Graphs: How regressive is the US tax system? & Income tax rates over time by income group.

[pampango]

It's not surprising that the US' tax system is the most regressive in the developed world. What is surprising is that an economic powerhouse like Germany has the most progressive tax structure in the developed world (at least among those countries shown. I suspect that the Scandanavian countries have even more progressive tax structures.)


In the last 30 years the top 1% have seen their incomes skyrocket while their tax rates have fallen be a huge amount.


Tax rates have fallen dramatically for the top %1 - particularly for the top .1% - (aside from an uptick in the 1990's) since the mid-1070's.

The experience of Germany shows that a progressive tax structure that contributes to a very equitable distribution of income is not inconsistent with a strong economy, strong unions and a strong middle class. Conversely our experience shows that a regressive tax structure that contributes to a very inequitable distribution of income is inconsistent with a strong economy, strong unions and a strong middle class.

[JHB]

1. Do you have a link?

The early 1990's uptick was due to adding a 31% bracket in 91 and 36% and 39% brackets in 93.

Notice the upper group in the 60's and 70's: near 60% even though the top marginal rate was 91% until '64, when it went to 77%, then to 70% until 82. In 82 it was dropped to 50%, then to 38.5% for 87, and 28% from 88-90.

A while back I posted graphs of the inflation-adjusted tax bracket thresholds (not the rates themselves, just the breakpoints between different rates). In addition to lowering rates, the Reaganites collapsed the progressive structure, reducing the number of brackets and sharply limiting how high they reached.

http://www.democraticunderground.com/1002400229

[pampango]

2. Here's the link. Though not much more than the graphs there. Forgot to post it.

http://delong.typepad.com/sdj/2012/04/michael-froomkin-the-hamilton-project-on-the-progressivity-of-the-us-tax-and-transfer-system.html

[JHB]

3. Looks like they come from here:

http://www.hamiltonproject.org/papers/just_how_progressive_is_the_u.s._tax_code/

e.g.:

In addition to being less progressive relative to other countries, the U.S. tax system has also become less progressive over time. Over the last fifty years, tax rates for the wealthiest Americans have declined by 40 percent, while tax rates for average Americans have remained roughly constant. This is illustrated in the figure below.

[pampango]

4. A related post at ThinkProgress today: Economists: Higher Tax Rates On The Rich Won’t Hurt Growth

According to the constant refrain from Republicans in Congress, the reason that tax rates can’t be raised on anyone, even the already super-wealthy, is because doing so will hurt economic growth. However, two prominent economists — Nobel Prize winner Peter Diamond and John Bates Clark award winner Emmanuel Saez — write in today’s Wall Street Journal that the conservative theory is basically bunk:

In the postwar U.S., higher top tax rates tend to go with higher economic growth — not lower. Indeed, according to the U.S. Department of Commerce’s Bureau of Economic Analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.

Neither does international evidence support a case for lower growth from higher top taxes. There is no clear correlation between economic growth since the 1970s and top tax-rate cuts across Organization for Economic Cooperation and Development countries.

Saez and Diamond also note that growth can be boosted if the revenue raised from higher taxes gets spend on infrastructure or other public investments. “The neglect of public investment over the last few decades suggests that the returns could be quite high,” they wrote.
As this chart shows, job growth has been weakest when the top tax rate was at its lowest:



In fact, job growth has been stronger when taxes are higher overall:



http://thinkprogress.org/economy/2012/04/24/469864/economists-higher-tax-rate-growth/