To hear many a commenter talk or write one would believe that over the last thirty years, and especially the last seven, the tax burden has become increasingly tilted in favor of the wealthy. Greg Mankiw begs to differ, and here is the data:
The first number below is for 2005, the most recent year available. For comparison, I computed, and present in parentheses below, the average effective tax rate from 1979 to 2005, the time span covered in the report.
All households: 20.5 (21.6)
Lowest quintile: 4.3 (7.2)
Second quintile: 9.9 (13.2)
Middle quintile: 14.2 (17.1)
Fourth quintile: 17.4 (20.1)
Highest quintile: 25.5 (26.1)
Top 10 percent: 27.4 (27.6)
Top 5 percent: 28.9 (29.0)
Top 1 percent: 31.2 (31.7)
Notice that all groups are paying lower tax rates than the historical average. But in contrast to some popular perceptions, the change is not concentrated among the upper income groups. In fact, the opposite is true.
This data includes social security and most other federal taxes:
In its analysis, CBO estimates effective tax rates for the four largest sources of federal revenues—individual income taxes, social insurance (payroll) taxes, corporate income taxes, and excise taxes—as well as the total effective rate for the four taxes combined. Those taxes account for over 95 percent of total federal revenues. The analysis does not include federal estate and gift taxes, customs duties, and other miscellaneous receipts. Nor does it include state and local taxes.
An interesting point is that it includes the employers contribution in the employees tax rate, rather than the employers, which raises the effective tax rate on employees, and thus the lower income groups. That makes the numbers all the more impressive, because many supporters of Social Security would argue that the employer contribution is not a tax on the employee. I agree with the CBO, but I am curious if anyone will argue the numbers are skewed to make the burden on the wealthy smaller, and the burden on the poor and middle class higher, than it should be. I doubt it, but if they were intellectually consistent they would.
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