PROGRESSIVE TAXATION?

There’s been a great deal of talk from the Obama administration about tax policy, which can be summed up in two sound bites: “Ninety-five percent of American taxpayers will not see an increase in (federal) income taxes” and “Those earning over $250,000 must pay their fair share.”

Here’s some Congressional Budget Office data for the 2006 tax year. The data is for household income, expressed in quintiles (20% of the returns), from lowest to highest. Here are the numbers for each quintile.



This chart is a rough cumulative distribution function of federal income tax paid by each (household) income quintile.



The lowest quintile, households averaging $17,200 in annual income, earned about 3.8%of the total household income. They got back (in refundable credits) something like 4% of the total income taxes paid. The second quintile earned about 8.3% of the total household income and paid a percent or so of the total income taxes paid. The top quintile (the 20% of households averaging $248,400 in annual income) earned about 55.6% of the total household income and paid roughly 75% of the total federal income taxes paid. The top two quintiles (40%) paid almost all of the income taxes collected.

That graph reminds me of the story of Robin Hood, robbing the rich to give to the poor. Our government appears to have “one-upped” poor Robin by eviscerating the rich, giving a pittance to the poor, and keeping the bulk for itself.

But never mind. Here’s what’s important - the bottom 60% of filing households essentially have no investment in America beyond voting themselves ever-increasing handouts. The 40% of taxpayers who fund America have a minority voice in keeping it running.

That’s a prescription for ‘bread & circuses’ – and corruption.

We’re at a tipping point.