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How progressive is the US federal tax system? A historical and international perspective

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  • Thomas Piketty

    (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research - CEPR)

  • Emmanuel Saez

    (NBER - The National Bureau of Economic Research - NBER, LBNL - Lawrence Berkeley National Laboratory [Berkeley])

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 labor 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 U.S. pattern. France had less progressive taxes than the United States or the United Kingdom in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the United States or the United Kingdom.

Suggested Citation

  • Thomas Piketty & Emmanuel Saez, 2007. "How progressive is the US federal tax system? A historical and international perspective," PSE-Ecole d'économie de Paris (Postprint) halshs-00754244, HAL.
  • Handle: RePEc:hal:pseptp:halshs-00754244
    DOI: 10.1257/jep.21.1.3
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754244
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    1. Thomas Piketty & Emmanuel Saez, 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 3-24, Winter.
    2. Alan J. Auerbach, 2006. "Who Bears the Corporate Tax? A Review of What We Know," NBER Chapters, in: Tax Policy and the Economy, Volume 20, pages 1-40, National Bureau of Economic Research, Inc.
    3. Feldstein, Martin, 1988. "Imputing Corporate Tax Liabilities to Individual Taxpayers," National Tax Journal, National Tax Association, vol. 41(1), pages 37-59, March.
    4. Feldstein, Martin, 1988. "Imputing Corporate Tax Liabilities to Individual Taxpayers," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(1), pages 37-59, March.
    5. Emmanuel Saez, 2004. "Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 117-174, National Bureau of Economic Research, Inc.
    6. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    7. Thomas Piketty, 2003. "Income Inequality in France, 1901-1998," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1004-1042, October.
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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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