There was general gratitude in the Nice Blog household today for Paul Krugman’s New York Times Magazine article “The Tax-Cut Con.” But as we were passing the article back and forth, an objection was raised: Isn’t Krugman a bit too quick to dismiss the complaints of middle-class people that their taxes have increased over the years? Isn’t the problem not merely that the rich have received tax cuts, but that the non-rich really have been squeezed?
Krugman can’t seem to find the data to justify this dismissal, which seems odd, given that he’s an Ivy League economics professor. He writes:
On average, families in the middle of the income distribution find themselves paying about 26 percent of their income in taxes today. This number hasn't changed significantly since 1989, and though hard data are lacking, it probably hasn't changed much since 1970.
We wondered if there was anything about this in the books those old-school liberals Donald Barlett and James Steele wrote back in the 1990s. Sure enough, there is. In their 1992 bestseller, America: What Went Wrong?, they cite statistics that perfectly fit the hole in Krugman’s data:
In 1970, a Philadelphia family with an income of $9,000 to $10,000 -- median family income that year was $9,867 -- paid a total of $1,689 in combined local, state and federal income and Social Security taxes.
In 1989, a Philadelphia family with an income of $30,000 to $40,000 -- the median family income that year was $34,213 -- paid $8,491 in combined local, state and federal income and Social Security taxes. Thus, while these taxes consumed 17.8 percent of a middle-class family’s earnings in 1970, by 1989 they took 24.3 percent of the family’s income.
A partial explanation for this is found in their 1994 follow-up, America: Who Really Pays the Taxes?:
From 1977 to 1990, the Social Security tax rate was raised nine times on Middle America. It went from 5.85 percent to 7.65 percent ... an increase of 31 percent.
(High earners, of course, pay this tax on only a fraction of their income, while middle-class earners pay it on every dime they make -- this year the tax is paid on the first $87,000 of a person’s income.)
If the Barlett and Steele numbers are right, middle-class taxes are noticeably higher than they were in 1970. Why shrug that off?