Istar Holliday, in his letter to the editor (“Change the tax structure,” Letters, Aug. 14, 2008), suggests that we “return to the principle of a progressive tax, wherein those who benefit the most pay the most.” I would suggest that he should first attempt to achieve some measure of factual correctness, because the implication that the U.S. does not currently have a progressive tax system is verifiably incorrect.
According to data from the U.S. Census and the Congressional Budget Office, the U.S. tax system is not only extremely progressive, but the tax cuts enacted by President Bush have actually increased the progressive nature of the tax code. The household income distribution in the U.S. is generally broken down in quintiles, or fifths, where the lowest fifth has an annual household income range between $0 and $20,506; the second quintile ranges from $20,506 to $37,757; the middle quintile ranges from $37,757 to $60,435; the forth quintile ranges from $60,435 to $97,160; and the highest quintile’s household income is anything higher than $97,160.
The median household income is $48,021, thus placing the “middle class” right in the middle of the middle quintile of household income distribution. (Source: U.S. Census, 2006, pubdb3.census.gov.)
By comparison, median household income in 1990 was $30,056 or $46,944 in 2006 dollars, indicating that the median before-tax household income has increased by 2.3 percent since 1990.
But what about after-tax income? If Holliday’s thesis is correct, that recent government tax cuts have favored the rich at the expense of the middle-class, then after-tax income must have decreased. Is this true? Well, according the Congressional Budget Office, the effective federal tax rates for each quintile range of household income have dropped!
The lowest quintile paid 8 percent in 1979 versus 4.5 percent in 2004; the second quintile paid 14.3 percent versus 10 percent; the third quintile (the “middle-class”) paid 18.6 percent in 1979 versus 13.9 percent in 2004; the fourth quintile paid 21.2 percent versus 17.2 percent; and the fifth quintile (the “rich”) paid 27.5 percent in 1979 versus 25.1 percent in 2004.
Not only has the effective federal tax rate declined since 1979, but it has also declined the most for the poorest. Clearly the “rich” pay the highest taxes and the middle-class not only has more income, but also pays fewer taxes than before. Hmmm, I think that is the definition of an increasingly progressive tax system.
Economists can and will argue forever over the details of how to measure this economic metric or that one, and all statistics should be carefully examined and not just accepted blindly. Nevertheless, when someone makes a blanket assertion that is clearly and obviously wrong, then the reader is obligated to provide a correction.
Istar Holliday has clearly demonstrated a lack of ability to read and interpret basic economic data, and evinces an intellectual blindness that could easily be confused for an inability to reason logically or to recognize simple facts. While I have noticed that such an inability is often present in those who profess to be liberals, I must sincerely hope that not all liberals are tainted by the same apparent lack of intellectual capacity.