TaxProf has a posting entitled "Did NY Times Publish Biased Marginal Tax Rate Table?" The NYT published a chart, which I discussed in my posting here. Apparently, the Times omitted the data from the lowest income levels which highlight the progressive effect of the Earned Income Tax Credit.
What's interesting is that, in some ways, the chart that includes the effect of the EITC highlights the overall lack of progressivity of the system. There is actually regressivity as between very low income individuals and lower-middle income individuals. There is a "notch" that reduces tax rates for some middle income individuals, but there's a steep jump in marginal rates for individuals making just under $100,000 a year. At just over the $100,000 a year mark, the marginal rates turn regressive. While there are some choppy progressive/regressive "spikes" as income moves upward from there, the marginal rates essentially flatten out as annual income hits about $225,000.
Again, as I pointed out, the figures used in both charts are representative of only the Federal tax system, the most progressive part of the American tax system. At least according to the older Pechman studies, state and local taxes tend to be fairly regressive, thus making marginal rates overall fairly flat.
3 comments:
Stuart,
I dont think that the EITC should be included in the analysis of the tax code because it is a program that excludes people that are not between the ages of 25-65.
also, as for state income taxes-some are more progressive than the fed. income tax (such as CA), but most are not. RI & VT's are based upon the fed. income tax.
As I recall, the chart that included the EITC was for a family of four with kids in college. Such a family would probably fall in the 25-65 age band.
Stuart,
very good, very good-i guess thats why youre a lawyer and im just some punk kid who aspires to be a lawyer : ) lol.
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