Friday, August 26, 2011
Tax Policy Blog, Maybe the Rich Can Afford to Pay More Tax, But Should They?
As the following graph shows, in 2007 those households in the highest income quintile (the top 20%) had an effective tax rate of a little less than 15%. This has changed very little since 1986 or anytime in the 1980s.
Contrast that with the lower income quintiles, which all pay dramatically less tax now than they did in the 1980s. The trend is most pronounced among those in lowest income quintile, which had an effective rate of about zero up until that magical year 1986, and thereafter a more and more negative rate. In 2007, those in the lowest income quintile not only paid no tax, they got paid at the rate of 6.8% of their income! Starting in 2002, the effective rate for the second lowest income quintile goes negative as well. This means that the bottom 40% of households are now getting paid through the income tax code.
This is why the OECD finds that the U.S. has the most progressive income tax system in the industrialized world. That means the rich in the U.S. pay a greater share of income taxes than in any other OECD country. The top 10% pay about 70% of income taxes. Mr. Bartlett's argument that the rich should pay even more doesn't hold water.