We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
On Wednesday, the Washington Post’s Wonkblog reported on new data from the Congressional Budget Office, explaining that “President Obama appears to have achieved at least one of his goals for the nation’s pocketbook: The very richest Americans are finally shelling out a bit more in federal taxes.” But it’s important to not read too much into this. As the blog post illustrates with a graph from the CBO report, the average effective federal tax rate for the richest one percent was actually higher in the late 1990s when the economy was thriving.
The blog post also notes that people in other income groups are also paying a bit more than they were before enactment of the “fiscal cliff” law that allowed several tax cuts to expire. We provided figures in 2013 showing that it had little effect on the overall distribution of the tax system because Americans at all income levels were, in fact, paying a bit more than would be the case if tax policies in effect in 2012 had been extended.
The term “fiscal cliff” actually described a sudden drop in the budget deficit that would have occurred if Congress did nothing in 2013, when several tax cuts were scheduled to expire and a health care tax for the rich was scheduled to go into effect. The fiscal cliff law made permanent most of the Bush tax cuts except some provisions that only benefited the rich. Lawmakers allowed a payroll tax cut for low- and middle-income Americans to expire, and the health care tax for the rich was allowed to go into effect. The result was slightly higher taxes for everyone.
Wonkblog does leave out a significant piece of the picture when it quotes the CBO report as saying the richest fifth of Americans receive “a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2011.” The CBO data describe federal taxes alone. The CTJ figures include state and local taxes, which are generally regressive, and show that the tax system as a whole is just barely progressive.