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“How Progressive is the U.S. Federal Tax System? A Historical and International Perspective” Thomas Piketty- Economics Professor, Paris Emmanuel Saez- Economics Professor, Berkley National Bureau of Economic Research
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Flat tax BaseRateTaxes 10,00020%2,000 50,00030%15,000 100,00040%40,000 BaseRateTaxes 10,00030%3,000 50,00030%15,000 100,00030%30,000 Progressive Tax
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What does that mean for income distribution? Flat TaxProgressive Tax
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Why not a flat tax? Does a CEO deserve their income less than a minimum-wage employee? – Irrelevant Reasons -Portion is undeserved rent (Land ownership) -Income inequality leads to crime/murder -As income rises, need for that income drops -Gov. must tax where the wealth is *Roughly 20 economically weak countries have a flat tax
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What makes our system progressive Taxable Income Tax Bracket $0-$8,50010% $8,500- $34,500 15% $34,500- $83,600 25% $83,600- $174,400 28% $174,400- $379,150 33% $379,150+35% + FROM the RICH Estate Taxes Capital Gain Taxes Tax credit limitations TO the POOR Welfare Social Security Other Gov. Programs
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2004 Income Groups Pre-tax Income Share Post-Tax income share P0-9053.7557.28 P90-9511.311.1 P95-9915.314.5 P99-99.54.13.7 P99.5-99.96.65.8 P99.9-99.995.54.7 P99.99-1003.53 1970 Income Groups Pre-tax Income Share Post-Tax income share P0-9067.6170.54 P90-9510.7611.1 P95-9912.612.23 P99-99.52.872.39 P99.5-99.93.632.62 P99.9-99.991.760.94 P99.99-100.76.25
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Change 1. Dramatic reduction in rates 2. Corporations paying half the taxes they did in the 60’s 3. Payroll taxes substantially larger… BUT only incomes over 106,800 are effected.
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Conclusion Other developed countries are far more progressive – UK/France Most dramatic changes occur within top 1% of earners – Tax system is being shaped by the wealthy Progress Taxation has declined dramatically since the 60’s – Top earners used to pay over 70% of income in Taxes
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