How progressive is the income tax?

Instapundit links to this post from TaxProf Blog, which has a very tidy table illustrating that the Top .1 % of earners pay quite a high proportion of the total tax bill, the Top 5% a substantial proportion of the total tax bill, the Top 20% the preponderance of the total tax bill, and the Bottom 20% of earners a very small proportion of the total tax bill. All of that may miss the point: what proportion of their incomes does each category pay out in federal taxes? All taxes? Isn’t that how progressivity is measured?

Doesn’t the table only tell us that the incomes of the very rich are very high, indeed, and the incomes of the lowest quintile rather low?

UPDATE: Submitted to the Beltway Traffic Jam

8 comments… add one
  • ryan Link

    That’s one way progressivity is measured, but surely not the only way. Another would be this way — to say that the default is to have everyone pay the same amount, but to acknowledge this isn’t possible (either financially or politically) and to make it “progressive” by making one’s total share increase progressively as one increases in income. We don’t like to think of things this way, but why is it inaccurate to say so? To quote a character from that bastion of economic conservatism, “The West Wing”, “I left Gage Whitney [Sam’s last job] making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And I’m happy to because that’s the only way it’s gonna work, and it’s in my best interest that everybody be able to go to schools and drive on roads, but I don’t get twenty-seven votes on Election Day. The fire department doesn’t come to my house twenty-seven times faster and the water doesn’t come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let’s not call them names while they’re doing it, is all I’m saying.” Why isn’t it accurate, if irksome, to say that if one person pays twice as much as me, our taxes are progressive whether he makes 1%, 10%, 100% or 10,000% more than me?

  • This is the sort of chart you are looking for.

    And here is an extract:

    * The top one percent of the population received 11.4 percent of national after-tax income in 2002, up from its already-large 7.5 percent share in 1979. (Each percentage point of after-tax income is equivalent to $62 billion in 2002 dollars.)

    * In contrast, the shares of national income received by various groups of low- and middle-income people all fell. The middle fifth of the population received 16.5 percent of the national after-tax income in 1979, but 15.8 percent in 2002. The bottom fifth received 6.8 percent of such income in 1979, but 5.1 percent in 2002.

    The Census Bureau and the CBO do these breakdowns of income by quintile quite regularly (and talk is cheap – why can’t I find one?)

    Lots of useful links in the footnotes here.

  • Thanks, Tom. Those are useful links. To be perfectly honest in this post I broke one of my own self-imposed rules: I asked a rhetorical question. My actual point was that the way the original WSJ editorial used the term didn’t fit an intuitive idea of progressivity. They’re just torturing the data until they submit.

    The issue of progressivity per se and different definitions are more than worth a post all by itself.

    And, ryan, the very rich may only get one vote on election day but every other day they got many, many more votes than that. Money determines who runs in the elections, which candidates are able to get their messages out, and who gets access to the elected officials after the election.

  • PD Quig Link

    As long as we’re playing statistical pocket pool here, I would point out that you are omitting the obvious fact that the rich consume a miniscule proportion of government services. These services are actually income–or at the very least–a negative income tax. In fact, let’s take it to the next level: every public sector worker is actually a payer of negative income taxes, since their income is derived from the redistribution of taxes paid by private sector workers.

    Before you go figuring out ways to balance my share of taxes against my share of the national “income,” make sure that you are 1) appropriately accounting for all the sources of income and 2) recognizing that the taxes of 80% of Americans are providing jobs for the other 20%.

  • PD Quig, in this post I’m not arguing for or against progressivity in the tax system. I’m merely suggesting that progressivity in the tax system seems to mean different things to different people.

    You might reconsider how miniscule a proportion of government services the rich consume. Without going into obvious comparisons of the costs of defending a $100,000 home sitting on an eighth acre with a multi-million dollar 100 acre estate, consider this: nearly every great fortune is derived from a government-granted monopoly whether it’s called a patent, copyright, or government contract it’s still the force of government giving enormous benefits to the wealthy.

  • DR Link

    PD Quig,
    Your obvious fact isn’t even true. 30% of outlays go to the current military, and 18% go to the past military. That is hardly miniscule. Furthermore, there are tons of government services that are mainly used by the rich. If you were rich, you would probably know this. For example, local airports. There are all funded by the federal government, even if they don’t have commercial flights. Also, private jets take up a larger percentage of resources at major airports as well.

    As for figuring in government employment, that is just silly, even if we accept your premise. Halliburton has been lining the pockets of Dick Cheney and pals at our expense. And I would hardly call them poor, so you better include that in your negative calculations as well.

  • PD Quig Link

    Now you’re just insulting the intelligence of the readers here. The rich consume an infinitesimal portion of Medicare/Medicaid’s and Social security’s combined $1.25 trillion annual spending. That number alone dwarfs by six orders of magnitude the silly anecdotal evidence you adduce.

    Your statement that the military is 30% of the budget is also inaccurate—it is in fact less than 19%. Now that should be apropos of nothing, except you ascribe military spending to consumption by the rich, presumably because evil corporations benefit from such spending? This completely unjustifiable argument also asks that we forget the hundreds of thousands of non-rich employees and the millions of non-rich 401k stockholders benefiting thereby. Up goes the Halliburton cri de coeur!

    Why don’t you just clear your throats, step up to the podium and announce clearly to the country that it is your goal to take economic resources from people who have more and to give them to those who have less without asking whether the first deserve to have them and the second deserve to receive them? That’s what this progressivity ruse is all about when laid bare. Which begs the question: if redistribution is an imperative within the context of one’s own society, why does the same rationale not apply to sharing resources outside of our own society? But then that gets into the whole ‘global’ thing, doesn’t it? And this conversation is over, my little class warriors.

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