A few readers were surprised by my mention Thursday that the U.S. tax code, while less progressive than it may initially appear, is actually the most progressive in the developed world. But it's true! For example, look at how big a share of the income pie the top 10 percent gets vs. what share of taxes it pays here, and then compare that to peer countries like Britain, France, Germany and Sweden:
Our top 10 percent gets a bigger slice to start, but it also pays a much higher share of the tax burden than the upper classes in other countries do. In Sweden, generally considered the most economically egalitarian country on the planet, the rich pay taxes that are more or less exactly their share of income. These numbers are a little dated, coming as they do from a 2008 OECD report, but the point stands.
Now, where this gets interesting is when you take transfers — that is, stuff like Social Security, Medicare/Medicaid, food stamps, the Earned Income Tax Credit, and other government programs designed to improve people's standards of living — into account. Those programs, like progressive taxes, reduce inequality relative to what it would be without them. But some reduce it more than others. And even though the United States has the most progressive tax system in the world, its overall tax and transfer system reduces inequality less than those in peer countries do:
The most redistributionist countries on the planet tend not to be those with really progressive taxes. Instead, they're the countries that tax regressively but then direct that money overwhelmingly to poor residents.
