Replying to a response by David Cay Johnston, Viard reiterates that the federal tax system is highly progressive, with the highest-income 1 percent of the population paying one-quarter of all federal taxes and the lowest-income 60 percent paying less than one-sixth of all federal taxes.

Resident Scholar Alan D. Viard

I write to reply to David Cay Johnston's response to my recent letter to the editor.[1] In that letter, I explained that the available data contradict Johnston's conclusion that the tax system "takes from the many to enrich the few at the top" and engages in redistribution that "is not trickle-down, but Niagara- up." In accord with Johnston's recommendation that the redistributive effect of the tax system be judged by looking at the "whole system," I presented data from the Congressional Budget Office and the Brookings-Urban Tax Policy Center on the overall distribution of federal taxes, including individual and corporate income taxes and social insurance taxes. Both organizations' data show that households in the top 1 percent of the income distribution pay roughly one-quarter of federal taxes and that those in the bottom three-fifths pay less than one-sixth of federal taxes.

In his response, Johnston reverses course and claims that looking at the whole tax system is "superficial." He now urges that the system's redistributive effect instead be gauged by looking at particular aspects of Social Security taxes and the alternative minimum tax. I continue to agree with his initial call for looking at the overall tax system.

For reasons that are unclear, Johnston states that my use of the CBO and Tax Policy Center data "relies on income taxes, which are only about a third of the total federal tax burden." In fact, both organizations' data, and the numbers that I cite from their studies, include social insurance (Social Security, Medicare, and unemployment compensation) taxes and the corporate income tax. The CBO data further include excise taxes, while the Tax Policy Center data further include estate and gift taxes. Each study therefore includes approximately 95 percent of federal taxes.[2]

Johnston also states that my use of the CBO and Tax Policy Center data "ignores" the excess portion of the Social Security tax and the cap on that tax; in fact, both organizations' data include all Social Security taxes and fully reflect the cap. He similarly states that my use of their data "ignores" various features of the AMT, such as its treatment of middle-class deductions and its taxation of the ill and sick; in fact, both organizations' data fully include all aspects of the AMT.[3]

After criticizing my use of Tax Policy Center data on the overall federal tax system, Johnston then points readers to an older chart that uses data from the same organization on the same topic. Johnston is surely correct that the older Tax Policy Center data were prepared with "meticulous care," although he offers no evidence that the Center's more recent data or the CBO data were prepared with any less care.

In any event, Johnston's preferred data are quite similar to the data that I originally presented. The chart that he cites shows households in the top 1 percent of the income distribution paying 22.8 percent of federal taxes.[4] That is only a little less than the 27.6 percent share that CBO found for 2005 or the 24.6 percent share that the more recent Tax Policy Center study found for 2010. The cited chart also shows that those in the bottom three- fifths of the distribution pay 11.1 percent of federal taxes. That is actually a lower share, indicating a more progressive tax system, than the 14.2 percent reported by CBO and the 15.7 percent reported by the more recent Tax Policy Center study.

In summary, all of the data sources agree that households in the top 1 percent of the income distribution pay roughly one-quarter of federal taxes and that those in the bottom three-fifths pay less than one-sixth of federal taxes. Readers can judge for themselves whether that sounds like Niagara-up redistribution and taking from the many to enrich the few at the top.

Alan D. Viard is a resident scholar at AEI.

Notes

1. In a note appended to his column, "Largesse Out of the Public Treasury," Tax Notes, July 7, 2008, p. 73, Johnston responds to my earlier letter, "Data Contradict Johnston's Statement About Redistribution," Tax Notes, June 23, 2008, p. 1275.
2. As a side note, individual income taxes comprise about 45 percent, rather than a third, of federal taxes.
3. It should be no surprise that the Tax Policy Center includes the AMT in its computations, as the Center is the nation's preeminent source of AMT data.
4. The data refer to projected tax payments for 2015, with the Bush tax cuts extended.