New York Sun on fiscal incidence study
Our fiscal incidence study got a nice write up in this morning’s New York Sun. The author compares our findings to an influential new study of tax progressivity from Profs. Thomas Piketty and Emmanuel Saez:
Messrs. Chamberlain and Prante took an entirely different approach [from Piketty and Saez]. Rather than focusing solely on federal individual taxes, they analyzed the distribution of all taxes paid — federal, state, and local. They looked at fifths of the population and didn’t produce data for fractions of the top percent. They analyzed the period between 1991 and 2004, thereby avoiding the pitfalls of comparing incomes before and after 1988.
And they added another dimension to the analysis. They analyzed government spending and which income groups it benefits — all government spending for goods and services, and also transfer payments to individuals, such as unemployment benefits and Social Security.
Households in the two lowest quintiles — a quintile is one-fifth of the whole — received 51% of all government spending because they received more transfer payments. Messrs. Chamberlain and Prante concluded that “both taxes and spending appear to have large distributional effects on households,” and that our tax system is very progressive. The share of total taxes paid by the top quintile rose to 49% in 2004 from 46% in 1991, after peaking at 51% in 2000.
Households in the lowest fifth of incomes received about $8 in federal, state, and local spending for every tax dollar they paid, whereas households in the top fifth of earners received only 41 cents. This shows a tax system with substantial progressiveness.
Looking at the burden of taxes paid in light of benefits received makes far more sense than looking at these taxes in isolation, so Messrs. Chamberlain and Prante are more persuasive.
Posted by Andrew on Friday April 20, 2007 | Feedback?
