The Rich Are Paying Lower Taxes Than Anyone Else

In the New York Times on Sunday, David Leonhardt wasted no time in unveiling a stunning new reality of modern American life:

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.

Amazingly, the overall tax rate for these 400 households was just 23 percent, compared to 70 percent in 1950 and 47 percent in 1980. There has definitely been a decline in the federal tax rate, but major slashes in the corporate and estate tax have also played an enormous role in reducing the tax rate for the very rich, not to mention the various loopholes and shelters available to big business.

Leonhardt gives credit for these revelations to Emmanuel Saez and Gabriel Zucman, Cal-Berkeley professors, who have a book coming out next week called The Triumph of Injustice. In speaking with Leonhardt, the authors make the point that the current tax system in American is absurdly unjust, and that it’s easily fixable:

“Many people have the view that nothing can be done,” Zucman told me. “Our case is, ‘No, that’s wrong. Look at history.’” As they write in the book: “Societies can choose whatever level of tax progressivity they want.” When the United States has raised tax rates on the wealthy and made rigorous efforts to collect those taxes, it has succeeded in doing so.

The fight about how much to tax the ultra-wealthy has been going on for centuries, and as you might guess from the title of their book, that war has been definitively won in the U.S. in favor of the rich. They couldn’t “win” without have a reason they could sell to the public, but that reason—it will help everyone economically—has been debunked:

The justification turned out to be wrong. The wealthy, and only the wealthy, have done fantastically well over the last several decades. G.D.P. growth has been disappointing, and middle-class income growth even worse.

The solutions? Per the authors, a wealth tax, higher income tax, and a stronger corporate tax that includes a tax on profits made in America even for companies with headquarters abroad. If these fail to pass, we’ll continue to live in the stunning reality where our wealthiest citizens not only to pay their fair share in a progressive system, but actually pay less than everyone else.