Saturday, April 16, 2011

U.S. Tax Code Is One of World's Most Progressive

The United States has one of the most progressive tax systems in the world, and has become much more progressive in the past 30 years, says Richard Rahn, a senior fellow with the Cato Institute.
  • The top 1 percent of taxpayers pay 38 percent of all the income taxes despite having just 20 percent of the income.
  • The top 10 percent of taxpayers pay 70 percent of the income tax while having just 46 percent of the income.
  • At the other end, the bottom 50 percent of taxpayers pay just 2.7 percent of the income tax while having 13 percent of the income.
This has resulted in a situation in which a relatively small minority of taxpayers pay the bulk of the taxes, while most American pay little or no income tax.  This is causing an increasing disconnect between benefits from government and what most citizens pay for.  One result is a greater polarization in the political realm where a majority of citizens increasingly demand more government benefits for which they want others to pay.
The Swedes were on this same destructive path, but they reversed course over the last couple of decades and made their tax system far less progressive, even though their tax rates at all levels are above most of those in the United States.  The result has been a tempering of demand for new government services as people at all income levels realize they will be the ones paying for those services and not some mythical "rich" person.  The side benefit is that Sweden, as a result of tax and other reforms, now has one of the highest economic growth rates in the world, says Rahn.

Source: Richard W. Rahn, "Tax Inequity," Washington Times, April 11, 2011.
For text: http://www.washingtontimes.com/news/2011/apr/11/tax-inequity/