Over at the Washington Examiner, Reason columnist and Mercatus Center economist Veronique de Rugy provides a crash course in tax progressivity. It turns out that despite America's lower nominal rates, top U.S. earners kick in more than their European counterparts when it comes to federal taxes:
Over the last 30 years, the progressivity of the rate structure has decreased in the United States. In the 1980s, the top marginal rate used to be 70 percent while it stands at half that today….
However, this decline in nominal progressivity doesn't tell you much about the actual progressivity of a tax system. That depends on the size of the exemptions, which are relatively large and frequent for U.S. taxpayers.
The OECD data shows that other countries tend to have much higher tax rates than the U.S. does but the threshold of income at which the top rate in applied is much lower.
For instance, it takes almost 3.4 times less income in France than in the U.S. to be taxed at the highest French rate. It means that other countries have higher rates but also more regressive systems.
By contrast, the United States has lower top lower rate but these lower rates kick at a much higher level—meaning that it take much more income to face the highest rates–hence the steeper progressivity.
Other factors, such as Europe's reliance on consumption-based taxes such as the V.A.T., also mean that a higher percentage of the tax burden in America is borne by high-income earners.
De Rugy's original article on progressivity is here. A snippet:
The richest 10 percent of U.S. households (those making $112,124 or more) contribute a greater share of taxes (45.1 percent of all income taxes) than their counterparts in any other industrialized nation.
Meanwhile, the average tax burden for the top 10 percent of households in OECD countries is 31.6 percent of the revenue collected, well below the percentage in America.
Interestingly, in France, a notorious welfare-state government, only 28 percent of revenue comes from the top 10 percent of income earners. As for the top 1 percent of Americans, their share of federal taxes paid is roughly 30 percent.
A week or so ago, I talked with my frequent collaborator de Rugy about why the Occupy movement should recognize the elderly rather than "the 1 Percent" as its true enemy: