Thursday, April 14, 2011

The wealthy aren't unduly burdened by taxes

With Tax Day fast approaching and deficit reduction all the rage, one fact deserves significant attention: the wealthy are enjoying the some of the lowest taxes in generations. The Figure shows the average tax rate in 1979, 1992, and 2007, as well as the tax rate for the top 1% of households, and the top 400 households (who have an average annual income of nearly $350 million).  Since 1979, the country’s overall average tax rate—the share of income paid in taxes—has fallen slightly, but for those at the top of the earnings ladder this share has fallen dramatically.



It may not be the case that we can solve all our problems by increasing taxes on the wealthy. But it's also not the case that the wealthy are stumbling under the weight of an overbearing tax burden in the United States, either.

4 comments:

FletcherDodge said...

This comparison is valid as far as it goes. What concerns me is the attitude I see behind it.

This line of reasoning is backwards, in that it starts and then end and works toward the beginning. It essentially is saying "Let's find people that we can take more money from so that we can fund more govt programs (i.e. increase the federal bureaucracy).

Rather, the budget process should work by identifying the real roles of government, determining how much it costs to fulfill those roles, and THEN trying to find the money (through taxes).

If that were the case we would even be looking at comparisons like this.

Joel said...

"Rather, the budget process should work by identifying the real roles of government, determining how much it costs to fulfill those roles, and THEN trying to find the money (through taxes)."

Completely agreed. But even if we all take that perspective—which I think is more widely shared than you expect—I think we still end up looking at these comparisons. Because the roles of government have to live in balance with the sustainable resources. Determining what's right and sustainable is part of the process.

KhabaLox said...

How is it that the extremely rich have such a dramatically lower tax rate than the very rich?

According to the graph, the top 400 households (which is about .00036% of households or 3.6 ten-thousandths of one percent) pay taxes at a little more than half the rate than the top 1.11 million households.

Regardless of one's opinion on the role and size of government, do people really think such a regressive tax structure is appropriate?

[I'm using an estimate of 111 million households in 2007, based on Figure 1 in this Census report.]

FletcherDodge said...

You may be right, Joel. But it feels like we've reached that point that de Tocqueville warned about, where Congress has realized it can use taxpayers' own money to get rich and bribe the taxpayers for votes.

I mean, they paid for people to have digital TV converter boxes, for cryin' out loud.

Unfortunately, it's the same kind of thing that was going on in the Roman Republic right before its implosion.