Law professor characterizes progressive tax system as unfair

[alp227]

Dorothy Brown, law professor at Emory University, wrote this article for CNN.com: "Let's kill the progressive tax system":

...not all income is taxed the same. While our income tax has always had progressive rates, for most of the 20th century a lower rate applied to certain nonwage income. That rate differential was increased dramatically as a result of the Bush tax cuts.

Most of the Romneys' income comes from stock ownership. Stock dividends and capital gains are generally not subject to our progressive rate system. Income from stock is taxed at a flat 15% rate.

Fewer than 1 in 5 Americans owns stock in a way that qualifies for the flat rate. Of that minority, very few benefit the way the Romneys do.

An analysis of IRS statistics show that for households up to $200,000, no more than about 5% of their income is eligible for the flat 15% rate. Those households combined represent well more than 90% of American households.

The Simpson-Bowles commission included a proposal that all income should be taxed the same. While some would say that is a radical step, it is precisely what we did in 1986.

Second, not all deductions are treated the same. Two-thirds of all taxpayers do not itemize their deductions but take the standard deduction. So, as a result, most Americans do not even benefit from the myriad of special interest group deductions found in our tax code.

In 2009, Brown wrote a similar article for the NY Times; that article was posted at DU.

[dkf]

1. Your tax rate depends more on your exemptions than on how much you make.

I don't know how anyone can consider it fair when taken as a whole.

[Igel]

2. For lower income levels, too true.

For higher levels where capital gains and unearned income swamps earned income, the capital gains tax tends to start to dominate.

I just did our taxes. An effective federal income tax rate of 5.1%. Plus 3% for property tax. There's sales tax and FICA/Medicare, but that's it. (And we don't pay FICA. Teachers are in a DCP, but we pay rates similar to FICA's.)

[Spider Jerusalem]

3. A better suggestion: tax capital gains at the same rate as income.

With one-off exemptions for home sales and so on to ensure that people who aren't actually wealthy aren't being hit unfairly.