E.J. Dionne Defends Obama “The Re-Distributor”

March 2, 2009

In this morning’s Washington Post column “The Re-Distributor,” E.J. Dionne declares that “The central issue in American politics now is whether the country should reverse a three-decade-long trend of rising inequality in incomes and wealth.”

As justification for Obama’s redistributionalist policies, Dionne cites OMB Director Peter Orszag as saying it is time for the rich “to pitch in a bit more” because “over the past two or three decades, the top 1 percent of Americans have experienced a dramatic increase from 10 percent to more than 20 percent in the share of national income that’s accruing to them.”

E.J. Dionne and Peter Orszag both seem to be unaware that a recent OECD study found that the U.S. already has the most progressive income tax system among industrialized nations. Our top 10% of taxpayers pay a heavier burden than that group in any other country and our poor have the lowest income tax burden of any country. Indeed, our top 1 percent pay a greater share of the income tax burden than the bottom 90 percent combined.

Ironically, the OECD also reports that the U.S. has one of the highest levels of inequality in the OECD—only Portugal, Turkey and Mexico have greater inequality. This means that either we have inequality despite a progressive income tax system or that progressive income tax systems are a poor way of countering inequality.

Mr. Dionne is also unaware that the number of tax filers who have no income tax liability after taking their credits and deductions has grown from 29 million in 1999 to 47 million today—a 50% increase while George Bush was supposedly “giving tax breaks to the rich.” Half of those non-payers get refundable tax credits back from the IRS, which means they see April 15th as payday not tax day.

Obama’s tax plan could push another 15 million off the rolls altogether, increasing the number of non-payers to more than 60 million.

According to a Tax Policy Center analysis of Obama’s tax plan, the share of the total federal tax burden on taxpayers earning over $200,000 would rise from 45.5 percent to more than 51 percent. In other words, the top 2 percent of taxpayers would shoulder more than half of the nation’s entire tax burden, not just income taxes but all federal taxes.

A question for Mr. Dionne is whether it is healthy for our democracy to have a growing class of Americans who are consumers of government but pay none of the costs and a shrinking class of Americans who consume little but pay all of the costs.

Cash Income Level (thousands of 2008 dollars)

Current Share of Total Federal Taxes (%)

Share of Total Federal Taxes Under Obama Plan (%)

Change (%)

Less than 10

0.2

-0.1

-0.3

10-20

0.7

0.0

-0.7

20-30

1.9

1.2

-0.7

30-40

2.8

2.2

-0.6

40-50

3.5

3.0

-0.5

50-75

10.0

9.1

-0.9

75-100

10.1

9.4

-0.7

100-200

25.3

23.7

-1.6

200-500

17.5

17.3

-0.2

500-1,000

7.5

8.6

1.1

More than 1,000

20.5

25.5

4.9

All

100.0

100.0

0.0

$0 to $100

29.2

24.8

-4.3

$100 to $200

25.3

23.7

-1.6

Above $200

45.5

51.3

5.9

Source: Tax Policy Center


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