I wasn't aware that the numbers that people throw around concerning inequality were _before_ gov't payments (they basically ignore current redistribution methods).
The other issue is that the European country that has had the greatest _decrease_ in income inequality in the last few years is Greece. Is that a model we should be emulating?
That actually works against the argument of US parity, since our tax system is less progressive than most industrialized nations. If you adjust for taxes, US income inequality would look worse, not better, compared to the rest of the industrialized world.
Yes, different rates of taxation and government benefits absolutely mean that Sweden, say, comes off a lot better vs. the US than this graph would suggest. To my mind that's a good reason to look at consumption inequality rather than income inequality.
Just a note on terminology, though. Whether a tax code is progressive usually refers to the shape of the income/taxes graph, rather than its absolute level. If you just look at that then (including VAT and social security etc) US federal taxes are a bit more progressive than in Sweden, though I believe that if you add the (usually regressive) state taxes Sweden comes out ahead with respect to most US states. But Sweden's overall rates are higher than in the US, and it spends more of its money on helping people instead of the military, so Swedish taxes do do more to reduce inequality than taxes in the US.
Actually, the US system is more progressive. It gets a much higher fraction of its revenue from higher income folk than do other countries.
Is there a reference for this? Germany and France have higher top rates, the UK slightly lower. But all three have higher capital gains taxes, which as noted above comprise most of the income for the wealthiest individuals. It seems odd that conservatives would fight so hard against things like universal health care and higher capital gains taxes if in fact they actually lead to less wealth redistribution on the whole. If that were true, the Republican campaign slogan would be 'make America more like Europe'.
> Germany and France have higher top rates, the UK slightly lower.
So? Never confuse top marginal rates with revenue. For example, other rates matter, as does the definition of income. (About 47% American households don't pay federal income tax and a huge fraction actually receive tax "benefits".)
> It seems odd that conservatives would fight so hard against things like universal health care and higher capital gains taxes if in fact they actually lead to less wealth redistribution on the whole.
Huh? Your conclusion doesn't follow from your premises.
However, it's interesting (to me) that you didn't try to make the complementary argument for Democrats.
A followup: the disconnect is in your source's estimate of the share of income of the top 10%. He puts it at about 33%, while most of the sources I found put it at over 45% (http://www.economist.com/blogs/freeexchange/2012/03/income-i..., http://www.nytimes.com/interactive/2011/10/30/nyregion/where...). According to the source you cite, that would put the US well below the other OECD nations in terms of progressiveness, a result which is much more consistent with conservative arguments against European policies.
Both those articles are about income inequality and tells us nothing about how progressive the tax system is.
Both articles cite the 47% figure, as I stated above. Your source uses a figure of 33%, which is why it (and you) conclude that the US tax system is more progressive.
And did you read the article you just cited? I don't think it means what you think it means. FTA:
"Among the industrial democracies where income inequality is increasing, it's much worse in the United States than it is almost anywhere else. Among 34 nations recently surveyed by the OECD, the United States got beat only by Turkey, Mexico, and Chile."
and
"If you omit government redistribution from the calculations in the previous paragraph then four countries that previously were more equal in incomes than the U.S.—Portugal, Italy, Israel, and Germany—become less equal than the U.S."
The article pretty clearly contradicts your own argument.
If I'm well-off, why do I care how much someone else has?
Indeed, let them eat cake. A time-tested strategy.
> Indeed, let them eat cake. A time-tested strategy.
"Let them eat cake" was a response to folks who didn't have bread. That's not the case here.
> The article pretty clearly contradicts your own argument.
Actually, it doesn't. Try reading what you quoted again.
The author is claiming that tax policy can do certain things. However, the "no tax policy" state contradicts what you've insisted is true.
> Both articles cite the 47% figure, as I stated above. Your source uses a figure of 33%, which is why it (and you) conclude that the US tax system is more progressive.
Your arithmetic is failing too.
And, you still haven't explained why their numbers are more accurate.
You cited the article to support the argument that US income inequality is less than countries like Germany, Israel and Portugal. The article explicitly says the opposite. It doesn't get much clearer than that. But if you really need to be hit over the head with it (again, from your own reference):
"Although income inequality is a global phenomenon, it isn't happening in all industrialized democracies; and in the places where it is happening it isn't, for the most part, as extreme as it is in the United States; and it isn't accelerating elsewhere as quickly, for the most part, as it is in the United States."
I don't know whose numbers are more accurate. But you still haven't explained why, if Europe really does have a fairer tax structure (as you maintain they do), we shouldn't emulate them.
Ok, now we've gotten to the point where we at least agree on the relevant numbers. And now I see what you're saying regarding inequality: that prior to redistribution, inequality is more or less universal. To use your phrase, well, duh. Remember that the point of my original comment was that Europe's more progressive tax structure addresses the problem of income inequality, where the less progressive tax structure of the US does not. You responded by saying the US tax structure is more progressive. Then you cited an article which explicitly argues my point, that other nations more effectively address income inequality with progressive taxation than does the US.
And, I've never said that Europe has a fairer tax policy.
You said (and repeated again here) that the US has a more progressive tax system, that the wealthy pay a greater share of taxes here than almost anywhere else in the world. I took that to be a criticism, that you believe progressive taxation is unfair. If so, then a country like Germany (which according to you puts less of a tax burden on the wealthy) is fairer overall than the US. I understand that you're trying to avoid saying they're fairer, but that's the inescapable conclusion of your argument that US taxes are more progressive.
[Y]ou didn't bother to look for the second number, the tax revenue share.
I didn't bother to look for it because it was already there in your source and I assumed it was a pretty solid number, since it's based on tax records. Judging the share of income seems a much more likely source of error since it requires more estimation.
Now you've got me wondering how accurate that tax number is, too. Your source put the share of taxes at 45.1% in the mid-2000s. Yet the same source puts the 2009 number at 70%. Do you really believe that the share almost doubled in four years? It's a lot more likely that you're misinterpreting the numbers, or the source is simply wrong. This chart from the conservative Heritage Foundation is more consistent: http://www.heritage.org/budgetchartbook/top10-percent-income... .
I found a reference for German taxes that puts their top 10%'s share at 60% in 2005 (http://www.google.com/url?sa=t&rct=j&q=germany+top+1...). The same source indicates that the top 10% in Germany earned 33% of the gross income, 29% net.
So taking 60%/33% you get a ratio of 1.82, significantly higher than your US value of 1.63. Oops indeed.
> I now I see what you're saying regarding inequality: that prior to redistribution, inequality is more or less universal.
Actually, no. I was saying what I actually said, that US pre-tax inequality wasn't exceptional.
And, you still seem to have problems with the fact that the EU addresses inequality through spending, not taxation.
I note that you ducked the discussion of revenue and spending per GDP, not to mention GDP per person.
So, I'll ask again. Is the EU's abysmal GDP per person due to tax or spending policy? (Or are Americans just inherently more productive?) I ask because you seem to be a fan of EU policy. Is the abysmal GDP a bug or a feature?
> I understand that you're trying to avoid saying they're fairer, but that's the inescapable conclusion of your argument that US taxes are more progressive.
No, it isn't "inescapable". You're leaving a lot of steps out of your "proof", many of which are arguable. One could reasonably arrive at precisely the opposite conclusion.
I note that you also ducked the envy issue and "why should I care about what someone else has", so I'll ask a variation.
Is a society where everyone is starving more fair than a society where almost no one is starving and 1% have Ferraris? The former is equal, the latter isn't.
The observant reader might notice a connection between the two questions posed. (I expect you to duck.)
>> You didn't bother to look for the second number, the tax revenue share.
> I didn't bother to look for it because it was already there in your source
Not for the years that you were arguing about it wasn't.
> Your source put the share of taxes at 45.1% in the mid-2000s. Yet the same source puts the 2009 number at 70%. Do you really believe that the share almost doubled in four years?
> I now I see what you're saying regarding inequality: that prior to redistribution, inequality is more or less universal.
Actually, no. I was saying what I actually said, that US pre-tax inequality wasn't exceptional.
Sorry I mis-paraphrased you.
I note that you ducked the discussion of revenue and spending per GDP, not to mention GDP per person.
I ignored them because they aren't relevant to the questions we're discussing, which are: 1) Is the US tax structure more progressive than other industrialized nations? 2) If so, then why do conservatives criticize the tax policy in places like Western Europe if they are in fact less progressive? These are questions about taxes. Not spending, not per-capita GDP. We're talking taxes. You can have a progressive tax structure and spend all the money on free limos for the rich, the tax rates are still progressive. The term has a specific meaning, which is that the tax rate increases as income increases.
You answered question #1 in the affirmative, but you've never directly answered question #2. Your response seems to be that conservatives think the higher European taxes are ok, but they don't approve of what the money is spent on. (If I'm mis-paraphrasing again, feel free to correct me with a more explicit answer.)
In conclusion, after looking over the sources and arguments you've offered, I'm satisfied that the US tax system is actually not more progressive than most industrialized nations, and that conservatives criticize European tax systems precisely because they are more progressive, in the belief that disproportionately taxing the rich disincentivizes productivity (which is the traditional conservative explanation for the lower per capita GDP).
> I ignored them because they aren't relevant to the questions we're discussing
They're certainly relevant to your assumption that progressive is better and that the EU's ways are better.
They're also extremely relevant to inequality, an issue that you keep bringing up.
> If so, then why do conservatives criticize the tax policy in places like Western Europe if they are in fact less progressive?
Do you really think that progressivity is the only issue in tax policy?
> In conclusion, after looking over the sources and arguments you've offered
I'd like to say the same, but your sole source hung my adobe so I have no idea as to the provenance of the data. (I can find sources for yogic flying so ....) I'm satisfied that the OCED reports Euro taxes reasonably well.
And, I note that you didn't even claim to address consumption taxes, which are both much large source of EU income and far less progressive than income tax. Even if we go with "the US income tax is about as progressive", that swings the balance quite a bit.
The article explicitly states that pre-tax inequality is greater in Germany than the US. I don't know why you insist otherwise.
And, I've never said that Europe has a fairer tax policy.
However, I'm happy to say that the US should NOT emulate the EU's abysmal per-capita GDP. I'll come to the consequences of that at the end.
You're the one who thinks that progressiveness is a virtue yet prefer a less progressive tax policy.
Let's review.
The original table (in
http://www.taxfoundation.org/blog/show/27134.html) had international comparisons for the mid 2000s. It showed that the top 10% in the US got 33.5% of the income and paid 45.1% of the income taxes. The ratio, 1.35, was the highest of the (selected) OCED countries. (Yes, including the majority of the EU countries.)
You found articles showing that the top 10% had a greater fraction of income in other years and assumed that that somehow contradicted the above table or at least the conclusion. (You implied that the original table's income numbers were wrong, but since they're for different years....)
However, progressivity is a relationship between two numbers and you didn't bother to look for the second number, the tax revenue share.
http://www.taxfoundation.org/news/show/250.html table 1 has the US numbers for 2009, when the top 10% had a higher fraction of income than in the mid-2000s. That fraction, 43.2%, is roughly the same as your articles. However Table 1 also has the fraction of income taxes. It's 70.5%. I'll do the math for you - the ratio is 1.63, or
significantly more progressive than the mid-2000s.
Oops.
Of course, this ignores consumption taxes, which are a big deal in the EU. However, consumption taxes much less progressive than income taxes so including them makes the EU even less progressive....
You then launched into inequality. I pointed out that the US isn't the most unequal pre-tax and you pointed out post-tax was different.
Well duh.
However, that doesn't support your argument that US tax policy needs to change to address inequality. It actually weakens it.
In anticipation of "but the US needs more revenue", I'll point out that the US has roughly the same tax revenue per person as major EU countries. It has more than Canada, just a little less than the UK, and way more than Japan. (See http://gregmankiw.blogspot.com/2010/03/taxes-per-person.html .)
Yes, tax revenue is a smaller fraction of GDP in the US. Are you certain that you increase the fraction without decreasing the GDP? As someone put it, if I'm paying German-style taxes, why wouldn't I work German-style hours. The result is German GDP, which is significantly
lower, and not much more tax revenue.
Do you really want to argue that the US would spend tax revenue better if it had a lower GDP?
Ah, but you don't believe that taxes affect the economy. But I'll bet that you believe that gas taxes affect gas consumption....
Back to Europe's abysmal (per capita) GDP - do you blame the tax policy or the spending choices? (Surely you're not going to argue that Germans are inherently less capable.)
No need for snark, it's an interesting point. So the US with lower tax rates and fewer government benefits actually imposes more on the wealthy than other so-called 'socialist' countries. If that's the case, it suggests to me that the wealthy should be trying to copy the European model, not fighting it, since according to your argument they would be paying less under such a system, not more as they typically argue. It's interesting to me that you don't see the plain implication of your own argument.
> If that's the case, it suggests to me that the wealthy should be trying to copy the European model, not fighting it, since according to your argument they would be paying less under such a system
No, it doesn't imply that.
And, the relevant question is not "how little taxes do I pay" but "how much money do I keep", which has two components.
Sure it does. Your first comment flatly stated that the wealthy in the US pay more of the overall tax burden than in other countries. Then to support your argument you cited a source that says it's actually the most progressive of the OECD countries.
I happen to think the source is wrong, but if it's not and you're right, the unmistakable conclusion is that European policies result in less progressive taxation. So if the conservative objective is a 'fair' tax rate in which everyone pays in direct proportion to what they earn, then Europe is (according to your argument) closer to this ideal than the US is. It follows then that their policies, according to you, are more favorable to the wealthy than the US and that we would be better off pursuing those policies. How can you on one hand argue that Europe is fairer and on the other hand argue that we shouldn't follow their example?
I wasn't aware that the numbers that people throw around concerning inequality were _before_ gov't payments (they basically ignore current redistribution methods).
If you want to listen to a great podcast on income inequality: http://www.econtalk.org/archives/2011/11/kaplan_on_the_i.htm...
The other issue is that the European country that has had the greatest _decrease_ in income inequality in the last few years is Greece. Is that a model we should be emulating?