A couple of years ago – in the HomaFiles most read post – I tried to answer the question: “Is the U.S. tax system progressive or regressive?”
My conclusion: progressive … for sure.
TIME even picked up the post and said I was “fair minded” and “undeniably right”.
Case closed, right?
Well – in the spirit of fair mindedness – I’ve done some analyses that indicate some degree of regressiveness.
Oh my …
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Oft-reported are the facts that — except for anomalies — higher income folks pay higher average income tax rates.
So, why does Warren Buffett whine that his taxes aren’t high enough and middle income people feel so squeezed.
Well, here’s a partial answer.
A couple of weeks ago the Fed released a report that caught my eye.
The Fed’s Survey of Consumer Finances reported a substantial drop in Americans’ net worth … especially for those in the middle income ranges.
Given the net worth numbers, I tried a different twist on income tax rates … rather than the usual income taxes as a percentage of income, I calc’d another ratio: income taxes as a percentage of net worth.
Gets interesting …
The lowest half still pays nothing or gets a credit. … that doesn’t change no matter how you cut it.
But, the mid-income ranges pay the highest % of net worth.
While only a point or two, suddenly progressive rates becomes regressive.
Hmmm …
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