Wednesday, April 14, 2010


David Leonhardt of The New York Times and Jonathan Chait of The New Republic are pushing back against the tax arguments currently broadcasting full blast from the right-wing noise machine. Both point out that it's deeply misleading to whinge about the fact that poorer people don't pay as much income tax as wealthier people for the obvious reason that poorer people pay plenty in sales taxes, payroll (Social Security and Medicare) taxes, excise taxes, state and local income taxes, and property taxes.

But don't we still have a progressive tax system -- one, in other words, that taxes the wealthy more than everyone else, even counting all taxes? And isn't that (sound of Gucci loafer being angrily stamped) unfair?

Joshua Holland says no, our tax system isn't progressive at all:

...we really have a flat tax. That's the conclusion of a 2007 study by Boston University economists Laurence J. Kotlikoff and David Rapson, who found that when you add it all up -- state and local taxes, federal taxes and excise fees -- "The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points."

More here. Click to enlarge the chart below.

(By the way, I'd add that the financial system adds a steeply regressive tax of its own, even though it's not truly a tax because it doesn't go to the government: the poorer you are, the more money you're likely to lose on your money -- in bank fees, credit card fees, interest payments, payday loan charges, etc. -- while the more money you make, the more money your money makes, in interest and dividends. That's one big reason progressive taxation is needed -- and it's one reason why our lack of progressive taxation means inequality just gets worse and worse.)

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