Declining Progressivity in US Taxes

[Hannah Bell]

Tom Piketty and Emmanuel Saez, Progressive is the U.S. Federal Tax System? A Historical and International Perspective, 21 J. Econ. Perspectives 3 (2007)...

What they show by looking at income and taxes over the period from 1960 to 2004 is revealing. While our system remains progressive to some extent, the progressivity has declined significantly.

This is primarily, they say, because of the cuts in the corporate tax and the estate tax--taxes that impact the very wealthiest more than others because of their high ownership of financial assets...

The decades since Reagan took office have taken a huge toll... Fueled by a religious-like belief in the mathematically elegant but unrealistic assumptions of the "free market" economists from the Chicago School... the GOP in Congress passed huge tax cuts for the wealthy accompanied by increasingly heavy payroll taxes for others at the same time that spending continued apace--in fact, Reagan, Bush1 and Bush2 all greatly increased the military budgets and the Bushes embarked on wars of choice that imposed significant budgetary demands...

The greater progressivity of federal taxes in 1960, in contrast to 2004, stems
from the corporate income tax and the estate tax. The corporate tax collected
about 6.5 percent of total personal income in 1960 and only around 2.5 percent of
total income today. Because capital income is very concentrated, it generated a
substantial burden on top income groups.

The estate tax has also decreased from 0.8 percent of total personal income in 1960 to about 0.35 percent of total income today. As a result, the burden of the estate tax relative to income has declined very sharply since 1960 in the top income groups.

http://ataxingmatter.blogs.com/tax/2010/03/declining-progressivity-in-us-taxes.html

[truedelphi]

1. The most significant thing about our tax code is that at no time

in the last four decades, has there been any real attempt to align the tax code for inflation.

When I was growing up in the nineteen fifties, for a jobholder to make 60 K a year would be a big deal. A really big deal.

But by the early eighties, in some parts of the nation, (and probably almost all of America by mid 1990's), sixty K was required if you wanted to have a roof over your head, and provide for a couple of kids.

Yet that 60K was treated as though it was the mad and glorious ABUNDANT SALARY of the early fifties.

I imagine that we are the only industrialized nation that requires someone making a paltry 30K to even consider having to pay income tax. And we have to have our medical expenses exceed 7.50% in order for them to serve as tax deductions (that limit has recently been nudged up to 9.5%, someone told me the other day. I guess in order to pay for HC"R"?)