Paul L. Caron
Dean


Monday, October 14, 2019

Saez & Zucman: How To Tax Our Way Back To Justice

New York Times op-ed:  How to Tax Our Way Back to Justice, by Emmanuel Saez (UC-Berkeley) & Gabriel Zucman (UC-Berkeley):

America’s soaring inequality has a new engine: its regressive tax system. Over the past half century, even as their wealth rose to previously unseen heights, the richest Americans watched their tax rates collapse. For the working classes over the same period, as wages stagnated, work conditions deteriorated and debts ballooned, tax rates increased.

Stop to think this over for a minute: For the first time in the past hundred years, the working class — the 50 percent of Americans with the lowest incomes — today pays higher tax rates than billionaires. ...

[W]we have estimated how much each social group, from the poorest to billionaires, paid in taxes for the year 2018. Our starting point is the total amount of tax revenue collected in the United States, 28 percent of national income. We allocate this total across the population, divided into 15 income groups: the bottom 10 percent (the 24 million adults with the lowest pretax income), the next 10 percent and so on, with finer-grained groups within the top 10 percent, up to the 400 wealthiest Americans.

SZ

The tax system in the United States has become a giant flat tax — except at the top, where it’s regressive. The notion that America, even if it may not collect as much in taxes as European countries, at least does so in a progressive way, is a myth. As a group, and although their individual situations are not all the same, the Trumps, the Bezoses and the Buffetts of this world pay lower tax rates than teachers and secretaries do.

This is the tax system of a plutocracy. With tax rates of barely 23 percent at the top of the pyramid, wealth will keep accumulating with hardly any barrier. So, too, will the power of the wealthy, including their ability to shape policymaking and government for their own benefit. ...

The good news is that we can fix tax injustice, right now. There is nothing inherent in modern technology or globalization that destroys our ability to institute a highly progressive tax system. The choice is ours. We can countenance a sprawling industry that helps the affluent dodge taxation, or we can choose to regulate it. We can let multinationals pick the country where they declare their profits, or we can pick for them. We can tolerate financial opacity and the countless possibilities for tax evasion that come with it, or we can choose to measure, record and tax wealth. ...

When it comes to the future of taxation, there is an infinity of possible futures ahead of us.

SZ2

 

https://taxprof.typepad.com/taxprof_blog/2019/10/saez-zucman-how-to-tax-our-way-back-to-justice.html

Tax, Tax News, Tax Scholarship | Permalink

Comments

It's not going to happen

Posted by: Mike Livingson | Oct 14, 2019 1:53:19 AM

I would love to see Mr. Saez run the same analysis for the typical, "progressive" European country. Oh, and please run a case where the high earning, say Swedish, tax-payer establishes his tax domicile in, say Monaco or Dubai. Then compare this to the case of high-earning US citizen. A lot of work needs to be done, and starting in the US seems peculiar.

Posted by: MG | Oct 14, 2019 3:23:33 AM

Numerous critics have taken issue with the notion that America has a regressive, rather than a progressive, tax system. These critics don't deny that the system is stacked in favor of the rich, but they definitely deny the central Saez-Zucman claim.

Here's one of the latest examples, from Howard Gleckman of the Tax Policy Center: https://www.taxpolicycenter.org/taxvox/are-us-billionaires-really-paying-lower-tax-rate-working-people-probably-not

Posted by: Gerald Scorse | Oct 14, 2019 6:22:33 AM

Utterly dreadful. A thoroughly dishonest representation of the tax system. Fortunately, the proposals here will go nowhere.

The payroll tax hit of 11.2% of income is impossible, since it exceeds the 7.65% maximum. Evidently it's achieved by the standard sleight of hand of including the employer's portion as paid by the employee, a sure sign that this is a propaganda exercise. Even the employee's portion is misleading, as the 6.2% employee portion buys individualized benefits under current law that match or exceed the contribution, for the lowest paid workers, so the system works more as a forced 401(k) with generous match.

The tax system may or may not be ideal, but useful ideas for its improvement will not be found in articles that are this biased.

Posted by: No-no-no | Oct 14, 2019 10:04:34 AM

Misleading graphic. What matters is the actual dollars paid, not percentages of income.
And perhaps more substantively, do these high rates actually bring in much to the governmental fisc? How many taxpayers in 1950 actually paid at that top rate?

Posted by: ruralcounsel | Oct 15, 2019 3:45:46 AM