american.com — Are the income gaps between races and between sexes increasing or decreasing?A. Here we have very positive news. Since 1980, women have seen much faster income gains than men, and blacks have made faster gains than whites (see graph 3). White males still earn the most, but the gap is narrowing significantly.
Sep 25, 2008 View in Crawl 4
davidmesaazSep 25, 2008Submitter
Q. Are high tax rates on the rich a good way to redistribute income?A. No. History teaches us that high tax rates are the worst way to redistribute income to the poor and the middle class. I recently reviewed IRS tax return data by income group going back to 1972. The results are jaw-dropping. In 1972, when the highest tax rate on the rich was 70 percent and the top capital gains tax rate was 35 percent, the richest 1 percent of Americans paid 17 percent of the income tax burden. Today, with a top income tax rate of 35 percent and capital gains at 15 percent, they pay 39 percent. With higher income tax rates the rich shelter more of their income through tax carve-outs, they invest less in the United States and more abroad, and they work less. The Robin Hood strategy has almost always failed because it means less income, not more, to take from the rich and give to the poor.What has happened to tax rates in America over the last several decades?They?ve fallen. In the early 1960s, the highest marginal income tax rate was a stunning 91 percent. That top rate fell to 70 percent after the Kennedy-Johnson tax cuts and remained there until 1981. Then Ronald Reagan slashed it to 50 percent and ultimately to 28 percent after the 1986 Tax Reform Act. Although the federal tax rate fell by more than half, total tax receipts in the 1980s doubled from $517 billion in 1981 to $1,030 billion in 1990. The top tax rate rose slightly under George H. W. Bush and then moved to 39.6 percent under Bill Clinton. But under George W. Bush it fell again to 35 percent. So what?s striking is that, even as tax rates have fallen by half over the past quarter-century, taxes paid by the wealthy have increased. Lower tax rates have made the tax system more progressive, not less so. In 1980, for example, the top 5 percent of income earners paid only 37 percent of all income taxes. Today, the top 1 percent pay that proportion, and the top 5 percent pay a whopping 57 percent.