Taxes Real and Imagined

Greg Mankiw at Harvard did some computations on tax burden by income quintile based on data from the Congressional Budget Office. He computed all Federal taxes as a percentage of Household Income. The first number (as a percentgae of Household Income) is for 2005. The number in parens is computed as the average for the period between 1979 and 2005.

All households: 20.5 (21.6)

Top 1 percent: 31.2 (31.7)
Top 5 percent: 28.9 (29.0)
Top 10 percent: 27.4 (27.6)

Lowest quintile: 4.3 (7.2)
Second quintile: 9.9 (13.2)
Middle quintile: 14.2 (17.1)
Fourth quintile: 17.4 (20.1)
Highest quintile: 25.5 (26.1)

Notice two things about the data. All income groups are paying a smaller percentage of their household income in federal taxes than they did over the period (1979-2005) but more importantly the lowest income groups have had their total tax burden reduced by more than 40% while the highest income tax payers (top 1%) have seen a decline of 1.5%. That compares to a 5% decline for all households. Were there a substantive discussion about taxes every candidate for President would applaud both the reduction in rates and the increasing progressivity. But the chances of that happening are very small.

Over the last decade in many countries around the world (except the US) the tax systems have been simplified immensely.