Larry Kudlow (the Economics editor for the National Review Online), while talking about Biden’s comments on the stimulus plan, awards us with a praisal for the riches that summarizes supply-side economics:

While I listened carefully, I never heard him say anything about rich people, or successful earners and investors. No mention of businesses. Irving Kristol taught us 3 decades ago that the top earners are the “economic activists”. They are the ones with the highest propensity to consume and invest. They’re the ones who purchase the yachts, which are subsequently constructed by blue-collar workers. And they’re the ones who run the small businesses and provide the capital for new entrepreneurial startups that are the lifeblood of this economy.

Whether you believe in the trickle-down effect or not, one things is certain: the top earners are paying more taxes, both in absolute and in relative terms, than ever.

Income Tax Share - from 1977 to 2006

Income Tax Share - from 1977 to 2006

Source: CBO report for 1977 and 1979 data, Tax Foundation for 1981-2006 data.

It is well-known that the American income tax system is progressive, placing a larger burden on the top earners. Both Republicans and “tax-and-spend” Democrats have reduced the tax share of 90% of tax payers, transferring to the top 10%. That includes those times of tax cuts as well, which leads us to some interesting conclusions. As Mark Perry puts it:

In 2002, before most of the “tax cuts” went into effect, the share of income taxes paid by the top 1% was below 34%, and by 2006 that share increased to almost 40%. If we assessed tax policies by the share of income taxes paid by “the rich” (i.e. top 1%), the “Jobs and Growth Tax Relief Reconciliation Act of 2003” wasn’t a tax cut, it was a tax increase, since it increased the tax burden on the top 1% to record levels (40%), and resulted in more tax revenue from the top 1% than the entire bottom 95% of taxpayers!

However a slightly different story comes from this data:

AIG Share x Average Tax Rate

AIG Share x Average Tax Rate

As real average tax rates were slowly reduced across the board, the participation of the top 10% on the overall national income has grown dramatically, from 33% to 47%. That translates into increased disparities between rich and poor, a condition common among third-world countries. Or one could argue the rich still have a lot of fat to cut.

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