Citera: This paper has discussed the progressivity of the U.S. federal tax system, its
evolution since 1960, and how it compares with other countries. Several important
findings emerge.
First, the progressivity of the U.S. federal tax system at the top of the income
distribution has declined dramatically since the 1960s. For example, the top
0.01 percent of earners paid over 70 percent of their income in federal taxes in
1960, while they paid only about 35 percent of their income in 2005. Average
federal tax rates for the middle class have remained roughly constant over time.
This dramatic drop in progressivity at the upper end of the income distribution is
due primarily to a drop in corporate taxes and to a lesser extent estate and gift
taxes, both of which fall on capital income,
combined
with a sharp change in the
composition of top incomes away from capital income and toward labor income.
The reduction in top marginal individual income tax rates has contributed only
marginally to the decline of progressivity of the federal tax system, because with
various deductions and exemptions, along with favored treatment for capital gains,
the average tax rate paid by those with very high income levels has changed much
less over time than the top marginal rates. Large reductions in tax progressivity
since the 1960s took place primarily during two periods: the Reagan presidency in
the 1980s and the Bush administration in the early 2000s. The only significant
increase in tax progressivity since 1960 took place in the early 1990s during the first
Clinton administration.
Second, the most dramatic changes in federal tax system progressivity almost
always take place within the top 1 percent of income earners, with relatively small
changes occurring below the top percentile. For example, many of the recent tax
provisions that are currently hotly debated in Congress, such as whether there
should be a permanent reduction in tax rates for capital gains and dividends, or
whether the estate tax should be repealed, affect primarily the top percentile of the
distribution— or even just an upper slice of the top percentile. This pattern strongly
suggests that, in contrast to the standard political economy model, the progressivity
of the current tax system is not being shaped by the self-interest of the median
voter.
Third, international comparisons confirm that is it critical to take into account
other taxes than the individual income tax to assess properly the extent of overall
tax progressivity, both for time trends and for cross-country comparisons. We hope
that the preliminary international comparisons presented in this paper will help to
stimulate more systematic comparative research in this area. | 
