A Stitch in Haste

The Internal Revenue Service has released 2003 data on income tax returns. The numbers show that, despite all the histrionics about the phantom "Bush tax cuts," the federal income has become even more progressive than in previous years:


(Click to enlarge.)

Some hasty stitches regarding these numbers:

--The idea that "the rich don't pay their fair share" is ludicrous. People who want to raise taxes on higher-income households should be pinned down: Exactly how much more progressive should taxes be? Give specific percentages — what exactly should this table look like in your "fair share" paradise?

--On the other hand, the upper tiers of this table (but not the lower 50% who pay no income tax) will shift quite a bit in the coming years as the Alternative Minimum Tax freefalls into the middle class. For details see my previous post. Those who are comfortable with such high progressivity should be the most vocal champions of abolishing the AMT, which will greatly reduce progressivity while raising overall tax burdens.

--For the most part, state and local income and property taxes only make this chart even more progressive on a government-at-all-levels, taxes-at-all-levels basis.

--Those who blame our federal budget deficit woes on the phantom "Bush tax cuts" are misguided. The problem is not that people are taxed too little, but rather than government spends too much.

--Of course, most of those filers in the "tax-free" lower half of returns are only free of income tax. They are not exempt from Social Security taxes. The rich are oppressed by income taxes; the working poor are oppressed by Social Security taxes. Therefore, those who champion the working poor ought to be less interested in income tax reform and more interested in Social Security reform. Indeed, they ought to be the most ardent advocates of Social Security reform, including voluntary partial privatization. Go figure.

Hat tip to Government Bytes; prior year data here. Other thoughts at DefCon:Blog.

UPDATE: A far better presentation of the data available here, including a debunking of the assertion by Tom in the comments that the distribution of federal income tax burdens merely replicates the distribution of income (see Table 5) -- higher-income filers pay a higher percentage of tax receipts than they receive in income. That's progressivity, folks.