Middle Class Tax Cuts
Greg Mankiw runs the numbers from the latest CBO report on “Historical Effective Tax Rates, 1979 to 2005 — Supplement with Additional Data on Sources of Income and High-Income Households” and supplies us with the following “total effective federal tax rates for 2005, the most recent year available.”
Lowest quintile: 4.3 percent
Second quintile: 9.9 percent
Middle quintile: 14.2 percent
Fourth quintile: 17.4 percent
Percentiles 81-90: 20.3 percent
Percentiles 91-95: 22.4 percent
Percentiles 96-99: 25.7 percent
Percentiles 99.0-99.5: 29.7 percent
Percentiles 99.5-99.9: 31.2 percent
Percentiles 99.9-99.99: 32.1 percent
Top 0.01 Percentile: 31.5 percent
Mankiw points out that, unlike most figures, which include only income taxes and are thus subject to the charge that it overstates the disparity, “These figures include all federal taxes, not just income taxes.”
President-elect Obama’s call for a massive tax cut aimed at the “middle class” will be a neat trick, indeed.
UPDATE: The commentary below put me in mind of a bit of dialogue from “West Wing” that I found, amusingly enough, via Google on the comments of an old post at Dave Schuler’s place.
Henry, last fall, every time your boss got on the stump, and said, ‘It’s time for the rich to pay their fair share,’ I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And, I’m happy to, ’cause that’s the only way it’s gonna work, and it’s in my best interest that everybody be able to go to schools and drive on roads, but I don’t get twenty-seven votes on election day. The fire department doesn’t come to my house twenty-seven times faster and the water doesn’t come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let’s not call them names while they’re doing it, is all I’m saying.
A fair exchange, I’d say.