We almost had a really interesting conversation about taxes in the waning days of the election. Almost.
To the surprise of few, it was discovered that Barack Obama favors something called "redistributionism." John McCain, it was discovered, opposes it -- which also surprised a lot of people.
To a certain extent, the outrage from folks on the right, at times including yours truly, over Obama's response to "Joe the Plumber" was overdone. It was, after all, Teddy Roosevelt -- McCain's hero -- who introduced the progressive income tax for precisely the purpose of spreading the wealth around. The maverick's campaign saddlebags are heavy with redistribution policies that redistribute wealth as well.
I still believe that redistribution for its own sake is little more than institutionalized covetousness. But that's a subject for another day. What was left out of the national tax conversation was the reality of the situation: America already redistributes its wealth. A lot of it. In fact, we're one of the most progressive countries in the world in this regard.
Now, first let me vent a peeve. Many people think "progressive" means "good," even though something can be progressive and bad, too. When economists refer to a "progressive" income tax, they merely mean a tax rate that increases as you move up the income ladder. (Right now in the U.S., the poor pay somewhere between 0 percent and 10 percent in federal income tax. The middle class pays 15 percent to 28 percent, and the highest earners pay 33 percent or 35 percent.) But most liberals also think that the income tax is "progressive" in the same sense that fair-trade coffee and weepy acoustic-guitar college music are progressive -- i.e. good and enlightened.
Either way, the U.S. tax code is a lot more progressive than you might think. A new study by the Paris-based Organization for Economic Cooperation and Development reveals that the United States "has the most progressive tax system and collects the largest share of taxes from the richest 10 percent of the population." Our tax system is, in fact, the most "pro-poor," according to a Tax Foundation analysis of that study, of any developed country's save Ireland. That's right, we're more progressive than France and Sweden.
The bottom 40 percent of income earners receive more from the federal income tax system than they pay into it. Meanwhile, the top 10 percent pay 71 percent of all income tax, despite only earning 39 percent of our pretax income. Taxes on the top 1 percent constitute 40 percent of tax dollars.
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