Working Paper: NBER ID: w12404
Authors: Thomas Piketty; Emmanuel Saez
Abstract: This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK.
Keywords: No keywords provided
JEL Codes: H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in progressivity of the U.S. federal tax system (H26) | Reduction in corporate taxes (H32) |
| Decline in progressivity of the U.S. federal tax system (H26) | Reduction in estate taxes (H24) |
| Decline in progressivity of the U.S. federal tax system (H26) | Shift in the composition of top incomes from capital income towards labor income (D33) |
| Top marginal individual income tax rates reduction (H29) | Overall decline in progressivity (H29) |
| Progressivity of the U.S. federal tax system in 1960 (H29) | Higher average tax rates for low and middle-income groups (H29) |
| International comparisons of tax progressivity (H29) | Similar trends in other countries (F69) |
| Tax policy changes (H29) | Income inequality (D31) |