The Numbers Inside a Hot-Button Issue

by alexvanbuskirk

The Numbers Inside a Hot-Button Issue: Amid the Debate About Whether and How to Reform the Tax Code, a Look at How the Picture Has Changed

By David Wessel @ WSJ (August 6, 2012)

The top marginal income-tax rate, the most visible metric, has gone from 7% in 1913 to 92% in the 1950s to 28% with the Tax Reform Act of 1986 to 39.6% in the Clinton years to today’s 35%. Mr. Obama wants to raise that; Mr. Romney wants to cut it while eliminating loopholes and deductions to make up the lost revenue.

Over the past three decades, Americans—including most of the rich—have paid less of their incomes to Washington. Top earners have received more of the income and paid more of the taxes; a growing number at the bottom have paid less or, in some cases, nothing.

Whether that is fair is a question of politics and values. Facts can inform the debate. Here are a few salient ones:

The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes…

Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends…

The share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income…

The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening…

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