Responding to my post on Robert Samuelson yesterday, Ted Burke said, "You can't compare and contrast top marginal tax rates when allowable deductions are so different today than they were years ago when tax rates were higher." He's right that marginal tax rates are a crude measures of effective tax burden. Which is why researchers developed the "effective federal tax rate" measure, which combines income, payroll, corporate, and estate taxes. Here's how that looks:
For the rich, effective federal tax rates fall throughout the century. The top one percent was paying around 45 percent in 1960, and that's fallen to around 37 percent. But the real action has been in the subgroups above the top one percent: The top hundredth of a percent was paying above 70 percent of their income, and now they're only a touch above 40 percent. But using Piketty and Saez's paper on the progressivity of the US tax system, we can break that down even further:
As they say, "The contrast between the progressivity of federal taxes in 2004 and in 1960 is striking." And a lot of the change has come in the top slivers of the income distribution. "The current federal tax system is relatively close to a flat tax rate within the top 1 percent," write Piketty and Saez, and that's no small statement. In 2006, the top percentile made around $380,000. The top hundredth of a percentile made around $5,000,000 a year, and controlled 9 percent of the nation's income. But they're not bearing a significantly heavier tax burden, as they would have been a few decades ago. Indeed, their burden has decreased. That's a serious reduction in progressivity.
For the rich, effective federal tax rates fall throughout the century. The top one percent was paying around 45 percent in 1960, and that's fallen to around 37 percent. But the real action has been in the subgroups above the top one percent: The top hundredth of a percent was paying above 70 percent of their income, and now they're only a touch above 40 percent. But using Piketty and Saez's paper on the progressivity of the US tax system, we can break that down even further:
As they say, "The contrast between the progressivity of federal taxes in 2004 and in 1960 is striking." And a lot of the change has come in the top slivers of the income distribution. "The current federal tax system is relatively close to a flat tax rate within the top 1 percent," write Piketty and Saez, and that's no small statement. In 2006, the top percentile made around $380,000. The top hundredth of a percentile made around $5,000,000 a year, and controlled 9 percent of the nation's income. But they're not bearing a significantly heavier tax burden, as they would have been a few decades ago. Indeed, their burden has decreased. That's a serious reduction in progressivity. 
