Felix Salmon posts this chart and waxes pessimistic about the sorry state of our tax code:
This chart should be ingrained in the mind of anybody who cares about fiscal policy. The main things to note:
- Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America's long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.
- Income taxes, in particular, both personal and corporate, are low and falling. That trend is not sustainable.
- Employment taxes, by contrast--the regressive bit of the fiscal structure--are bearing a large and increasing share of the brunt. Any time that somebody starts complaining about how the poor don't pay income tax, point them to this chart. Income taxes are just one part of the pie, and everybody with a job pays employment taxes.
- There aren't any wealth taxes, but the closest thing we've got--estate and gift taxes--have shrunk to zero, after contributing a non-negligible amount to the public fisc in earlier decades
My interpretation is rather different. We have an awkward tax structure, to be sure--if you were designing a code from scratch, you probably wouldn't set it up this way. However, the payroll tax isn't particularly different from what the tax code looks like in many places in Europe--most people pay a broad, low rate, and then the carriage trade pays something more progressive. And it has grown over time largely in support of two social programs much beloved of progressives. If those programs were smaller, the employment taxes would be, too.