That rhetoric about giveaways for multimillionaires? It's accurate.THE QUEST for ways to reduce inequality begins with taxation. Unlike spending programs, redistribution through taxation is administratively simple; besides, putting money directly into people's pockets allows them to spend it on whatever they need most. But the tax tool has been wielded badly. Rather than using it to offset rising inequality, politicians have contrived to do the opposite.
The Bush administration refuses to acknowledge this extraordinary fact. It argues that the tax system has grown more progressive because the rich provide a larger share of government revenue than in the past. But this isn't because tax rates for the rich are higher; it's because the pretax earnings of the rich have taken off.
While the income of the families in the middle fifth of society has grown 12 percent since 1980, the income of the top tenth has grown 67 percent, and the income of the top 1 percent has more than doubled. In short, the rich have grown a whole lot richer: That's why they pay a larger share of total tax.The administration also argues that the federal income tax is already progressive enough. Thanks to the earned-income tax credit and Mr. Bush's refundable child credit, almost a third of tax filers pay either zero income tax or less than zero -- meaning that they take money out of the system. But it's nonetheless true that the income tax is less progressive than it used to be. People still have to pay the regressive payroll tax. And changes to the estate tax must be factored in as well.
Our chart shows the combined effect of the Bush tax cuts. It leaves no doubt that the tax system has become less progressive, even as the need for progressivity has grown. Over the past quarter of a century, the tide of the American economy has failed to lift the bottom half of society, damaging the faith on which capitalism depends. Seven out of ten say the nation is headed in the wrong direction even though economic growth is galloping, and many are hostile to trade, immigration and big business. But rather than crafting a tax policy that responds to those sentiments, the administration has done the opposite.
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