Friday, October 31, 2008

News to me: USA most progressive already 

According to The OECD, the US already has the most progressive tax system. Scott Hodge of the Tax Foundation notes:
Even after accounting for the fact that the top 10 percent of households in the U.S. have one of the highest shares of market income among OECD nations, our tax system is second only to Ireland in terms of its progressivity for households.

The table also shows that the U.S. collects more household tax revenue from the top 10 percent of households than any other country and extracts the most from that income group relative to their share of the nation's income.

Of course, these measures do not include the litany of other taxes households pay in each country, such as Value Added Taxes, corporate income taxes and excise taxes, but they do give a good indication that our system places a heavier tax burden on high-income households than other industrialized countries.

The study also shows that while most countries rely more on cash transfers than taxes to redistribute income, the U.S. stands out as "achieving greater redistribution through the tax system than through cash transfers."
I've noted several times that the share of taxes paid by that top decile has risen during the Bush years, but we don't recognize this in the US because it's not seen. Demogrants and other cash grants are more visible, and more visible cash leads to more loyalty of the payees. "The government that robs Peter to pay Paul can always count on Paul's support."

h/t: Powerline, where John Hinderaker wonders "whether a democracy can survive indefinitely under these circumstances."

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