The headline sez "Tax Code May Be the Most Progressive Since 1979."
The last-minute deal struck by the departing 112th Congress raised taxes on a handful of the highest-earning Americans, with about 99.3 percent of households experiencing no change in their income taxes. But the Tax Policy Center estimates that the average family in the top 1 percent will pay a federal tax rate of more than 36 percent this year, up from 28 percent in 2008. That is the highest rate since 1979, at least.To further clarify, the total tax bill is more than ordinary income taxes that effect most tax-payers.
By some measures, the tax code might now be the most progressive in a generation, tax economists said, while noting that every American is paying a lower burden currently than they did then. In fact, the total federal tax rate is still vastly lower for the very rich than it was at any point in the 1940s through 1970s. It has risen from historical lows, but is still closer to those lows than where it was in the postwar decades.
[The final] deal includes a host of tax increases on the rich. It raises the tax rate to 39.6 percent from 35 percent on income above $400,000 for individuals, and $450,000 for couples. The rate on dividends and capital gains for those same taxpayers was bumped up 5 percentage points, to 20 percent. Congress also reinstated limits on the amount households with more than $300,000 in income can deduct. On top of that, two new surcharges — a 3.8 percent tax on investment income and a 0.9 percent tax on regular income — hit those same wealthy households.
As a result of the taxes added in both the deal and the 2010 health care law, which came into effect this year, taxpayers with $1 million in income and up will pay on average $168,000 more in taxes. Millionaires’ share of the overall federal tax burden will climb to 23 percent from 20 percent.
The result is a tax code that squeezes hundreds of billions of dollars more from the very well off — about $600 billion more over 10 years — while leaving the tax burden on everyone else mostly as it was. And the changes come after 30 years of both Republican and Democratic administrations doing the converse: zeroing out federal income taxes for many poor working families while also reducing the tax burden for households on the higher end of the income scale.
Jonathan Chait puts a finer point on it in a series of Twitter messages.
Unless I'm mistaken, I think people are misinterpreting @AnnieLowrey today. Tax code *most progressive* since 1979 means the ratio of tax rates on the rich vs. non-rich is higher. Doesn't mean tax rate on the rich is higher. It's lower. Income tax rates same as under Clinton, and taxes on capital gains and dividends were higher before 1997. Estate tax also lower now. Basically, since 1997, the rich have gotten a tax cut, but the nonrich have gotten a bigger tax cut (as a share of their income.)
No matter how you slice it, the fact is that during the last three decades the rich have become richer and the gap between rich and poor has become wider.