Taxes: additional data

Lane Kenworthy, The Good Society
November 2019

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A1. Tax revenues and total government revenues: rich countries
A2. Top statutory income tax rates and pretax top-end income inequality: rich countries
A3. Effective tax rates and tax progressivity: US states

TAX REVENUES AND TOTAL GOVERNMENT REVENUES: RICH COUNTRIES

The following charts show tax revenues (black lines) and total government revenues (gray lines) as a share of GDP in 21 countries.

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Figure A1. Tax revenues and total government revenues
Black lines: tax revenues. Gray lines: total government revenues. Share of GDP. Includes all types of taxes and revenues at all levels of government. Data source: OECD.

TOP STATUTORY INCOME TAX RATES AND PRETAX INCOME INEQUALITY BETWEEN THE 1% AND THE 99%: RICH COUNTRIES

The following charts show the top statutory income tax rate (dashed lines) and the top 1%’s share of pretax income (solid lines) in 18 countries.

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Figure A2. Top statutory income tax rate and top 1%’s share of pretax income
Dashed lines: top statutory income tax rate. Solid lines: top 1%’s share of pretax income (excluding capital gains). Both measures are rescaled to vary from 0 (“min”) to 1 (“max”). Data sources: OECD; World Inequality Database.

EFFECTIVE TAX RATES AND TAX PROGRESSIVITY: US STATES

In the United States, state and local governments collect a significant share of the taxes. These include consumption taxes (general sales taxes and specialized excise taxes), property taxes (taxes on homes, businesses, and motor vehicles), and income taxes (on individuals and businesses).

The Institute on Taxation and Economic Policy (ITEP) calculates average effective tax rates in each of the US states at various points along the pretax income distribution. As the charts here show, households pay, on average, about 10% of their income in state and local taxes.

State and local taxes tend to be regressive — people with higher incomes pay a smaller share of their pretax income in state and local taxes than do people with lower incomes. (For a good discussion, see Katherine Newman and Rourke O’Brien’s Taxing the Poor.) This is clearly visible in these charts. If the line for a state slopes up to the right, its tax system is progressive, If the line is flat, the tax system is proportional. If the line slopes down to the right, the tax system is regressive.

Sales taxes are almost always regressive, while income taxes tend to be progressive. In most states, the regressive impact of sales taxes outweighs the progressive effect of income taxes. And a handful of states don’t have income taxes.

ITEP calculates a progressivity index, measured as the degree to which state and local taxes make the distribution of income in a state more equal (progressive) or more unequal (regressive). If state and local taxes make a state’s income distribution more equal by more than 2.5%, I’ll call the tax system progressive. If they make the income distribution more unequal by more than 2.5%, I’ll call it regressive. If they change the income distribution in either direction by 2.5% or less, I’ll call the tax system proportional. By this measure, no state has a progressive tax system (California’s comes closest), 19 states have proportional systems (e.g., New York and New Jersey), and 32 have regressive systems (especially states with no income tax, such as Texas, Florida, and Washington).

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Figure A3. Effective tax rates, US states
Taxes paid as a share of pretax income. The tax rates are averages for the following groups: p0-20, p20-40, p40-60, p60-80, p80-95, p95-99, p100 (top 1%). Excludes households with a “head” aged 65 or over. Includes consumption taxes (general sales taxes and specialized excise taxes), property taxes (taxes on homes, businesses, and motor vehicles), and income taxes (on individuals and businesses) collected by state and local governments. The data are for 2018. The numbers in parentheses are state populations, with “m” = million. Data source: Institute on Taxation and Economic Policy (ITEP), “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” 6th edition, 2018.