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Showing posts from April, 2011

Thinking about tax share

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Kevin Drum posts this showing tax share by income in 1979 vs 2007.



This purports to show that: 1) Our tax system is not progressive (i.e. the rich don't pay outsized tax rates) 2) Tax rates on the rich have declined.
The biggest differences between this graph and graphs favored by the right: 1) "Average" is probably a very misleading way to present a comparison. 2) This graph includes state/local taxes. 3) This graph includes payroll taxes (Medicare, Social Security)

Thinking about "Average" tax share It's not clear what "average" mean here. I'm presuming it's the simple mathematical average: tax rate = sum(all taxes) / sum(all income) If that's the case, then it's a highly misleading way to try and show the progressiveness of a tax system. The average almost by definition cannot show the progressiveness of a distribution. Consider the most progressive tax system imaginable: Top 1%: 50% of income, 100% of all taxes, with 30% ef…

Taxing the harder working

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Instead of thinking of increasing marginal rates as "taxing the rich", think of it as "taxing the harder working".Here's a graph showing hours worked by income quintile:


Russel Sage Chartbook
The top income quintile household works more the 2x hours per year. And their reward for all that hard work? Higher marginal taxes!