Presentation on theme: "“How Progressive is the U.S. Federal Tax System? A Historical and International Perspective” Thomas Piketty- Economics Professor, Paris Emmanuel Saez-"— Presentation transcript:
“How Progressive is the U.S. Federal Tax System? A Historical and International Perspective” Thomas Piketty- Economics Professor, Paris Emmanuel Saez- Economics Professor, Berkley National Bureau of Economic Research
What does that mean for income distribution? Flat TaxProgressive Tax
Why not a flat tax? Does a CEO deserve their income less than a minimum-wage employee? – Irrelevant Reasons -Portion is undeserved rent (Land ownership) -Income inequality leads to crime/murder -As income rises, need for that income drops -Gov. must tax where the wealth is *Roughly 20 economically weak countries have a flat tax
What makes our system progressive Taxable Income Tax Bracket $0-$8,50010% $8,500- $34,500 15% $34,500- $83,600 25% $83,600- $174,400 28% $174,400- $379,150 33% $379,150+35% + FROM the RICH Estate Taxes Capital Gain Taxes Tax credit limitations TO the POOR Welfare Social Security Other Gov. Programs
2004 Income Groups Pre-tax Income Share Post-Tax income share P0-9053.7557.28 P90-9511.311.1 P95-9915.314.5 P99-18.104.22.168 P99.5-22.214.171.124 P99.9-99.995.54.7 P99.99-1003.53 1970 Income Groups Pre-tax Income Share Post-Tax income share P0-9067.6170.54 P90-9510.7611.1 P95-9912.612.23 P99-99.52.872.39 P99.5-99.93.632.62 P99.9-99.991.760.94 P99.99-100.76.25
Change 1. Dramatic reduction in rates 2. Corporations paying half the taxes they did in the 60’s 3. Payroll taxes substantially larger… BUT only incomes over 106,800 are effected.
Conclusion Other developed countries are far more progressive – UK/France Most dramatic changes occur within top 1% of earners – Tax system is being shaped by the wealthy Progress Taxation has declined dramatically since the 60’s – Top earners used to pay over 70% of income in Taxes