S.; the top 0.1% -- just 115,000 households, whose average income is more than $9.4 million -- pay more than 20% of it.

Having fought a Revolution based on the idea that representation is a function of taxation, it seems problematic to have a tax system that is so fundamentally unbalanced.  Meanwhile, economically it is odd to use taxes to punish earning, profits, saving and investing. Thus, the Neoconomic notion of transitioning to a regime of consumption taxes.


Posted by at January 6, 2019 8:52 AM

  

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