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Posted By TheNewsCommenter: From Nationalreview.com: “Income Inequality Has Soared While Taxes Have Become Dramatically Less Progressive . . . or Not | National Review”. Below is an excerpt from the article.
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The truth gets its boots on pretty quickly in the Internet age. On October 6, the New York Times ran a piece broadcasting the striking claims made by the economists Emmanuel Saez and Gabriel Zucman in the new book The Triumph of Injustice. Just a couple of weeks later, it’s clear that these claims are built atop a foundation of often questionable and sometimes indefensible assumptions.
Per Saez and Zucman, while the rich have been pulling in more and more of the nation’s income — grabbing about a fifth of it these days, double what they got a few decades back — they’re paying lower and lower tax rates. Indeed, in 2018, the richest 400 Americans paid the lowest overall tax rate (including state, local, and federal taxes) of any income group. While the very richest Americans in 1950 paid two-thirds of their income in taxes, in 2018 it was down below a quarter; even the full top 0.1 percent barely pay more than the bottom 90 percent these days. It’s not that much of an exaggeration to say we have a flat tax system, not a progressive one.
The debunkings came from everywhere: a Twitter thread by Journal of Public Economics editor Wojtek Kopczuk, an article by the economic historian Phil Magness, an academic response from the economist David Splinter, a report from the Republican side of the Senate’s Joint Economic Committee (JEC), a traditional book review in Le Grand Continent, and more.
Let’s take the two claims, rising inequality and rich people paying low tax rates, in turn. Both of these problems are probably overstated, in the latter case quite dramatically, in Saez and Zucman’s numbers. And I say “probably” only because no one writing about these trends should pretend that even the best estimates are much more than guesswork, and necessarily so, because the data here are spotty and there are legitimate disagreements over what should even count as income and tax payments.
So why is sky falling in the S-Z book? Recall this animation. There are just two changes of relevance here. One is corporate tax incidence. This is what turns very mild decline in progressivity into rapid drop. The other somewhat important one is treatment of capital gains pic.twitter.com/vOQchHMGAY
— Wojtek Kopczuk (@wwwojtekk) October 15, 2019
The standard data shows that the tax system is overall progressive. This chart combines CBO estimates for federal taxes with ITEP estimates for state & local taxes. Federal income taxes highly progressive, when you add in payroll/state/local/etc. is still progressive but less so. pic.twitter.com/WTOgm58Fyo
— Jason Furman (@jasonfurman) October 7, 2019
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