The WSJ’s David Wessel points out just how progressive the U.S tax system is:
In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.
In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes
In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes.
So the share of income to the top 5% has gone up by 5.8 percentage points, while the taxes they pay has increased by 11.9 percentage points. They make more but are paying even more.
Now, according to Wessel, America has greater income inequality now than it did during the 1980s:
In 2007, the bottom 40% received 14.9% of the income (including the value of government benefits) and paid 5.9% of all federal taxes. In 1979, they had a bigger share (17.4%) of the income and paid more (9.5%) of the taxes.
So the bottom 40%’s share of income fell by 2.5 percentage points while their share of taxes paid fell by 3.6 percentage points.
Wait, I thought the tax system causes incomes to grow more equal. Actually, it is a mitigating factor.