Great study on debt and taxes from the St. Louis Fed. Lots of insightful charts and facts. Here are a few:
1. From 1979 through 2000, all of the changes in the tax code before the Bush tax cuts effectively reduced the average tax rate for the bottom 80 percent of earners and raised the average tax rate for the top 20 percent. Hence, these tax changes appear to have redistributed the tax burden to the higher-income earners.
2. In contrast, the Bush tax cuts reduced average tax rates for all income levels. However, these cuts reduced the average tax rates more for higher-income earners: From 2000 to 2007, the average tax rates declined by 3.1, 1.9, 1.7, 2, and 2 percentage points from the highest to the lowest quintiles, respectively.
3. The lowest-income earners have benefited the most from all tax law changes since 1979; the average tax rate declined by 1.3, 3.9, 4.2, 4.5, and 6.8 percentage points from the highest to the lowest quintiles, respectively.
4. Moreover, since 2001 the lowest 40 percent of income earners have had zero or negative individual income average tax rates. Hence, 60 percent of income earners account for 100% of personal income tax revenue.
5. The average Social Security tax for all quintiles increased until early 1993. The average Social Security tax rate continued to increase for the lowest-income earners but either leveled off or declined for everyone else. The top 5 percent of income earners has had the lowest average social insurance tax rate over the entire period and the tax rate has been relatively constant. The highest and lowest income quintiles had nearly identical average tax rates from 1979 to 1995, when the highest quintile’s average tax rate began to decline.