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  5. How Progressive is the U.S. Federal Tax System? A Historical and International Perspective

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

How Progressive is the U.S. Federal Tax System? A Historical and International Perspective

  • Thomas Piketty
  • Emmanuel Saez
Journal of Economic Perspectives
vol. 21, no. 1, Winter 2007
(pp. 3–24)
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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.

Citation

Piketty, Thomas, and Emmanuel Saez. 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective." Journal of Economic Perspectives 21 (1): 3–24. DOI: 10.1257/jep.21.1.3

JEL Classification

  • D31 Personal Income, Wealth, and Their Distributions
  • H22 Taxation and Subsidies: Incidence
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)