The top 1% tend to have significant income that is not wage based. The rich pay less as a percentage thanks to long term capital gains being taxed at 20%.

Note, the truly rich would consider anyone (no matter how much they make) as a poor wage slave if their primary source of income was wage based.

Capital gains are included in these numbers.

Source: https://www.cbo.gov/system/files/2019-07/55413-CBO-distribut...

ctrl+f "Definitions"

Ignoring Social Security, Medicare, State, and Local Taxes etc makes for meaningless comparisons.

Two paragraphs later:

> When assessing the total tax burden facing different U.S. households, looking at federal, state and local taxes is instructive. The federal system is more progressive than state and local systems, but combining them — as the Institute on Taxation and Economic Policy has done — doesn’t change the story: the higher your income, the greater your tax burden. Harvard economist and top Obama adviser Jason Furman confirms this by combining federal taxes and transfers with state and local taxes.

Hold up, I was just looking at that CBO report you linked:

“Income before transfers and taxes consists of market income plus social insurance benefits (including benefits from Social Security, Medicare, unemployment insurance, and workers’ compensation).

Means-tested transfers are cash payments and in-kind services provided through federal, state, and local government assistance programs.”

That’s exactly the arbitrary definitions used to distort what’s going on. I am not saying it’s inaccurate data based on defines used, but all choices are subject to spin. Choices like using 6.2% or 12.4% for Social Security tax rates make a huge difference, and really should be included in these discussions.

PS: Progressive also implies the top 0.1%, and 0.0001% also have higher effective tax rates not just an arbitrary top bucket of say 1%. Using words like ‘top’ is again arbitrary.

PPS: Anyway, do you have a link for that report your referencing?

> That’s exactly the arbitrary definitions used to distort what’s going on. I am not saying it’s inaccurate data based on defines used, but all choices are subject to spin. Choices like using 6.2% or 12.4% for Social Security tax rates make a huge difference, and really should be included in these discussions.

Ya, I can certainly see the case that you don't want to include those numbers. However, I don't think excluding them changes the rank ordering of who pays higher rates. Those sorts of transfers will only be salient for the bottom 20%, and excluding them doesn't get them anywhere near what the top 20% or the top 1% pay.

> PS: Progressive also implies the top 0.1%, and 0.0001% also have higher effective tax rates not just an arbitrary top bucket of say 1%. Using words like ‘top’ is again arbitrary.

I'm sure you can find a few instances in the continuum where a wealthier person or small group pays less than a poorer person or small group. But I don't think that justifies the claim that our system is not progressive. Broadly speaking, for significantly sized buckets of people, our system is quite progressive.

That isn't to say we shouldn't try to address the issue that prevents the 0.00001% from paying the same rate or higher as the top 1%. We should. But I don't think it is the sort of existential issue that people seem to want to frame it as, and I really don't think it justifies the conclusion that our system is not progressive.

> PPS: Anyway, do you have a link for that report your referencing?

I'm just referencing the CBO report:

https://www.cbo.gov/system/files/2019-07/55413-CBO-distribut...

I personally feel the US taxes are generally progressive though not massively so, but significant exceptions exist. For example, the social security tax stops at $132,900 so there is a significant drop in marginal tax rates at that point.

Similarly, including or excluding donations, inheritance, and home sales from income can really change these numbers. I have seen analysis that says are system is progressive, regressive, and flat based on different definitions.

Honestly, that’s what I find most interesting about the system. The collision of a huge number of different interests result in a system that can be perceived mathematically different based on viewpoint. It’s like watching a magic trick in action.

PS: One of the most extreme divergent analysis focused on the sales and sin taxes paid by a group of homeless drunks. It varies by area but with 40+% percent alcohol taxes they where paying a rather shocking effective tax rate when you exclude benefits.

Ya, certainly. I mean, I think the most regressive part of the system that almost nobody talks about is the fact that unrealized capital gains compound untaxed. People focus a lot on the differential treatment of long term capital gains vs income, but I think that mostly misses the point. The real wealth building effect from capital gains comes from allowing them to compound completely untaxed for decades, if the gains are never realized. Unfortunately there's not any obvious workaround for that that doesn't have serious negative consequences.

The important fact is "[percent] of their income" much of the earns at the top end get shifted to capital gains which aren't counted as income and get taxed much lower.

Hm. The CBO report uses the phrase "total income", which I would expect to include capital gains. But it does not explicitly define it as far as I can tell. Do you have a citation for those numbers not being inclusive of capital gains?

EDIT: It does define everything at the end. Total income in this context does include capital gains.

Does the article seriously quote the non-effective rates as the wealthy paying more?

I'm not sure what you're referring to, but the source it cites is this:

https://www.cbo.gov/system/files/2019-07/55413-CBO-distribut...

I can't find the word "effective" in there. It just quotes the tax rates.

EDIT: I see what you are trying to say now. And the answer is no, it quotes the effective rate.

What the poster means is that official tax rate before all of the tax breaks, etc.

Maybe the top do officially pay 33%, but if they're able to get that number down to 16%, then their effective tax rate is 16%.