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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 19, 2012

Just How Progressive is the U.S. Tax Code?

Adam Looney & Michael Greenstone (both of The Hamilton Project), Just How Progressive is the U.S. Tax Code?:

[W]e examine the progressivity of the U.S. tax code and highlight two facts: the current U.S. tax system is less progressive than the tax systems of other industrialized countries, and considerably less progressive today than it was just a few decades ago.

The figure below shows how much influence taxes and transfers have in reducing inequality (measured using a common metric called the “Gini coefficient”) in various countries around the world. As indicated in the chart, the U.S. tax and transfer system does less to counteract pre-tax income inequality than the tax systems of most of our peer countries, meaning that our system is actually less progressive.

In addition to being less progressive relative to other countries, the U.S. tax system has also become less progressive over time. Over the last fifty years, tax rates for the wealthiest Americans have declined by 40 percent, while tax rates for average Americans have remained roughly constant.  This is illustrated in the figure below.

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Why don't they just use the Suits index rather than change in Gini coefficient?

Posted by: Michael Perkins | Apr 20, 2012 5:09:39 AM

bad title--the article is not about progressivity but inequality, as the article notes:

"These estimates may come as a surprise to observers focused on the share of federal taxes paid by high-income individuals, rather than the tax rates that those individuals face. Without a doubt, the share of taxes paid by high-income individuals has increased. But the reason why the share of taxes paid by the top 10 percent has increased is because their share of income has increased."

Posted by: daniel | Apr 20, 2012 7:52:22 AM

This is so annoying.
The graph is NOT about tax rates. The graph is about the combination of tax rates and transfers:
how much influence taxes and transfers have in reducing inequality

US taxes can be, and are, quite progressive -- far more so, relatively, than transfers. But the "tax the rich more" crowd are not quite honest with their headlines.

Posted by: Tom | Apr 20, 2012 7:59:34 AM