Tuesday, February 25, 2020
Economic Policy Institute, New Tool Examines How U.S. Taxes and Spending Affect Income Inequality:
Today, the Economic Policy Institute is launching a website aimed at shedding light on how the U.S. tax and spending system affects household income up and down the income distribution.
The U.S. Tax & Spending Explorer allows users to take a deep dive into the ways that the federal government affects the inequality of households’ incomes through taxes and through spending on social insurance and safety net programs. The explorer also examines so-called “tax expenditures,” sometimes referred to as the hidden federal budget. ...
Taken as a whole, the federal tax system is progressive—people with higher incomes tend to face higher tax rates. For instance, the bottom 20% of households pay just 0.9% of their income in federal taxes, while the top 1% of households pay one-third of their income in federal taxes. Two of the most progressive taxes, the individual income tax and the corporate tax, account for a majority of federal tax revenue. But decades of corporate tax cuts and increases in payroll taxes, which are less progressive, have weakened the equalizing effect of the federal tax system. This decline in corporate tax rates also explains why some analyses of the absolute richest households (the top 0.1% or the Forbes 400, for example) show their tax rates are actually lower than those faced by typical taxpayers.