Economics: Lower Taxes on Wealth; Higher Taxes on Work

Detailed estimates from the Congressional Budget Office — which only go up to 2005, but the basic picture surely hasn't changed — show that between 1979 and 2005 the inflation-adjusted income of families in the middle of the income distribution rose 21%. That's growth, but it's slow, especially compared with the 100% rise in median income over a generation after World War II.

Meanwhile, over the same period, the income of the very rich, the top 100th of 1% of the income distribution, rose by 480%. No, that isn't a misprint. In 2005 dollars, the average annual income of that group rose from $4.2 million to $24.3 million.

... there has been a major shift of taxation away from wealth and toward work: tax rates on corporate profits, capital gains and dividends have all fallen, while the payroll tax — the main tax paid by most workers — has gone up.

And another wealth tax that has been reduced or eliminated is the estate tax.

For more, see The Social Contract by Paul Krugman, September 22, 2011 at NYTimes.com.