• A few tax charts

    I find that charts like these provide helpful perspective. The first two are from Citizens for Tax Justice. The last one is from the Center on Budget and Policy Priorities. Both sources provide much more in this area. Figures account for taxes and revenue at the federal, state, and local levels (including payroll, income, excise, estate, and property taxes).

    Bottom line: US taxes are low by international standards. They’re also not that progressive, particularly in the top half of the income distribution. They’re not progressive at all in the top 10% of the income distribution.



    • I saw these graphs on Dr. Krugman’s website. I think they’re misleading because they don’t account for the payments made to people. For example, by including Social Security, it makes it look like the tax system is more regressive, but since Social Security pays citizens according to what they put in, I think it’s important to control for what people take out.

      Poor people put in more of their own income into the payroll taxes, but they also get more out (relative to their income).

    • CTJ’s number merit a little bit of skepticism. The ITEP model they use is constructed from old (by modeling standards) microdata ). Also, while their approach to federal taxation is pretty standardized among think tanks and universities, their approach to state-level taxation is fairly unique and innovative; the drawback, however, is that we cannot compare their results to any other model out there.

    • Interestingly, Veronique de Rugy published almost identical charts this morning on the National Review web site, although she focused on federal taxes only. Her data comes from the Tax Policy Center, and her charts are here:

    • The final chart is interesting as it shows Australia as having a lower tax rate than the United States. Being an Aussie, now living in the U.S. for 11 years, I think there must have been some changes for this to be accurate. When I moved here in 2000 Aussie taxes were very high, they were introducing a VAT, and they had just been through a major health care debate like the U.S. just had. I recall that going to a Dr cost only $25 out of pocket, no insurance necessary…public health.

      Perhaps the transition to more private health insurance has brought costs down? The Aussie economy has also benefited from a massive commodity boom as they have been exporting gas, coal, etc, to China. Maybe all the citizens are benefitiing from this with lower taxes?

      Interesting stuff, thanks.

    • I would like to see SS and medicare made explicitly into welfare programs but currently they retain a facade that makes them look like retirement plans. Keeping that appearance means that USA taxes look less progressive that they otherwise would. Never the less I heave read that USA taxes are still more progressive than European taxes because we do not have a VAT.

    • “They’re not progressive at all in the top 10% of the income distribution”

      Dr. Frakt,

      These charts are rather frustrating and I question their overall analysis. To say that our tax system is not progressive at all is misleading. The top 10% pays drives the majority of tax revenue. The American system is very progressive. It kind of boggles me that you do not think so.

      I am okay with a somewhat progressive tax system, but I think the current system is unfair to people who work hard and become successful. There is a difference between the super rich and the poor rich (as Zipf’s law shows). To me people who make 250k a year, are NOT rich. They are most likely successful middle class families who worked hard.

      I think people argue for higher taxes on the “rich” because they believe the system is inherently unfair. As in, the rich were lucky. This thought pattern is ignorant and dangerous to our economic system. Most of the “rich” made their path… took risks… made life happen for them. Our economy is a system of risks and rewards. If you do not take a risk, you do not get a bigger reward. The “rich” I know are willing to pay more in taxes but are UNWILLING to pay taxes they believe punishes them for being successful.

      I also find it hilarious how everyone hates paying taxes yet we expect the “rich” to enjoy it and make it their duty to pay more.

      We should help people become successful, not encourage them to be dependent.

      Great Post!

      • Am I misleading someone by using a term as it is defined? Look up what it means for a tax to be progressive. For example, from Wikipedia, “A progressive tax is a tax by which the tax rate increases as the taxable base amount increases.” Therefore, my statement about the progressivity (or, really, lack thereof) at the top of the distribution is correct. To say that it is progressive is highly misleading!