June 10, 2002
The progressive income tax doesn't work
See this piece from the NCPA. (Note that the Bush tax cut INCREASED the progressivity of our tax code--read to the end to see a chart on who pays what in this country. Can you guess what % of the federal personal income tax is paid by the top 5%? What should it be? Read on to find out what it is.)
A study by the Institute for Policy Innovation reports that the Progressive Income Tax (PIT) does not redistribute income. In fact, it has an overall negative effect on income. While the top 10 percent of reported incomes accounts for an increasingly large percentage of total revenue, the incomes of the other 90 percent have declined.
- From 1973-1997, the top 10 percent's share of revenue rose from 48 percent to 63 percent, yet the other 90 percent's income declined by 14 percent.
- Critics might claim that this is because the rich are getting richer, but the top 10 percent's income grew at a rate less than inflation -- 2.10 percent between 1971-1997, slightly down from its previous growth rate of 2.15 percent.
- During a time when the top 10 percent's share of tax revenue was constant (1957-1973), the other 90 percent's income rose sharply.
- By contrast, during the period when the top 10 percent's share increased (1973-1997), the other 90 percent's income growth was sharply reduced.
Even when welfare benefits and other transfer payments are taken into account, the other 90 percent still saw a relative drop in income.
In short, the real income effects of high marginal taxation have resulted in lower real after-tax income for all Americans.
|Who's Paying Taxes|
|PERCENTILES*||TOTAL SHARE OF AGI||% OF FEDERAL PERSONAL INCOME TAX|
*Ranked by adjusted gross income (AGI)