How Progessive is the US Federal Tax System? An Historical and International Perspective

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How Progessive is the US Federal Tax System? An Historical and International Perspective

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Piketty, Thomas
Saez, Emmanuel

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Emmanuel Saez

Abstract

This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labour income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5778.

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Date of creation: Jul 2006
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Handle: RePEc:cpr:ceprdp:5778

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue

This paper has been announced in the following NEP Reports:

NEP-ACC-2006-10-28 (Accounting & Auditing)
NEP-ALL-2006-10-28 (All new papers)
NEP-HIS-2006-10-28 (Business, Economic & Financial History)
NEP-PBE-2006-10-28 (Public Economics)
NEP-PUB-2006-10-28 (Public Finance)

Cited by:
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Graziella Bertocchi, 2007. "The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective," IZA Discussion Papers 2578, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Bertocchi, Graziella, 2007. "The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective," CEPR Discussion Papers 6115, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Graziella Bertocchi, 2007. "The Comparative Evolution of Bequest Taxation in Historical Perspective," Center for Economic Research (RECent) 005, University of Modena and Reggio E., Dept. of Economics. [Downloadable!]
George Irvin, 2007. "Inequality and the Anglo-American Economic Model," ICER Working Papers 26-2007, ICER - International Centre for Economic Research. [Downloadable!]

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