After being called out very elegantly and eloquently by Clive Crook in The Atlantic about the fact that the U.S. tax system is in fact more progressive than other countries, Jonathan Chait responds one last time. His problem with my original argument, he writes, nicely this time, is that it is wrong to use the share of tax paid by the top earners to show the progressivity of a tax system.
The measure of progressivity used by the OECD isn’t easy to illustrate in a meaningful way (the U.S.’s is 1.35 vs. France’s 1.1) which is why I used the share of taxes paid (especially since my source for the data is the same table that shows the measure of progressivity and that I linked to that data in my column and responses).
Now, does it mean that every country where top earners pay a larger share of taxes collected than other countries automatically has a more progressive tax system? No, it doesn’t and nor did I in For instance, it is true that a higher share of taxes paid can be the result of top earners taking a biggest share of income in that country. However, having the highest share of tax paid isn’t always, as Chait claims, simply the result of having the biggest share of income either. As it turns out, in the United States, taxpayers at the top bear the highest share of the tax burden both because they earn the biggest share of income, but also because the U.S.-income-tax system is more progressive.
In this third round, Chait also explains that his only beef with me is my use of the share of tax paid by top earners. However, in his first response he did bring up the issue of tax rates, as he defines progressivity as “the degree to which a tax system increases tax rates on higher-income earners.” Since he brought this issue up, in both of my subsequent responses, I tried to explain the interesting paradox that the U.S. can have both lower rates and higher progressivity than EU countries. Smaller tax deductions, higher rates hitting lower levels of income, and heavy reliance on regressive taxes in other countries are some of the factors that explain this paradox. Chait claims I am changing the topic when I was merely addressing an issue he raised and establishing the reasons for the progressivity of the U.S. tax code.
Now, to conclude, yes, it is true that a higher share of taxes paid alone doesn’t prove higher progressivity — and hence it is a very imperfect measure. But will Chait acknowledge the progressivity of the U.S. tax system?