Monday, January 08, 2007

America's High Tax Progressivity

Greg Mankiw tips about a CBO Report which details the total federal taxes (as percentage of income) payed by different groups of tax payers. The result is:

Lowest quintile, 4.5
Second quintile, 10.0
Middle quintile, 13.9
Fourth quintile, 17.2
Highest quintle, 25.1

Top 10 percent, 26.9
Top 5 percent, 28.5
Top 1 percent, 31.1

While the overall level of taxing and spending in America may be lower than in Europe, the level of progressivity (the word "progressivity" here is not related to progress but redistribution) is arguably even higher. This again illustrates that the main reason for differences in inequality is not differences in government redistribution, which often backfires by encouraging low productive individuals to become dependent on the welfare state.


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