Progressive Taxation Is Alive and Well in The U.S. of A.


Will Wilkinson, in the course of a good post about Obama’s big lie, writes:

I’d like to thank my colleague [a blogger who goes by D.R.] for helping me see how to make my case stronger. Of the comprehensive American tax system, he writes:

The fact of the matter is that the American tax code as a whole is almost perfectly flat. The bottom 20% of earners make 3% of the income and pay 2% of the taxes; the middle 20% make 11% and pay 10%; and the top 1% make 21% and pay 22%. Steve Forbes couldn’t have drawn it up any better.

I happen to agree with Steve Forbes that a flat tax best reflects our intuitions about proportionality and fairness, so I’m tickled to see that our system is so fair!

The link attached to “almost perfectly flat” leads to this:

The source is a “sister organization” of the union-dominated lobbying organization, Citizens for Tax Justice, which is responsible for a graph that I reproduced in “Elizabeth Warren Is All Wet“:

As I said in “Elizabeth Warren…,” Citizens for Justice

acknowledges (backhandedly) that “the rich” pay their “fair share” of all taxes — federal, State, and local….

[G]iven the source, this [graph] can be taken as a “worst case” depiction of the distribution of the total tax burden. “The rich” are paying their “fair share,” and then some, unless you believe (as leftists seem to believe) that  “the rich” are supposed to take care of everyone else.

Not surprisingly, the statistics for 2011 yield a graph that looks much like the one just above:

What puzzled me, briefly, is why the Citizens for Tax Justice and Institute for Taxation and Economic Policy split the top quintile into chunks. Then it occurred to me that those left-wing outfits are trying to suppress the fact that taxpayers in the top quintile pay a disproportionate share of all taxes. Thus:

Further, the effective tax rate isn’t quite as flat as the left-wing outfits would like gullible readers to believe. Thus:

If that isn’t the picture of a progressive tax structure, I’ll eat my external hard drive.

The innumerate reader might say something like “Gee willikers, people who make more ought to pay more in taxes.” Think about it for a minute. If someone earning $100,000 pays taxes at the same rate as someone earning $10,000, the person earning $100,000 does pay more in taxes. For example: $100,000 times a tax rate of 15 percent is greater than $10,000 times a tax rate of 15 percent — 10 times greater, to be precise. Raise to 30 percent the tax rate on the person making $100,000 and, voila, his tax bill is 20 times greater than that of the person making $10,000.

A progressive tax structure penalizes success, which inhibits economic growth, which means fewer jobs and lower incomes for the low-income persons who are the supposed beneficiaries of progressive taxation. I say “supposed” because the “house” (high-paid office holders and bureaucrats, all with cushy health insurance and pension plans) takes its very large cut before any of the money extorted from those who earn it trickles down to those who don’t earn it.

Related reading:
Greg Mankiw, “The Progressivity of Taxes and Transfers
Steve Landsburg, “Charting the Tax Plans

Related posts:
A True Flat Tax
Taxing the Rich
More about Taxing the Rich
In Defense of the 1%
The Burden of Government
Economic Growth Since World War II
Economics: A Survey
The Barbarians Within and the State of the Union
Why Are Interest Rates So Low?
Estimating the Rahn Curve: Or, How Government Spending Inhibits Economic Growth
America’s Financial Crisis Is Now