Krugman: 'Federal Tax Burden Has Fallen For All Income Classes'

The lengths Paul Krugman will go to further the lie that the rich don't pay their "fair share" of taxes knows no bounds.

In his New York Times column Friday, the Nobel laureate in economics claimed, "[T]he federal tax burden has fallen for all income classes":

The [Congressional] budget office's numbers show that the federal tax burden has fallen for all income classes, which itself runs counter to the rhetoric you hear from the usual suspects. But that burden has fallen much more, as a percentage of income, for the wealthy. Partly this reflects big cuts in top income tax rates, but, beyond that, there has been a major shift of taxation away from wealth and toward work: tax rates on corporate profits, capital gains and dividends have all fallen, while the payroll tax -- the main tax paid by most workers -- has gone up.

Really? Well let's look at some of the CBO's numbers:

This first chart totally destroys the liberal orthodoxy that taxes have shifted from the rich to lower income earners since the Reagan revolution began. In fact, nothing can be further from the truth.

"Total federal tax liabilities" include income taxes, corporate taxes, social insurance taxes, and excise taxes. As you can plainly see, the share of these taxes paid by all quintiles EXCEPT the highest one has declined since 1979.

By contrast, the top quintile has seen its share of total payments go from 56.4 percent in 1979 to 69.3 in 2006. The wealthiest one percent have seen their share go from 15.4 percent in 1979 to 28.3 percent in 2006.

But they don't pay their "fair share."

Now let's break this down:

Notice how the two lowest quintiles have seen their share of individual income taxes go negative. This is because the lowest 40 percent of wage earners on average are receiving money from the federal government rather than paying income taxes, a dramatic shift since Reagan was first elected.

Notice, too, how that quintile in the middle has seen its share drop from 10.7 percent in 1979 to 4.4 percent in 2006. Yet the top quintile has gone from 64.9 percent to 86.3 percent, with the wealthiest one percent seeing its share more than double from 18.3 percent to 39.1 percent.

But they don't pay their "fair share."

Now let's look at social insurance taxes (Medicare, Social Security, unemployment):

The lowest quintile still pays roughly the same percentage it did in 1979, while the next three quintiles have shown modest declines.

Not surprisingly, ALL of the gain has come from the top quintile going from 35.9 percent in 1979 to 43.5 percent in 2006. The richest one percent saw their contribution go from 1.3 percent to 4.0 percent.

But they don't pay their "fair share."

Now let's look at corporate income taxes:

Once again, the four bottom quintiles - or 80 percent of Americans! - saw their share decline since 1979. But not the top quintile, which saw its share of corporate income taxes go from 76.5 percent in 1979 to 87.2 percent in 2006. The top one percent saw their share go from 37.8 percent to 57.1 percent.

But they don't pay their "fair share."

As for federal excise taxes:

No really significant changes here.

Add it all up, and the Reagan revolution has actually been quite beneficial for almost all Americans when it comes to federal taxes EXCEPT for the upper income earners who have seen their share of the total collected do nothing but go up.

Yet folks like Krugman continue to report the opposite:

And one consequence of the shift of taxation away from wealth and toward work is the creation of many situations in which -- just as Warren Buffett and Mr. Obama say -- people with multimillion-dollar incomes, who typically derive much of that income from capital gains and other sources that face low taxes, end up paying a lower overall tax rate than middle-class workers. And we're not talking about a few exceptional cases.

Actually, as NewsBusters reported Wednesday, the liberal think tank the Brookings Institution believes this could be as low as 1,000 people.

Given that there are almost 237,000 millioniares, 0.4 percent is indeed "a few exceptional cases."

Does Krugman ever get anything right?

*****Update: I've gotten some feedback that Krugman's point was the rich's tax burden has declined because their incomes have risen at a faster rate than lower wage earners. I agree with that, but believe this conflates the issue.

If you're asking me for more money, you are putting an increased burden on me regardless of what my income does.

The important number here is how much the percentage of the total tax collected paid by upper earners has increased in the past several decades. Whether their income has grown at a faster rate doesn't mean that their burden of paying an ever increasing percentage of the taxes collected has diminished.

That's like saying my healthcare expenses - which go up every year! - have actually declined because my income is growing at a faster rate.

In my view, that's silly - even for a Nobel laureate.

However, my original headline was misleading and has been amended. What Krugman said wasn't false, it was just inconsequential in relation to today's discussion about millionaire taxation.

Taxes Economy New York Times Warren Buffett
Noel Sheppard's picture