Tuesday, December 4, 2012

A History of Income Tax Changes

Owen Zidar gives us this history of tax changes over the past 50 years:


This chart shows how income tax liabilities have changed each year for the five income quintiles over the past half century.  Here are a few things to notice:
  1. We love cutting income taxes. Almost all of the changes are tax cuts (i.e. they fall below zero in the chart), especially for the bottom 80%. Note that this pattern does not hold for payroll taxes.
  2. Tax cuts almost always benefit top income earners most. They pay the most taxes in dollar terms, so they get the most back. For example, the top 10% paid roughly 70% of federal individual income taxes in 2009. Increases in income inequality tend to increase this share.
So the case that tax cuts will increase revenues more than leaving rates the same doesn't seem to hold up considering that deficits started really ballooning around 1980.  I am shocked. Hey and look when we actually were starting to run a surplus (at least on paper).  The other thing to pay attention to is the giant crater in 2003 when dividends went from regular income rates to 15% and capital gains went from 20% to 15%.  That needs to go away.

No comments:

Post a Comment