Working-class and middle-class Americans pay a substantial amount of taxes because of payroll taxes, which are high and barely affect the rich, and state and local sales taxes, which are regressive – they take a bigger chunk out of a smaller wage than out of a large income. Today, virtually all income groups pay roughly 28% of their income in taxes – except for the 400 richest Americans, who each own more than $2 billion in wealth today and pay around 25% in taxes. tax system now resembles a flat tax that becomes regressive at the very top end, meaning the super-rich pay proportionately less. The upshot is that for most income levels the U.S. tax system has dramatically declined over the past seven decades. Meanwhile, the rich were subject to high tax rates on wages, dividends, interest and income from partnerships.
In the postwar decades, corporate profits – the main source of income for the rich – were subject to an effective corporate tax rate of 50%. In 1950, when looking at all federal, state and local taxes, the top 0.01% of earners paid almost 70% of their income in taxes. That would still be far below the level of progressivity the United States embraced in the middle of the 20th century – when wealthier individuals paid a much higher share of their income in taxes than the poor. The committee’s plan would roughly put tax progressivity back to where it was just before President Donald Trump signed off on Republican tax cuts in 2017. With a regressive tax policy, lower earners pay a larger percentage of their earnings in tax than wealthier ones.
Tax policy is deemed progressive if the chunk of income taken increases with the income of the individual – so wealthy Americans would pay a larger proportion of their income than poorer ones. Alexandria Ocasio-Cortez’s dress demanded at a glitzy New York bash just hours later. That proposal would fall short of calls to really “tax the rich,” as Rep. 13, 2021, to move the top marginal income rate up a couple of notches to 39.6% and to introduce a 3% surtax on incomes above $5 million. The House Ways and Means Committee outlined plans on Sept. Demanding tax increases on the rich is back in fashion – both in the corridors of the House of Representatives and on the red carpet of the Met Gala.
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