Richest 400 Americans Pay Lower Taxes Than Every Other Income Group
As income inequality soars in the U.S., the rich are paying fewer and fewer taxes.
Drawing upon data from a new book, “The Triumph of Injustice” by UC Berkeley economists Emmanuel Saez and Gabriel Zucman, New York Times columnist David Leonhardt’s Sunday op-ed has drawn attention to how tax rates for the richest Americans have declined since the 1950s, and how “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,” as per Leonhardt.
Falling Tax Rates for the Wealthy, Increasing Tax Burden For Others
The overall tax rate for the richest 400 Americans was 70 percent in 1950, 47 percent in 1980, and just 23 percent in 2019. Saez and Zucman attribute this decline to severe cuts to taxes that impact the super wealthy the hardest, like the capital gains, estate, and corporate tax, the growth of tax avoidance in offshore havens, and Trump’s 2017 tax cut.
Meanwhile, payroll taxes, which hit middle-class and poorer families harder and fund Medicare and Social Security, have increased. The less money a person makes, the more severely the percentage of taxes they pay impacts them, because they have less money to pay for basic needs like healthcare, housing, and education, all of which have become more expensive over the past few decades.
The reduction in government revenue caused by tax cuts for the wealthiest has contributed to the $22 trillion national debt. GOP leaders have suggested cutting popular social programs Medicare and Social Security to bring down the massive debt, programs that workers have been funding with their payroll taxes.
As Leonhardt writes in his article, The Rich Really Do Pay Lower Taxes Than You:
“[Saez and Zucman] have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. The story they tell is maddening — and yet ultimately energizing.
“‘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.”
As American as Taxes
The struggle over tax policy is a consistent theme in American history. Northern colonies pushed for progressive taxation as far back as the 17th century while Southern colonies and plantation owners were opposed to high taxes. The post-World War II era of Presidents Franklin Delano Roosevelt and Dwight Eisenhower was one of high taxes, while the latter decades of the 20th century saw major cuts to the taxes of the wealthiest.
Tax cuts guided by the trickle-down economic theory have not served to boost the economy, Leonhardt notes, as GDP and middle class income growth have been disappointing while the rich have enjoyed most of the country’s gains. While some argue that the rich will always find ways to avoid taxes, Saez and Zucman point to the US’s history as evidence that taxes can be successfully raised for the benefit of the broader economy. “History shows that serious attempts to collect more taxes usually succeed,” writes Leonhardt.
The economists recommend doubling taxes on the top 1 percent, instating a minimum global corporate tax of 25 percent that would curtail offshore tax havens, the creation of Public Protection Bureau to crack down on tax avoidance.