Chapter 1: INCOME AND TAXES IN AMERICA
1. See online appendix available at taxjusticenow.org for complete details on the statistics discussed in this chapter.
2. Barbier (2014).
3. Reeves (2017).
4. Alveredo et al. (2018). All the data are available online on the World Inequality Database at wid.world.
5. Custom duties are on pace to reach $75 billion in 2019, double the $38 billion collected in 2017 (US Department of Commerce Bureau of Economic Analysis, National Income and Product Accounts of the United States, Table 3.2, 2019-Q1). Yet, total consumption taxes including all levels of government are over $800 billion (ibid., Table 3.5, 2017, total taxes on production and imports excluding property taxes).
6. US Treasury (2018).
7. Okner and Pechman (1974). Federal agencies (the Congressional Budget Office, the US Treasury, or the Joint Committee on Taxation) and think tanks (such as the Tax Policy Center) produce statistics on the distribution of federal taxes by income groups but they ignore state and local taxes. See, e.g., US Congressional Budget Office (2018). The Institute on Taxation and Economic Policy (ITEP) has produced estimates of the distribution of state and local taxes for recent years (Institute on Taxation and Economic Policy, 2018). Piketty, Saez, and Zucman (2018) distribute all taxes and the results presented in this chapter update and improve this study.
8. We discuss this point in detail in Saez and Zucman (2019).
9. At the very bottom of the distribution, people do not earn labor, capital, or pension income but only transfer income; they pay consumption taxes out of this transfer income, which leads to high tax rates when expressed as a fraction of pre-tax income. We avoid this problem by restricting our population to adults with pre-tax income more than half the annual federal minimum wage ($7,250 per year). The average tax rate in that population is almost identical to the macroeconomic rate of taxation.
10. In 1950, the minimum wage was $0.75 per hour or $1,500 for a full-year, full-time job (50 weeks × 40 hours × $0.75). National income per adult in 1950 was $2,660.
11. See Organisation for Economic Co-operation and Development (2019) for a description of payroll taxes in France.
12. Institute on Taxation and Economic Policy (2018) provides the most comprehensive estimates of state and local tax progressivity.
13. In the national accounts, federal corporate tax receipts were $285 billion in 2017 and $158 billion in 2018 (US Bureau of Census, 2019, Table 3.2).
14. Business owners can deduct (up to the limit of 20% of income) 2.5% of their capital stock (excluding land, intangibles, and inventories) valued at its purchase price without depreciation. As long as the rate of return on their capital—the ratio of business income earned to the value of their capital stock—is below 12.5% (2.5% / 20%), the deduction is unlimited.
15. Landais, Piketty, and Saez (2011) and Bozio et al. (2018).
Chapter 2: FROM BOSTON TO RICHMOND
1. The top marginal income tax rate even reached 92% in 1952 and 1953.
2. The property tax records from colonies have been used by scholars to construct inequality statistics for antebellum America. Northern colonies had levels of inequality substantially lower than in England (Lindert, 2000).
3. Einhorn (2006).
4. Einhorn (2006).
5. This saying is attributed to John Steinbeck by Canadian author Ronald Wright (Wright, 2004) but is likely a paraphrase.
6. The Revenue Act of 1861 established the first federal income tax with a rate of 3% for incomes over $800 but it lacked an enforcement mechanism and was never applied. It was repealed and superseded by the Revenue Act of 1862.
7. In 1860 there were about 31 million inhabitants in the continental United States (US Bureau of the Census, 1949, series B2). The national income of the United States was about 5 billion current US dollars (the Historical Statistics of the United States report a total “private production income” of $4.1 billion in 1859 in series A154, which is likely to be slightly on the low end and must be adjusted upward for the small amount of government production), and hence average income per capita was around $150 in 1860, i.e., a fourth of the exemption threshold of $600. From 1860 to 1864 the price index increases by about 75% (Atack and Passell, 1994, p. 367, Table 13.5), so the average income per capita reached about $250 in 1864.
8. Huret (2014), p. 25.
9. The price index was multiplied by a factor of about forty between 1860 and 1864 in the Confederacy but increased only by about 75% in the Union. Confederacy: Lerner (1955); Union: Atack and Passell (1994), p. 367, Table 13.5.
10. Huret (2014, p. 40–41).
11. US Bureau of the Census (1975), series Y353–354.
12. Holmes (1893).
13. Sparh (1896), Pomeroy (1896), and Gallman (1969).
14. Lindert (2000).
15. Seligman (1894).
16. Huret (2014), p. 85.
17. See Mehrotra (2013) and Scheve and Stasavage (2017).
18. According to available estimates, the top 10% owned 90% of total wealth in Europe on the eve of World War I, against about 75% in the United States (Piketty, 2014; Piketty and Zucman 2015).
19. Fisher (1919).
20. Einhorn (2006), Chapter 6.
21. Plagge, Scheve, and Stasavage (2011), p. 14.
22. See Piketty, Saez, and Stancheva (2014) for presenting such a theoretical model and estimating it using modern data.
23. Kuznets (1953) pioneered the creation of top income shares using individual income tax statistics. See Piketty and Saez (2003) for modern estimates of top fiscal income shares. The statistics cited here refer to the top 0.01% income share excluding capital gains.
24. For a detailed description of how we account for untaxed income, and complete results, see Piketty, Saez, and Zucman (2018).
25. Norton-Taylor (1955).
Chapter 3: HOW INJUSTICE TRIUMPHS
1. Four polls carried out by ABC and Gallup in late 1986 showed that public support for the Tax Reform Act of 1986 was at best tepid with approval rates between 22% and 40% and a large fraction of the public not having a view. Approval/disapproval/don’t know percentages stand at 22/15/63, 22/15/63, 38/36/26, 40/34/26 for each of the four polls (Kertcher, 2017).
2. Crystal (1992) shows that executive compensation soared after the Tax Reform Act of 1986. Hubmer, Krusell, and Smith (2016) find that the Tax Reform Act of 1986 has played a key role in the rise of US wealth concentration. See also Piketty, Saez, and Zucman (2018).
3. See, e.g., the symposium on the Tax Reform Act of 1986 in the Journal of Economic Perspectives in 1987 (online at https://www.aeaweb.org/issues/256). Even scholars in favor of progressive taxation such as Joseph Pechman or Richard Musgrave end up broadly supportive of the tax reform—or at least recognize its inevitability (Pechman, 1987; Musgrave, 1987).
4. On the Mont Pelerin society, Burgin (2012). On tax revolt of the rich, Martin (2015). On Goldwater, see Perlstein (2001). On the role of conservative foundations, see Mayer (2017) and Teles (2012).
5. Margaret Thatcher, interview for Woman’s Own, September 1987.
6. See Slemrod (2007) and Slemrod and Bakija (2017), Chapter 5, for a discussion of tax evasion and tax enforcement.
7. Since 1922, when preferential tax rates on capital gains were first introduced, the maximum tax rate on long-term capital gains has always been below 40%. The maximum tax rate was 25% from 1942 to 1964, the era of quasi-confiscatory top marginal income tax rates.
8. Oblivious to this social norm, economists could not understand why firms were paying dividends and dubbed this the “dividend puzzle” (see e.g., Black, 1976).
9. Hall (1951), p. 54. Lewellen (1968), the classic study on executive compensation from the 1960s, entirely ignores company perks, perceived as negligible.
10. A long article in Fortune in 1955 described how top executives live (Ducan-Norton, 1955). The only mention of company perks is the following statement: “A common practice is for a company president, on his way to New York in the company plane, to fill the empty seats with family and friends. The return trip may include a detour into Canada for some fishing.” This can be compared to anecdotal evidence of company perks today, such as the gala in the palace of Versailles paid for by the automaker Renault (for over 600,000 euros) in 2014, on the sixtieth birthday of Renault’s then-CEO Carlos Ghosn (officially to celebrate the fifteenth anniversary of the Renault-Nissan alliance).
11. US Joint Committee on Tax Evasion and Avoidance (1937).
12. Fack and Landais (2016), Figures 4.5 and 4.7.
13. Wang (2002), p. 1252.
14. These calculations are made by the authors using publicly available income tax data published by the Statistics of Income division of the IRS.
15. Even more, businesses losses from passive activities (where the taxpayer was just owning part of the business and did not perform any significant activity managing the business) would only be deductible against business gains from similar passive activities. See Auerbach and Slemrod (1997) for a more detailed discussion.
16. Thorndike (2003).
17. David Cay Johnston’s 2003 book, Perfectly Legal, describes the surge in tax avoidance by the rich since the mid-1970s.
18. Ventry (2006).
19. These auditing statistics are published by the IRS annually and available online (US Treasury, Internal Revenue Service, 2018, Table 9a for year 2018 and US Treasury, Internal Revenue Service, 1975, Table 2, p. 89 for year 1975). The reporting series Gutting the IRS (ProPublica, 2018–2019) use these statistics to document the sharp reductions in IRS enforcement activities in recent decades.
20. It is possible to infer the wealth distribution among the full population from estate tax statistics using the estate multiplier method in which wealth at death is weighted by the inverse of the mortality rate conditional on age, gender, and wealth. See Saez and Zucman (2016) for a detailed discussion and evaluation.
21. Raub, Johnson, and Newcomb (2011).
22. See Cooper (1979) for a description of estate tax avoidance in the 1960s and 1970s.
23. Kopczuk and Saez (2004), Table 1, column 2.
24. Donald Trump provides a vivid illustration of estate tax dodging as documented by the New York Times (Barstow, Craig, and Buettner, 2018).
25. The academic literature on tax evasion finds small effects of marginal tax rates on tax evasion but very large effects of enforcement on evasion. See, e.g., Kleven et al. (2011).
26. This is known as the IRS National Research Program, previously called the Taxpayer Compliance Measurement Program. See, e.g., US Treasury, Internal Revenue Service (1996).
27. Guyton et al. (2019).
28. This is documented for the United States in the IRS National Research Program (see, e.g., US Treasury, Internal Revenue Service, 1996). This issue is analyzed in more detail in the context of Denmark by Kleven et al. (2011).
29. Alstadsæter, Johannesen, and Zucman (2019) and Zucman (2019).
30. International Consortium of Investigative Journalists (2016).
31. Zucman (2013, 2015) and Alstadsæter, Johannesen, and Zucman (2018).
32. Johannesen and Zucman (2014) study the weak information exchange regime prevailing before the automatic exchange of bank information. The incomplete network of cross-border information exchange treaties in place could be circumvented by tax evaders using offshore accounts in noncomplying tax havens.
Chapter 4: WELCOME TO BERMULAND
1. Zucman (2014).
2. Organisation for Economic Co-operation and Development (2017).
3. In the United States, employee representation plans and company unions—employee-elected bodies that consult with management on workplace issues—played an important role in corporations from World War I to the mid-1930s (see, e.g., Wartzman 2017).
4. Wright and Zucman (2018).
5. Zucman (2014).
6. https://www.sec.gov/Archives/edgar/data/1288776/000119312504143377/d424b4.htm.
7. Drucker (2010), Kleinbard (2011), pp. 707–714. Ireland has committed to phase out the scheme that enables a firm to be incorporated in Ireland but tax resident in Bermuda by 2020.
8. Bowers (2014).
9. Wright and Zucman (2018).
10. See US Treasury, Internal Revenue Service, Country-by-Country Report (Form 8975) (2018, Tax Year 2016, Table 1A).
11. Tørsløv, Wier, and Zucman (2018) and Clausing (2016, 2019).
12. See for instance Phillips et al. (2017) for estimates of how much profits Fortune 500 companies held offshore on the eve of the Tax Cut and Jobs Act.
13. See for instance Hodge (2018).
14. Cook (2016).
15. Wearden and Elliott (2018).
16. On the notion of commercialization of state sovereignty, see Palan (2002).
17. Tørsløv, Wier, and Zucman (2018).
Chapter 5: SPIRAL
1. The income earned by self-employed workers is mixed in the sense that it conceptually corresponds to both a payment for their work (time spent curing patients or performing legal services) and their capital (medical devices, intangible assets such as the brand value of a law firm). Attributing 70% of self-employment income to labor is somewhat arbitrary, but because most workers are salaried individuals (not self-employed), varying this assumption is largely immaterial.
2. In public financial statements, total labor costs are not reported separately (they are lumped with other costs under “costs of goods sold”). However, we know that Apple had approximately 132,000 full-time equivalent employees in 2018, and thanks to a new rule implemented by the Securities and Exchange Commission in 2018 compelling companies to disclose the ratio of the CEO’s to median employee pay, we know that the median Apple employee was paid $55,000 (excluding fringe benefits such as health insurance). We assume that the average employee was paid $95,000, to which we add $20,000 in health and retirement benefits, bringing total labor compensation to about $15 billion. We add this amount to the $70.9 in “operating income” reported in Apple’s 2018 10-K report, p. 38, to form our estimate of Apple’s value-added ($85 billion).
3. See Piketty and Zucman (2014) for a systematic analysis of capital versus labor shares at the macroeconomic level across countries and over time.
4. To be complete, we also assign sales taxes to labor and capital, in proportion to the share of labor and capital in national income. This ensures that the average macroeconomic tax rate is equal to the sum of the capital and labor rates, weighted by the respective shares of labor and capital in national income.
5. According to the Kaiser Family Foundation, an MRI scan cost five times more in the United States ($1,119 on average) than in a country like Australia ($215) in 2014. An appendectomy costs $15,930, the equivalent of an entire year of pre-tax income for the average American in the lower half of the income distribution (Kamal and Cox, 2018).
6. Kaiser Family Foundation Employer Health Benefits Survey, 2018; see also Kaiser/HRT Survey of employer-sponsored health benefits for statistics covering the period from 1999 to 2017. The Bureau of Labor Statistics Employee Benefits survey shows that in 2017, 58% of workers received health care benefits (US Bureau of Labor Statistics. National Compensation Survey, 2018, Table 9). There were 150.5 million full-time and part-time employees in the United States in 2017 (see US Department of Commerce, Bureau of Economic Analysis, 2019, Table 6.4D) and hence 87.3 million with health insurance at an average cost per insured worker of $12,000. The total cost of insurance premiums for employer sponsored benefits is $1.044 trillion in 2017 (see US Centers for Medicare and Medicaid Services, 2019, Table 05–06 of the National Health Expenditure Accounts). Assuming a 4% nominal growth rate in health care cost from 2017 to 2019, this is $13,000 per worker in 2019.
7. Dafny (2010).
8. Organisation for Economic Co-operation and Development (2018c, 2019c).
9. The total cost of insurance premiums for employer-sponsored benefits represented the equivalent of 6.2% of national income in 2017 ($1.044 trillion out of $16.756 trillion in national income, see US Centers for Medicare and Medicaid Services, 2019, Table 05–06 of the National Health Expenditure Accounts, US Department of Commerce, 2019, Table 1.12). As health care costs grow faster than national income, the corresponding figure for 2019 is slightly higher than 6.2%.
10. See Organisation for Economic Co-operation and Development (2018c) for macroeconomic tax rates across OECD countries.
11. Piketty, Saez, and Zucman (2018).
12. See Piketty (2014) for an analysis of the interplay between capital taxation, the rate of return to capital, and long-run wealth inequality.
13. Top wealth shares are estimated by capitalizing the capital income reported on income tax returns. See Saez and Zucman (2016) and updated data series in Piketty, Saez, and Zucman (2018).
14. These zero capital tax results are known as the Atkinson-Stiglitz theorem (Atkinson and Stiglitz, 1976) and the Chamley-Judd result (Chamley, 1986, and Judd, 1985). These results, however, rely on very strong and unrealistic assumptions. In more realistic settings, capital taxes are actually desirable (see, e.g., Piketty, and Saez, 2013, and Saez and Stantcheva, 2018).
15. Piketty and Zucman (2014).
16. See Saez and Zucman (2016) for a detailed description of the evolution of bottom 90% savings and wealth over the last century.
17. Two broad-audience books provide overviews of the behavioral economics literature and summarize its implications for public policies: Thaler and Sunstein (2008) and Thaler (2015).
18. This result was first established by Madrian and Shea (2001). It has been replicated in many subsequent studies (see, e.g., Beshears et al., 2009).
19. Chetty et al. (2014).
20. This is apparent, for instance, in Denmark, which abolished its progressive wealth tax in 1997 and yet where wealth inequality did not rise, as the extra saving rate of the wealthy was more than offset by the boost in middle-class saving coming from changes in pension regulations. See Jakobsen et al. (2018).
21. See De Mooij and Ederveen (2003) for a survey of the empirical literature.
22. McCormick (2018).
23. Agostini et al. (2018).
24. In Israel, see Romanov (2006). In Sweden, see Edmark and Gordon (2013). In Norway, see Alstadsæter (2010). In Finland, see Pirttilä and Selin (2011).
Chapter 6: HOW TO STOP THE SPIRAL
1. International Monetary Fund (2019), Appendix 1, p. 47.
2. Tørsløv, Wier, and Zucman (2018).
3. Available estimates suggest that the compensation of transfer pricing professionals globally has been about $20 billion a year in recent years; see Tørsløv, Wier, and Zucman (2018).
4. Brennan and Buchanan (2000).
5. See, e.g., Atkinson, Piketty, and Saez (2011) and Piketty (2014).
6. Organisation for Economic Co-operation and Development (2018).
7. See online appendix available at taxjusticenow.org.
8. Federal corporate tax revenue fell from $285 billion in 2017 to $158 billion in 2018 (US Department of Commerce, 2019, Table 3.2). With state corporate income taxes, the fall is 35% (from $338 billion in 2017 to $218 billion in 2017, ibid. Table 3.1).
9. The 2018 US tax reform introduced an embryo of remedial taxation with its GILTI (“global intangible low-tax income”) provision. According to this rule, the foreign profits of US multinationals deemed abnormally high (that is, exceeding a 10% return on tangible capital) are taxed at a minimum tax rate of 10.5% in the United States. However this provision is insufficient for two key reasons: the 10.5% tax rate is too low, and the remedial tax does not apply on a country-by-country basis but on a consolidated basis (which means that a company that books profits in Bermuda but pays high enough taxes in Japan can avoid it). See Toder (2018) for more details.
10. Bloomberg (2017).
11. Forbes (2019), accessed July 4, 2019.
12. For an analysis of the US experience with the apportionment of corporate profits, see Clausing (2016b).
13. Organisation for Economic Co-operation and Development (2019b).
Chapter 7: TAXING THE RICH
1. Barstow, Craig, and Buettner (2018) and Buettner and Craig (2019).
2. Rawls (1971).
3. Economists rely primarily on the utilitarian principle of maximizing the sum of utilities across individuals in society. Individual utility increases with income but at a decreasing rate so that the kick in utility provided by an extra dollar of income becomes vanishingly small as income becomes very large. See Piketty and Saez (2013b).
4. Ramsey (1927).
5. Diamond (1998) and Saez (2001).
6. See Slemrod (1990) and Saez (2004) for a discussion of tax avoidance responses around the Tax Reform Act of 1986. Moffitt and Wilhelm (2000) show that the increase in the taxable income of high-income individuals around the tax reform was not accompanied by an increase in hours of work.
7. See Diamond and Saez (2011) for a summary of the theoretical analysis.
8. Saez, Slemrod, and Giertz (2012) review the empirical literature and show that large documented behavioral responses to tax changes always arise from tax avoidance. In the case of tax systems with few avoidance opportunities such as Denmark, behavioral responses to tax changes are quantitatively small with elasticities in the range of 0.2–0.3 for top earners (Kleven and Schultz, 2014).
9. The average income above $500,000 is approximately $1,500,000 (Piketty, Saez, Zucman 2018). Hence top bracket taxpayers would pay 75% on $1,000,000 and a lower rate on their first $500,000. If we assume that the tax rate on their first $500,000 is the average macroeconomic tax rate of 30%, this gives a total tax rate on top bracket taxpayers of (2/3) × 75 + (1/3) × 30 = 60%.
10. Kiel and Eisinger (2018) document the gutting of the IRS budget and enforcement activities since 2010.
11. See for instance Kiel and Eisinger (2019).
12. Zucman (2015).
13. In current US law, when assets are transferred to heirs, their purchase price is re-set to the price prevailing at the time of the transfer. This infamous loophole, known as stepped-up basis, means that people can avoid capital gains taxes by holding on to their assets until death. Most economists agree that this is a critical loophole to close.
14. Zucman (2014).
15. Profits accruing to nonindividual shareholders (such as pension plans and foundations) would remain subject to the corporate tax. Realized capital gains would be subject to the progressive income tax, but this does not imply that these capital gains would be taxed twice, for the following reason. In the integrated system that we describe, retained earnings would be considered as new investment from shareholders and hence factored in the shareholder stock basis (as for S corporations in the United States today). As a result, capital gains would not reflect retained earnings but would only reflect pure asset price appreciation.
16. We assume that the elasticity of income with respect to one minus the marginal tax rate is 0.25 for the top 1%. Under the current system, individuals in the top 1% pay an average tax rate of 30% and face a marginal tax rate of 35% on average. Shifting to a marginal tax rate of 75% would reduce top 1% pre-tax incomes by a factor of ((1 – 0.75) / (1 – 0.35))0.25 = 79%. The top 1% income share would fall to 20% × 79% = 15.8%.
17. We discuss in more detail prospects for progressive wealth taxation in the United States in Saez and Zucman (2019b).
18. In the 1950s–1970s, wealth concentration was at a historically low level in America. Progressive wealth tax proposals usually follow from the empirical analysis of growing wealth concentration. Following his research on the rise of wealth inequality in America in the 1980s (Wolff, 1995), Wolff (1996) proposed a progressive wealth tax (albeit with modest rates). More recently, Piketty (2014) proposes a global progressive wealth tax with top rates of up to 5%–10% in response to the rise of global wealth concentration. Piketty (2019) suggests top wealth tax rates up to 90% on multibillionaires to fund a capital endowment for each young adult.
19. Rosenthal and Austin (2016).
20. Meyer and Hume (2015).
21. For smaller businesses (like mom-and-pop companies with a single owner), the simplest way to proceed is to follow the best international practices. Switzerland has successfully taxed equity in small, single-owner private businesses by using formulas based on the book value of business assets and multiples of profits. In the United States, the IRS already collects data about the assets and profits of private businesses for business and corporate income tax purposes, so it would be straightforward to apply similar formulas.
Chapter 8: BEYOND LAFFER
1. Commentators often convert brackets using price inflation adjustment only, without factoring in economic growth. This exaggerates the tax burdens of the distant past as real incomes were much lower then.
2. See US Treasury Department, Internal Revenue Service (1962), p. 32.
3. Madison (1792).
4. Madison (1795).
5. Piketty, Saez, and Stantcheva (2014) develop a model of taxation along these lines. They find that if high top tax rates reduce rent extraction by top earners, then confiscatory top tax rates that go beyond the Laffer rate are desirable. Using international evidence on CEO pay, they show that indeed, high top tax rates play an important role in moderating top executive compensation.
6. Piketty, Saez, and Zucman (2018) present US distributional national accounts and Alvaredo et al. (2016) present the general methodology. The US census bureau and the Organisation for Economic Co-operation and Development have also developed initiatives in this direction for the United States and European countries (Fixler and Johnson 2014; Zwijnenburg et al. 2017).
7. Garbinti, Goupille-Lebret, and Piketty (2018).
8. College Board (2019).
9. Feldstein (2017).
10. Gates (2013).
11. Aeppel (2015).
12. Mouton (2018).
13. Chetty et al. (2017).
14. Organisation for Economic Co-operation and Development (2018b).
15. See OECD Health Statistics (Organisation for Economic Co-operation and Development 2019c). Case and Deaton (2015) document these mortality trends and show that the increase in mortality in the US is concentrated among whites in mid-life without college degrees. They show that this increase in mortality can be partly explained by “deaths of despair”: poor economic prospects leading to drug or alcohol abuse and suicides.
16. Saez and Zucman (2019b) provide all the details on the computations of the wealth tax statistics discussed here.
Chapter 9: A WORLD OF POSSIBILITY
1. Kuziemko et al. (2015) show that in the United States, public support for redistribution in a high inequality context is much weaker when trust in government is low.
2. A large body of empirical work shows that public health insurance saves lives (although a precise quantification is difficult); see, e.g., Card, Dobkin, and Maestas (2009).
3. See OECD Health Statistics (Organisation for Economic Co-operation and Development 2019c).
4. Singapore is often cited as an example of an advanced economy with low taxes. The tax to GDP ratio in Singapore was only 13.5% in 2016. But this is misleading as Singapore imposes very large mandatory payroll contributions on workers’ earnings for health and retirement benefits and education expenses, called the Central Provident Fund (www.cpf.gov.sg), which are essentially equivalent to payroll taxes. The rates are very high, with a combined employee and employer contribution of 37% of earnings for nonelderly workers (see Organisation for Economic Co-operation and Development, 2019d, Global Tax Statistics Database).
5. See OECD statistics for the level of public and private education funding relative to GDP in OECD countries (Organisation for Economic Co-operation and Development, Revenue Statistics, 2019e).
6. See Goldin, Katz, and Kuziemko (2006) on the college graduation rate by gender and cohort. See Blau, Ferber, and Winkler (2014) for an analysis of the gender gap, and Kleven et al. (2019) for estimates of “child penalties” across countries.
7. See Gallup surveys (Witters, 2019).
8. This is the case of France for example with its Contribution Sociale Généralisée (see Landais, Piketty, and Saez, 2011).
9. See Ebrill, Keen, and Perry (2001) for a detailed history of the VAT.
10. Turnover taxes are taxes on gross sales that businesses make regardless of whether the sale is made to final consumers or another business. Some US states still use such turnover taxes (see Watson, 2019).
11. Martin Luther King, Jr. used the phrase “justice too long delayed is justice denied” in his “Letter from Birmingham Jail,” smuggled out of jail in 1963.
12. Bakija, Cole, and Heim (2012).
13. Organisation for Economic Co-operation and Development, Revenue Statistics (2018c), Table 3.14.
14. Hall and Rabushka (1985) proposed the “flat tax.” Viard and Carroll (2012) present a description of various consumption tax proposals. They lucidly point out that flat tax proposals disguised as income taxes are challenging to sell to the public because they would be “income taxes” exempting interest income, dividend income, and realized capital gains—that is, exempting the forms of income which are highly concentrated among the rich.
15. See US Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts of the United States (2019), Tables 7–14, 7–16, and 7–18. Misreported income in 2015 was $86.2 billion for wage earnings, $672 billion for unincorporated business income, and $367 billion for corporate profits. The total is $1,125 billion or 7.2% of national income in 2015. Complete details are provided in Saez and Zucman (2019c).
16. Chetty, Friedman et al. (2017) provide an analysis of college attendance by family income. They show that the likelihood of college attendance by age twenty-two grows linearly by percentile of parental income from 32% at the bottom to 95% at the top (Appendix, Figure I). Richer kids also attend better schools than poor kids.
Conclusion: TAX JUSTICE NOW
1. Tax simulators exist within government agencies, including the Congressional Budget Office, the US Treasury, and the Joint Committee on Taxation, as well as within think tanks such as the Tax Policy Center. These tools capture minute details of the tax code, making it possible to precisely simulate federal legislative changes, but they are not accessible to the public. Our tool is accessible to all and focused on the interplay between taxes and inequality. Combining these two approaches would be valuable and we hope to contribute to this task in the future.