![]() ![]() In their Appendix, Table 1, for example, they show that average tax rate (including income taxes, payroll taxes, corporate income taxes, and estate taxes) is 5.3% of income for those in the bottom quintile, 13.0% of income for those in the second-from-bottom quintile, 19.1% for those in the middle quintile, 22.1% for the second-from-top quintile, and 28.6% for the top quintile. ![]() tax system, the higher your income, the higher a percentage of it you pay in federal taxes. Everyone, including Leiseron and Rohaly, recognizes that under the U.S. One that increases after-tax income more for higher-income households makes the tax system less progressive (or more regressive).īy that standard, then, they show that all the Bush tax cuts combined were regressive.īut wait. A tax cut that increases after-tax income proportionately more for lower-income households makes the tax system more progressive (or less regressive). In the same piece, Leiserson and Rohaly explain why they think this is regressive:Ī tax cut that gives all households the same percentage increase in after-tax income is distributionally neutral it leaves the relative distribution of after-tax income unchanged. Those in the bottom quintile will get an average cut equal to just 0.7 percent of income. Households in the top quintile–the 20 percent of the population with the highest incomes–will receive an average tax cut that is more than twice as large: 5.4 percent of income. In 2010, when the cuts are fully phased in, households in the middle fifth of the income distribution will receive an average tax reduction equal to 2.6 percent of after-tax income. ![]() The Bush tax cuts were sharply regressive–that is, people with high incomes benefited far more as a percentage of their income.Īnd he gives a cite, to a 2008 Tax Policy Center study by Greg Leiserson and Jeffrey Rohaly. So it seems straightforward to judge whether a tax cut is progressive or regressive. We all know what a regressive tax is: it’s one that takes a higher percentage of income from low-income people than from high-income people. How starting with a progressive tax system and cutting everyone’s taxes by the same percent gives you a regressive tax cut. ![]()
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