Effective Tax Rates 1960-2001, derived from Piketty and Saez

Since the CBO and most other data sources stop their analysis of effective tax rates in 1979, here is a similar analysis as my last using data from Piketty and Saez (two well know liberal economists that are very much in favor in much higher taxes).

their data in excel

their paper in PDF format

My first chart here simply their own computed effective tax rates (less the estate tax component).


Note that, even here, you need to go up to beyond the 99.5 percentile to find any sign of cuts in the effective tax rate.

Effective Federal Tax Rates using CBO data 1979-2005

Many people believe that the rich once paid much more in taxes as a percentage of their income since top marginal rates were once much higher.   The reality, however, is that a combination of relatively higher brackets, larger deductions, and tax avoidance and the like actually reduced the effective rates to MUCH less than is popularly believed.

The CBO published some data a few years ago to break down effective tax rates amongst higher income groups (they usually aggregate the top 1% as one big group), so here is a chart to actually reveal the truth.

Historical Effective Tax Rates, 1979 to 2005: Supplement with Additional Data on Sources of Income and High-Income Households
Below is simple illustration of their data.

According to their calculations,the rich did pay a bit more in 1979 (the late 70s probably had abnormally high ETRs due to bracket creep and the like).   That said, they also imputed 100% corporate income taxes to shareholders (mostly the rich) and the employer-portion of payroll taxes to both the numerator and the denominator [in other words, they assume that the tax payer would have had correspondingly more income and thus add both the the numerator and the denominator of this calculation]

Since many of these same progressives have trouble with this concept (e.g., they wish to assert that Romney only paid a ~15% ETR) I thought it’d be helpful to illustrate what this would look like if we subtracted both of these imputed income sources/tax burdens.  This, in other words, would more closely resemble one’s ETR if they divided the total federal taxes paid by their AGI [although this also includes the miniscule burden added by federal excise taxes]