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Graph of the Day: No Radical Redistribution
We all know that the “socialism” charge leveled by conservatives against any and all government revenue is a lie. Nonetheless, myths proliferate about taxes, redistribution, and “spreading the wealth.” Let's take a deeper look at that.
Here's today's graph:
(Data from Congressional Budget Office.)
Like yesterday, we're looking at income quintiles. The 20% of households with the highest income are represented by that big red bar on the top. The 20% with the lowest income are the tiny blue bar at the bottom. Each bar in between represents another 20%.
The stack of bars on the left shows each quintile's share of total household income in 2007 before they paid taxes, and the stack of bars on the right shows that share after they paid taxes.
See the difference?
Of course, there is some slight change in the size of each bar. Each of the bottom four bars grows a little bit, and the top bar shrinks some. Still, even after taxes the top fifth of U.S. households have been paid more than half of the money.
Now, some of you may be saying to yourselves, “Yes, yes, but that was still during the Bush years. What about that socialist Obama?”
Here's the thing about that: tax brackets and rates under President Obama have not changed. A few temporary credits and cuts have been put in place in response to the economic crisis, but they have not been substantial enough to dramatically alter these numbers. (I'm trying to put together the relevant information for a graph to make this point, but the CBO only provides this information up through 2007.)
The bottom line is that for all the whinging and moaning about “spreading the wealth,” our tax system is not exactly Robin Hood right now.
The next time someone goes off about socialism, point them to this graph and remind them that the Obama administration has not changed the basic tax structure that produced it. It's time to stop indulging conservative myths and talk about how to increase income equality in order to stabilize our economy.
Posted in Fiscal Policy | Related Topics: Graphs Economic Inequality President Obama Income Tax Tax Fairness
10 Comments
November 3, 2011 at 3:31 pm
Mike: The IMF has become, or maybe always was, the world-wide implementer of the Ayn Rand/Milton Friedman school of unregulated capitalism.
It gave Greece two choices: Accept our terms or forget any financial help or default and go into bankruptcy. Greece should have taken Option 2.
The IMF’s terms were to shift the burden of repaying its debt to its poorest citizens and its public employees, many of whom have had their incomes cut by 50% while facing (as all Greeks now do) a brand-new nationwide property tax.
If Greece is now pushed by Europe and the US into accepting additional bailout money from the IMF, it will end up having to sell its islands and ancient architectural sites and natural resources, including mineral rights, to whatever corporate banker-type wants to pick them up cheap. Greece is to be sacrified to save the Euro and the banks unless it defaults n-o-w.
November 3, 2011 at 2:17 pm
Income equality; isn’t that what they tried in Greece. How’s that working out? The bottom three bars grow, so where is that money coming from? A tree? No, it comes from the top earners and is redistributed to the low earners by our corrupt-on-every-level government. This idea is conceded in the article, thereby proving redistribution of wealth is occurring. How anyone can give a pass defending our current administration of adding to this, without backing it up with solid data is telling of this site.
The pursuit of happiness.
November 3, 2011 at 10:19 am
I’ll tell you what’s radical: of of the 280 most profitable corporations in America, 30 of them paid no tax at all. Talk about an “entitlement” mentality! They think they should be able to make millions and billions, and put into the country that’s making them rich? Nothing.
I’ve put the link up to the Highlights Summary of the report… but you can jump to the original 71 page report from there. Again, the consistent facts about who’s actually benefiting from current policies.. that they lobbied to get just for themselves… speaks loudly.
<http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersPR.pdf>
November 3, 2011 at 9:59 am
(continued)
Since the “free market” system has been corrupted and now is nothing more than a smokescreen used to hide all the ways those at the top of the income scale have rearranged our economy and government tax structures to ensure that they continue to absorb the vast majority of the proceeds of every else’s labor,...
and continue to reap the benefits of “civilization” without bearing any of the costs,...
it’s far past time that we devise a way to compensate people in proportion for the actual benefit they provide to society, which, at this point in history, our “free market economy” absolutely fails to do.
A serious redistribution of wealth from the largely-idle rich to the hard working poor (as well as those who would LIKE to be working but can’t find jobs) would help move us in that direction.
We’ve likely reached the point where such redistribution is coming, either through voluntary, legal means or through involuntary, extra-legal means.
This may happen electronically without physical violence. Or it may happen as the inescapable after-effect of a new global financial collapse which will have occurred as the result of all the big investors and investment houses coming to realize (as they did in 2008) that none of the financial instruments they’ve create out of thin air to trade “risk” with each other are worth the bits and bytes used to transmit them,...
and everyone else was lying to each of them as much as they, themselves, were lying to everyone else.
It is up to our wealthiest brothers and sisters which of those means of redistribution will come into play, but, as people of lesser means already know, volunteering to share what you have with others would be a FAR LESS PAINFUL option than either of the other two.
November 3, 2011 at 9:55 am
If some of us believe that 51% of the population does not work but is living off government programs, I suspect those folks have been listening to too much conservative talk radio.
The fact is that those who actually WORK (i.e. do some actual productive activity - activity which provides benefit to society - for which they are rewarded with pay and benefits) tend to make far lower incomes than those of greater means, plus the incomes of working people have stagnated over the past thirty years.
Those whose income is accomplished by having others play (generally non-productive but highly-lucrative) games of “risk” with their huge financial reserves (most of those in the top percentages of income) can’t be said to be “working for a living” in any conventional sense of that word,...
but, rather, accomplish their incomes by playing games stacked to guarantee that those with the most money always win,...
while the rest of the investing population (those with retirement investments, for instance) are denied the types of information and analysis that would allow them to realize that a substantial portion of the “gains” on their own investments seem to vanish into “fees,” and the like.
What’s more, through the use of off-shore tax shelters and other loopholes, those with incomes at the top generally pay far less tax on the income they make from their extractive financial games,...
than their artificially low “capital gains” taxes would even indicate.
November 3, 2011 at 9:23 am
Scott, are you talking about the millions of people whose manufacturing jobs were offshored by corporations in search of slave-wage labor and no environmental protection laws?
Or those with physical or mental disabilities who cannot work but need help just to survive, especially if they’re living on the street?
Or those over 50 who were laid off but can’t find employers interested in skilled (but older) employees?
America could choose to treat all these people harshly or continue to do what it can to ease their true suffering, which in the current economic climate is far from enough. Refusing to revise the tax code so it reflects the needs of the poor as much as the wants of the rich is a national failure.
November 3, 2011 at 9:17 am
Scott represents an apparently growing number of people who believe the rhetoric that more than half the people in this country don’t work and the other half supports them. Just isn’t true. But we have become a country where workers pay is steadily being pushed down and executive pay is skyrocketing. As a result, a significant number of working individuals and families pay no income tax because they make so little. With a more equitable economic system, they would be earning enough that they would be paying. That was the magic of the US economy until Reagan reversed its direction and Bush accelerated that reversal.
The chart in this article is based on households, not individuals, and I assume includes everyone whether they have taxable income or not. It is the distribution of income after current tax policy. What it shows is that the system is not very progressive at all. The wealthiest now pay only a little more of their income in taxes than do those at the bottom. Keep in mind that the top marginal rate put in place by the Nixon administration was ~90%. It is now less than half of that.
November 3, 2011 at 7:23 am
This graph shows the people who work and earn an income. What about the 51% who are not working and earning an income. Where do they fit into the graph?
October 31, 2011 at 4:08 am
well stated and illustrated. In addition, the bottom 3 quintilles furnish almost all of the children used to fight our numerous wars. The top 1/5 reaps all the rewards with none of the cost or obligations.
Now tell me, who are the real patriots.
Dan Conner says:
November 5, 2011 at 8:46 am
I think it is flawed thiniking that claims Greece has an economy based on redistributed wealth and second that contributed to its financing problems.
Look at the US. We are probably the most capitalist country in the world and yet our economy and finances are among the worst of the industrialized world.
It is extremely shallow and superficial thinking that looks to blame a country’s economic woes on its financial system. There are endless examples disproving these theories. Each country has to be evaluated separately. Are they exporters or importers? Do they have abundant natural resources, etc.? Pathetic anecdotal illustrations don’t prove anything.