It turns out, writes David Leonhardt in the New York Times, The Rich Really Do Pay Lower Taxes Than You.
. . . For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.
. . . The overall tax rate on the richest 400 households last year was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980.
For middle-class and poor families . . . taxes have remained fairly flat.
The combined result is that over the last 75 years the United States tax system has become radically less progressive.
The data here come from the most important book on government policy that I’ve read in a long time — called “The Triumph of Injustice,” to be released next week. The authors are Emmanuel Saez and Gabriel Zucman . . .
“Many people have the view that nothing can be done,” Zucman told me. “Our case is, ‘No, that’s wrong. Look at history.’” As they write in the book: “Societies can choose whatever level of tax progressivity they want.” When the United States has raised tax rates on the wealthy and made rigorous efforts to collect those taxes, it has succeeded in doing so.
And it can succeed again.
Saez and Zucman portray the history of American taxes as a struggle between people who want to tax the rich and those who want to protect the fortunes of the rich. . . .
By the middle of the 20th century, the high-tax advocates had prevailed. The United States had arguably the world’s most progressive tax code . . .
But the second half of the 20th century was mostly a victory for the low-tax side. . . . Politicians cut every tax that fell heavily on the wealthy: high-end income taxes, investment taxes, the estate tax and the corporate tax. The justification for doing so was usually that the economy as a whole would benefit.
The justification turned out to be wrong. The wealthy, and only the wealthy, have done fantastically well over the last several decades. G.D.P. growth has been disappointing, and middle-class income growth even worse.
The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it’s been true recently. Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.
In their book, Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth. . . .
I already know what some critics will say about these arguments — that the rich will always figure out a way to avoid taxes. That’s simply not the case. True, they will always manage to avoid some taxes. But history shows that serious attempts to collect more taxes usually succeed.
Ask yourself this: If efforts to tax the super-rich were really doomed to fail, why would so many of the super-rich be fighting so hard to defeat those efforts?
→ If you have time, read the whole column — not least for its dynamic graphics.
The one thing I’d add is that those (like me) who advocate higher taxes on the best off need to change the tone. Elizabeth Warren and others should frequently preface their remarks by saying (in effect):
Hey, it goes without saying — which is why I haven’t said it, but it’s time to say it now: super rich people are mostly pretty wonderful. We should celebrate their success — and thank them for the millions of tax dollars they do pay. But you know what? We need them to pay even more, as they did throughout much of the last century. Same with corporations and corporate executives. Most of them are pretty great and well-meaning — not all of them, but most of them — and we should celebrate all they produce and achieve and invent. Truly! But you know what? Many of them make billions of dollars in profits and pay little or no tax. We need to tax their profits so we can rebuild the crumbling infrastructure they rely on to MAKE those profits. And that WE rely on to get to work and have water to drink and all the rest. So this is not “us versus them, the rich are the enemy.” This is “we’re all in this together, and need to make some important adjustments to assure a bright American future.”
I’d like to see a Forbes 400 of the biggest taxpayers — and maybe some medals — to thank and honor those who do the most to fund everything from our national defense to our National Institutes of Health. Make the richest and most powerful feel appreciated — not stupid — for paying a lot in taxes.