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Who Got the Biggest Tax Break in the Last 50 Years? (The Rich, Of Course)

Derek Thompson

Since 1980, total tax rates have fallen for each income group -- rich, poor, and everybody in the middle. That's after up all the bit and pieces: federal income, payroll, corporate, and state/local. But who got the biggest break?

This fabulous series of charts from the New York Times offers one answer. It shows changes in average tax rates from 1980 to 2010 for the lowest income earners ($0-$25,000) to the highest (more than $350,000). This first graph makes the most important point: Taxes have gone down on every group since 1980 and total tax rates are basically progressive. That means: The more you earn, the higher share you pay back to the government.*

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2010 taxes (in RED) are lower than 1980 taxes (in BLUE) for every group. Who got the biggest break since 1980? Divide the first by the second and you get the graph below. Taxes fell 5% for the poorest households. They fell about 7% for the typical household. And they fell 14% for the richest households. It is fair to say that between President Carter and President Obama, taxes have fallen by twice as much for the richest households as for the median household.

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When it comes to taxes, "fair" is a four-letter word, and one that splits liberals and conservatives. I'd encourage anybody on either side of the debate to go back and study these New York Times graphs to see three points: (1) the richest households pay a growing share of our taxes, because (2) we earn a growing share of national income and (3) the tax code is largely progressive, except for the tippy-top.


*This is true for the mass, mass majority of tax payers. But at the very tippy-top of the income pyramid, it becomes less true. The richest households earn most of their money from capital gains, which are taxed at a lower rate than earned income. In 2009, for example, the average salary of the 400 richest U.S. households was $22 million. Their average capital gains income? $92 million. So that's why the tax code bends back toward regressivity at the very top: We've decided to give investment income a tax break, and the rich happen to earn most of their money from investments.

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