It's easy to conclude the U.S. tax system is pretty progressive if you look only at figures like the share of individual federal income tax paid by the top 20 percent of taxpayers—almost 84 percent! That's pretty hefty, even when you consider that this top quintile also earns almost 60 percent of the income.
But those figures, fondly quoted by many conservatives, leave out quite a bit. When you consider a broad range of state, federal, and local taxes together, the result is barely distinguishable from a flat tax—only without the vaunted simplicity of flat-rate taxation. The bottom 60 percent of taxpayers make 22.2 percent of the income and pay 18.2 percent of the taxes, while the top 1 percent make 19.1 percent of the money and pony up 20.8 percent of the taxes.
Without reform, the relative burden borne by the middle class could soon get heavier still. As Len Burman and other scholars at the Urban Institute have noted, the Alternative Minimum Tax (AMT), originally intended to ensure that the very wealthy paid a certain minimum, is not indexed for inflation. That means the AMT, projected to affect some 4 million taxpayers in 2005, will hit more than 44 million within 10 years. Does that count as "class warfare"?
Income and Tax Shares by Income Quintile
Quintile Income Federal Total Federal State, Local Tax Share
Share Income Tax
Lowest 3.4% -1.5% 2.2%
Second 7.0 -0.5 5.5
Middle 11.7 4.5 10.5
Fourth 19.2 13.6 19.0
Top 58.7 83.9 62.6