Gilded Age Taxation

The problem isn’t taxes. The problem is who pays taxes and who gets the benefits.

The federal tax code becomes less fair every year. Thirty years ago, the tax code was broadly progressive, reflecting shared contributions to public investments and our common good. Loopholes were fewer and covered such items as home mortgages that everyone could understand and appreciate.

Now the tax code is a scam. Billionaire hedge fund managers pay taxes at lower rates than their receptionists. Corporations get tax breaks for moving jobs overseas. Oil companies with the largest profits in corporate history receive annual tax breaks worth $14 billion, roughly twice the budget of the Environmental Protection Agency.

While rich people reap tax breaks, working people struggle just to keep even. Adjusted for inflation, weekly wages were lower in 2007 than they were in 1979.

This inequality is no accident. It is not the result of market forces, globalization or technology. It is the result of policy decisions that could have been made differently.

Income inequality is rising — measured by the ratio of after-tax income of the top one percent (1.1 million people) to after-tax income of the whole middle 60 percent (68.3 million people). Top-end taxes are declining — measured as the average effective tax rate of the top one percent. The trend lines for top-end tax cuts and income inequality since 1980 form the X in the chart on this page and in the report.

Our report explains the X. Inequality rose 144 percent; top-end taxes dropped 15 percent.

We also explain what to do about it, and how to make the code more progressive. Additional detail can be found at Reversing the Great Tax Shift [6] by the Institute for Policy Studies.

Finally, our report explains what taxes are for. From schools to roads to hospitals. Our government performs these functions. It isn't free. And paying for our needs is the essence of responsible leadership.