I have yet to see any study that shows the US is less progressive in taxation than most European countries. We take in less revenue and that’s pretty much why we take in less revenue. A VAT would get us to 25-30% of GDP in revenues. An income tax that falls mainly on the rich will never get us above 18%.
I also notice that those who are taxed tend to have the greatest voice in how that money is spent. There could be a relationship between voter apathy in the US vs. Europe, and the fact that middle class and poor people in the US pay less taxes.
That concentration of tax burden borne by the top 10% is not a function of progressivity so much as it is a function of how much of the income is jam packed into the top 10%.
And your argument for capital gains treatment seems like it should apply to all investment income, including interest, rent, licenses, royalties, etc.
We used to have a revenue base ~20% that fell significantly more on the rich than it does now or are you starting your historical analysis in 2001 and ignoring everythign between 1913 and 1999?
The ratio between the amount of income earned by the top 10% and the taxes paid by the top 10% is the highest amoung the developed world. The average for the OECD-24 is 1.11 the US has a ratio of 1.35. Belgium, Iceland, and Norway all have ratios under 1. The top 10% of the US earns slightly more than the average, 5.1% more, but the taxes paid by the top 10% are 14.1% higher.
I agree with the interest but am too much of a Georgist to agree with the rent income part. I don’t see why licenses and royalties should be treated a capital gains.
This is misleading. What’s the percentage of national income gathered by that top 10% in each country?
In other words, if in the US, the Top 10% is paying 45.1% of the tax, but gets 49% of the income, while in Japan, the Top 10% pay 28.5% of the tax, but get 25% of the income, then Japan’s system is more progressive. Right?
There’s a video purportedly showing the distribution of wealth: [Wealth Inequality in America](Wealth Inequality in America). I don’t know how accurate it is, but I was dumbstruck by how wide the gap is. It’s about wealth, not income, so may not be relevant in terms of taxation.
This is untrue. Capital gains are taxed on the profit realized, not the whole of the proceeds.
Really, if we’re concerned about not punishing risk-taking investment, we should fold capital gains into regular income, tax the net total, and allow capital losses to be subtracted from regular income for tax purposes. By comparison, the present system gives us very low rates on very high capital gains and higher rates on capital losses.
That’s because we have such high pre-tax income for the top 0.1% that they blow the curve; and that we have so many people so underpaid that they can’t be expected to afford income taxes.
If you want to tax everyone via a massive VAT, fine. Michael Lind has been advocating this for years. But if you’re trying to build a prosperous Sweden-like economy out of it, you have to have benefits going out that make the final effect highly progressive. The Wonkblog article was making the point that our tax side is relatively progressive while our net–taxes and benefits together–is relatively regressive.
So I await your full-throated support of massive payouts to the poor.
Demand is infinite, supply is the bottleneck.
The US has the most progressive tax system even when you take into account the relatively high income inequality. You mention Sweden, there the top 10% earn 26.6% of income and pay 26.7% of the taxes. In the US the top 10% earn 33.5% of income and pay 45.1% of the taxes.
If you factor taxes and transfers together the top 20% of income earners in the US pay 22 cents to the government on every dollar earned whether income or capital gains. The bottom 20 of income earners receive three dollars in benefits for every dollar earned. That is still very progressive.
As I mentioned upthread, a large chunk of the government spending in the US is done via tax incentives and if you factor those in the US government spends about the same as the Swedish government. The US just does not get as much value for what it spends. If you factor in tax incentives and look at per capita spending the US spends $7,800 per person while Sweden spends $6,700 per person. (cite)
Because tax incentives aren’t actually spending money?
Look, our poorest make incredibly little money, which also blows the curve. Does Sweden have our homeless problem? Does it have a system of disability stipends designed to pay as little money as possible while keeping people technically alive? People who make no spending money aren’t really able to pay taxes of any kind.
That might be just about the most economically illiterate statement I’ve ever seen. I guess there is no unsold inventory in your world. I guess there is no unused capacity in your world.
BTW, a state with N people where N -1 have just barely enough to live on, and 1 person has all the rest of the money and thus pays all the taxes has a very progressive tax system. Just not a very good society.
True, but if you look at median income, the US is behind only Luxembourg, bitching of our middle class aside. I compare the US middle class to Christian evangelists(the two groups overlap of course). An oppressed majority constantly under attack in its own collective mind.
The fact is, we have the richest middle class of any decent sized country in the world, yet also the least taxed. Despite an extremely wealthy middle class, we keep on cutting taxes for those making under $250,000/yr and hope to make it up by taxing the tiny minority above that more. Then act surprised when it isn’t working.
A government that relies primarily on the top 1% for funding by necessity must be a small government. If you vote for low middle class taxes, you vote for small government. If you want the government at its current size or larger, then you need a VAT.
You don’t need a cite for that, I think we all accept your argument. However, how important is inequality when it produces such a well-off middle class? Would you like to make $5000 less so that a millionaire can make $100,000 less? How would this make you happier or better off?
Does it? The middle class, like everyone else except those at the top have gotten poorer over the last few decades.
And as far as if the wealth distribution in this country wasn’t so ridiculous, would people be better off…money is value, so unless the only thing you want in live is love or something…
And finally, redistributing the wealth would obviously be a decrease for the mega-rich and ideally an increase for everyone else, because that’s the fundamental pattern. And it has been somewhat exacerbated by the recession, but the pattern existed long before that.
How come nations that redistribute wealth more than the US tend to have less of it to redistribute? Tell the rich that they’ve done enough, no need to make any more money and eventually they take it to heart and stop working those 80 hour weeks. That’s my theory anyway for why Sweden would be the 49th poorest state if it was part of the US.
No, actually, Sweden’s always been poor, except for perhaps maybe trading, historically. But it’s pretty obvious why the US is so rich given the last 100 years of history or so.
It’s still a problem that over the past few decades, wealth has been shifting upwards into the top 1% leading to a ridiculous imbalance. Even the moderately rich on the whole, the poorer millionaires have gotten poorer. It’s one thing where it’s communism and everything is equal, as though anyone said it should be but it’s another when it’s a corporate oligarchy. I think our shift towards the latter should be slowed and stopped and returned to what it was, say, 20 years ago.
You can’t income-tax your way into substantially more revenue because true “rich” people have wealth, not income. You aren’t a member of the economic elite if you work for a paycheck. It’s amazing how little understanding there is of this. A high income tax hits people who are good at being lawyers, doctors, or corporate board members. It doesn’t hit people who live off trusts and investments. The psychological conclusions I could reach about what the real agenda of a high income tax is are left as an exercise to the reader.
Actually, very rich people live off capital gains income, which is taxed according to its own schedule, and at lower rates at all margins than other kinds of income are in the same amounts. We could add some brackets to the capital gains tax schedule and either raise a lot of cash or incentivize that money’s expenditure.
We could also tax wealth in itself, as the French do.