Quote:
Originally Posted by loquitur
That's simply not true. Tax rates were nominally more progressive, but the actual rates paid at the top were not very much different from what they are now, because the tax code was riddled with exemptions, shelters and other such things. That in itself created unproductive activity (tax-saving-oriented planning and investment instead of productive planning and investment), which means that the economy likely would have been even better with a sane tax structure. But you're confusing nominal rates with actual rates, and the two have only a tenuous relationship to one another. The fact is that taxes actually paid are more progressive today than they have ever been in history. The bottom half of the income scale pays something like 3% of the income taxes. The top 1% pays something like 40%. I believe the top 5% pays something like 70%. You claim not to want to cap or confiscate, but how much more progressive do you think you can make the tax system than it is right now? You can make it saner and simpler but it can't get very much more progressive. The tax system has many things wrong with it, but lack of progressivity isn't one of them.
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No, really, actually it was more progressive. From just two decades ago:
That is the effective tax rate.
And if you look at tax share of income:
So as you can see, the difference between the top and the bottoms has reduced by quite a lot.
In fact, the current system, when take all taxes into account, is barely progressive. The whole thing about the top paying the vast majority of taxes happens because the top has the vast majority of income:
It is specially not progressive when compared to other nations (considering taxes and transfers):
If you want to really go at this, this paper really addresses all of this:
http://elsa.berkeley.edu/~saez/piket...P07taxprog.pdf
And if you don't want to read all of that, here's the bottom line:
these are the effective total tax rates, so your whole bit about nominal vs effective is actually false.
So yes, the American tax system was significantly more progressive in the past. And it was so when you look at individual income taxes, but even more so when you look at the total share of income paid in taxes by each group. That is specially so because taxation has shifted significantly from capital to labor.