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
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
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
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: