Am I looking at the second chart wrong? The biggest difference seems to be in the Corporate Tax.

An interesting comparison would be with the federal benefits people in the lower quintile received in 1960 vs. what they receive today. Has there been progressivity in outlay?

I guess I just don't get it. Why the obsession of how wealth is earned and who earns it?
In times of technological change, there are always opportunities for a few to become uberwealthy. That's because they promote and utilize that technology and make it available as Bill Gates did.

What is the goal here? Should we all make the same? Is that desirable? Wise?

Is all of this just jealousy?

Yeah this is disturbing. Is the goal to bring top marginal rates in line with the 1960's?

People who think about high tax rates as moral imperative rather than a practical matter are deranged. You are not four years old, so grow up.

I completely agree stan, increasing tax rates on the top of the economic spectrum are a practical matter. We'll increasingly need police services to tamp down social unrest at the bottom of the economic food chain and it's only practical the wealthy pay for those services. Same thing for our military continuing to leverage foreign goverments/markets open for the further profit of investors.

The schools are something of a chimera, we shouldn't really want public education if it's not going to properly train the base-level workforce for the benefit of corporate investors and executives... but there you have it, axe reading and writing while expanding business and engineering.

If I were the rich I would just give everyone the finger and go buy some banana republic where I didn't have to pay any taxes.

Stan, El V:

It's not just a question of morality, it has both political and economic implications.

Politically, as republican thought has suggested since the American Revolution, when economic power is concentrated in the hands of a few, political power becomes concentrated in the hands of the few. If you look at periods of extreme concentrations of wealth (the Gilded Age, the Roaring Twenties, today), you get situations in which economic power is parlayed into huge amounts of political influence. This is bad for democracy. A more progressive income tax, by moving the country closer to the "rough equality" that republican thinkers believed was necessary for establishing a polity of equal citizens, creates a more democratic system since more people have the wherewithal to participate in the political system but fewer people have the capacity to monopolize it.

Economically speaking, an overconcentration of wealth at the top is very dangerous for the long-term health of an economy. Without enough income flowing to the bottom, consumer purchasing power slows down, and the only way to keep economic growth going is through levering more and more debt. Likewise, with too much income flowing to the top, you get too many investment dollars floating around, which entices people to find more new investment vehicles offering better returns and flashier prospects in the hot new wave of the future. There's a reason why we had strong economic growth from the 1940s through the 1960s - more broadly distributed wealth created a strong domestic market, so that investments found enough outlets in consumers.

I understand all of these points. It is practical. Whats not practical is increasing tax rates on people invest during a recession.

We also don't want to cut spending.

So, the easiest choice is deficit spending. But damn, the deficits sure look big...

Do these numbers include both employer and employee contributions to the payroll tax, or just the employee part?

The article doesn't say.

Stan:

That depends on whether or not you think over-investment was a cause or contributing factor to the recession. In my mind, it was - we had way too much money chasing too few real investment opportunities, so people with money started doing unwise things - loaning subprime mortgages on the assumption that housing prices and credit availability would always go up, sinking huge amounts of money into securities and derivatives they didn't know very much about, and it turns out, investing in Ponzi schemes.

In that case, one might take the stance that progressive taxation at the top end might serve as an anti-recessionary measure by pushing money from the top to the bottom, thereby firming up consumption, and creating more avenues for productive investments that have some solid basis for their profits.

uh_clem, the charts treat the entire payroll tax as falling on the employee (in other words, they add the employer's share of the tax to the employee's income, and add the same amount to the employee's tax burden).

kaybeel, it's interesting that the corporate tax is driving the differences, because the underlying research (Piketty and Saez, available free online) didn't make any effort to actually determine the incidence of the corporate tax.

It's hard to figure out who really pays the corporate tax. Instead, the researchers just assumed that the corporate tax is borne by the people who receive capital gains income. (I don't know how they treat dividends --- which aren't capital gains income.)

Piketty and Saez say that this makes the current tax code look more progressive than it really is, because rich people have more capital gains than other kinds of income. But it may also exaggerate the decrease in progressivity over time, if the distribution of capital gains income became less skewed to the upper wage brackets.

When looking at corporate tax as a share of total federal tax, one should also remember that a lot of businesses that would have been taxed as corporations in 1960 are being taxed under subchapter K through the individual income tax today. I don't know, in quantitative terms, how significant that change is.