Effective Tax Rates 1960-2001, derived from Piketty and Saez

Since the CBO and most other data sources stop their analysis of effective tax rates in 1979, here is a similar analysis as my last using data from Piketty and Saez (two well know liberal economists that are very much in favor in much higher taxes).

their data in excel

their paper in PDF format

My first chart here simply their own computed effective tax rates (less the estate tax component).

Pands_etr_including_imputed

Note that, even here, you need to go up to beyond the 99.5 percentile to find any sign of cuts in the effective tax rate.

My next chart is the effective tax rate excluding the imputed income and imputed taxes [namely, the corporate income tax and the employer’s portion of the payroll taxes].
Pands_etr_excluding_imputed
Here you need to go up to the 99.99th percentile to find any indication of cuts to the ETR.
So you need to go to very highest reaches to actually say that ETRs, as they’re popularly concieved (i.e., the income earned by and the taxes paid directly by individuals), have fallen for “the rich”.
Further, the proportion of incomes derived from capital amongst these very highest reaches have fallen dramatically over these same periods.
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Contrary to popular opinion the effective tax rates on capital incomes are and have almost always been substantially higher than tax rates on “ordinary income”. This is largely due to the impact of corporate income taxes which, when combined with capital gains and/or dividend taxes, amounts of “double taxation” (hence the reason why most entrepreneurs prefer to form pass-through entities over C-corps whenever possible). So the net effect of this change on income composition amongst high income households will drive down their apparent ETRs [and, conversely, drive up the ETRs of relatively lower income households who have accumulated a LARGER share of these assets].
Now part of this is likely due very high income people shifting from C-corp structure to pass-through entities (which offer most of the same advantages at the generally lower ordinary income tax rate), but that’s not all of it either (there has been a shift to wages too).
See here:
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source

In any event, it’s far from clear that even this small and arguable ETR reduction on the very tippy top of the income distribution is due to tax policy even instead of economic and other legal changes.

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