post by Paul Kelleher
Prompted by Pres. Obama's proposal of a "Buffett Rule"--that billionaires should not pay less in taxes than their secretaries--Greg Mankiw today writes (his emphasis):
If you can remember only one fact, make it this one: The middle class (middle quintile) pays 14.1 percent of its income in federal taxes, while the rich (top tenth of one percent of the population) pay 30.4 percent.
That fact does seem to establish that the the U.S. has a progressive federal tax system. Of course, Americans pay taxes other than federal taxes, so this fact does not alone establish the degree of overall progressivity of the U.S. tax system.
Moreover, there are facts other than the one Professor Mankiw selects that are worth remembering. Here are some of them in chart form, taken from Jacob Hacker and Paul Pierson's book Winner Take All Politics (click to enlarge):
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The evident trend is tremendous growth in after-tax income for the richest Americans coupled with a marked decline in their federal tax rates over the last 30 years. The first chart does not report on income growth among the top one-tenth of one percent, which is the group Mankiw compares to Americans in the middle-fifth of the income distribution. For some perspective on that question, albeit with what I believe is pre-tax data, here's a graph from the Century Foundation's blog:
My takeaway (although I'm willing to revise it): while the richest Americans do pay a higher federal tax rate on their income than do most Americans, most Americans have not enjoyed anything close to the income gains that the richest have enjoyed over the last 30 years. Mankiw has a paper in which he argues that this divergence in income growth is the result of skill-biased technological change. Hacker and Pierson offer a great deal of evidence against that interpretation in their book referenced above.
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