Over at the American blog last year, Andrew Biggs of the American Enterprise Institute responded to the usual argument that while the federal income tax may be progressive, the rest of the tax system isn’t, particularly the payroll tax, since Social Security taxes are capped. He wrote:
Social Security taxes, as Krugman may or may not be aware, fund a thing known as Social Security benefits. Analysts of this system consider them together in order to determine whether the program is or isn’t progressive.
One way they do it is by calculating what’s called the “net tax rate”—that is, the statutory 12.4 percent Social Security tax paid by workers minus the benefits they receive from the program. If you receive benefits equal to your taxes, then your net tax rate is zero. If you pay more in taxes than you receive in benefits, your net tax rate is positive; likewise, if you receive more benefits than taxes your net tax rate is negative.
I suspect that things aren’t that different this year. Now there is the issue of state and local taxes. State sales taxes are regressive, while state income taxes are relatively flat and property taxes are progressive. It looks like overall state taxes are much less progressive that the federal ones but of course that varies between states. I am going to look into this issue more this week.
Here is the script with links and charts.