And this quote from the OECD paper means the Journal’s assertion that the rich in the U.S. pay the most of any country studied “even after adjusting for their relatively higher incomes” is not quite true (emphasis mine):
Based on the concentration coefficient of household taxes, the United States has the most progressive tax system and collect the largest share of taxes from the richest 10% of the population. However, the richest decile in the United States has one of the highest shares of market income of any OECD country. After standardising for this underlying inequality, Ireland has the most progressive tax system as measured by the ratio of the concentration coefficients of household taxes and market income, while Australia and the United States collect the most tax from people in the top decile relative to the share of market income they earn.
Moreover, I have to question whether the OECD study is valid at all. It uses something called “household taxes,” but the numbers don’t seem to add up. The data it uses says that average household taxes in the U.S. during the “mid-2000s” were higher than they were in the UK and the same as France and Canada, at about 26 percent of income. I don’t think so.
Here’s another OECD report on taxes as a percentage of GDP. It has 2009 U.S. numbers at 24 percent of GDP, while Canada is 31 percent, the UK is 34 percent, and France is 42 percent. For all levels, including state and local, U.S. tax revenue was at 32 percent of GDP in 2008, while Canada was at 40 percent, the UK at 42 percent, and France at 49 percent. Those numbers include corporate taxes, but those are lower in the U.S. as a share of GDP than in other similar countries.
Meantime, there’s this from the Journal today:
They say it’s more important to look at the tax rates being paid by higher earners. In the U.S., the average tax rate for higher earners has fluctuated, but generally has declined for the top 10% from 29.6% in 1979, to 26.7% in 2007, according to the CBO, even as incomes for that group were rising.
That’s misleading. The Journal has been talking about federal income taxes up to now, but this CBO number includes all federal taxes, including payroll. The top 10 percent paid nowhere near a 26.7 percent federal income-tax rate in 2007. That number, according to the same CBO estimates, was 16.2 percent, and it was 18.8 percent, according to the IRS (spreadsheet), which oughta know.
If you want a real look at who pays taxes in the U.S., you have to include payroll and excise taxes for everybody, as well as state and local taxes, which are highly regressive:
Another problem here is that the Journal focuses variously on the top 10 percent or the top 20 percent of earners. But the income gains haven’t been concentrated in the 80th to 98th percentiles. They’ve been concentrated in the 99th percentile, and more specifically in the 99.9th percentile.
And the Journal’s graphic arbitrarily looks at the numbers only since 1987, rather than, say, 1979, before top tax rates were slashed by Reagan.
The story here that the Journal misses is that effective federal tax rates for the top 1 percent have plunged over the last
three four or five decades while those of the top 20 percent and the second-highest quintile, which obviously includes the top 1 percent, have risen. In other words, the 60th to 99th percentile are paying a lot more while the richest pay a lot less.*
If you go back half a century, the picture is even more striking: Middle-class tax rates have risen or stayed the same while those of the top 1 percent, and especially the top 0.1 percent’s, have plummeted.
As David Leonhardt said about that chart:
If we had good numbers on the distribution of state and local taxes, the picture would be even more pronounced. These taxes tend to be less progressive than federal taxes…
The Journal does note that at least part of the highest quintile’s greater share of the overall tax burden is due to their income gains, but it obscures the inequality again by not focusing on the top 1 percent, which has gotten almost all of the after-tax income gains of the last three decades (the red line here is the top 1 percent and the yellow line is the top 20 percent):
The paper goes on to call Singapore an “emerging economy.” Presumably, having per capita GDP (in purchasing power parity) that’s 10 percent to 20 percent higher than the U.S. means you’ve emerged.
This story’s meme emerged from the Journal edit page. Best to stick it back in that cesspool.