Sure you can speculate that there are round about effects that shift things from the direct effect, but its just speculation. Instead of looking at the total share from the top 20% of income earners, consider that they are the recipients of more than 46% of total income.

These are the CBO tax incidence figures for 2001:

Effective tax rates by quintile (1st to 5th, then overall average)

Individual Income Tax:
-5.6, 0.3, 3.8, 7.2, 16.3; 10.4

Corporate Income Tax:
0.3, 0.4, 0.7, 0.7, 2.8; 1.8

Social Insurance Income Taxes:
8.3, 9.4, 9.5, 10.4, 7.1; 8.4

All Federal Taxes (includes Excise and "other" ... income taxes are about 92% of the total, and indirect taxes about 8%):

5.2, 11.5, 15.1, 19.2, 26.7; 21.4.

So the tax incidence on the top quintile is about 1.2 times the tax incidence on average. And the payroll taxes are not "maybe they are regressive maybe they are not", they are regressive. That is the segment of the income tax system that has replaced the progressive corporate income tax.

And why is the top 20% of income earners, recipients of more than 50% of income in 2001, the recipients of that income? Because they are disproportionate beneficiaries of the present system. That is why they hold more than 90% of financial wealth in the US.

The purpose of taxation is to prevent the inflation that would occur if the government were to spend and inject purchasing power without then taxing and destroying all or some of that purchasing power.

The heaviest penalty of inflation falls on holders of financial assetts, which are the wealthy. Since the taxation exists first and foremost to protect their wealth from runaway inflation, it is only fair for them to pay a higher effective rate of tax than those who hold little wealth.

And indeed, if they hold in excess of 90% of wealth and only pay 75% of total income tax, they are getting their wealth protection at a discount.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.