No, wealth inequality increased because we stopped taxing rich people.
The US tax code has gotten more progressive over time, not less. The very high tax rates from the past were quite narrow in scope, they covered few taxpayers.
The top 25% are paying 85-88% of all income taxes in a given year. The top 10% are paying 70% of all income taxes.
The top 1% yield 20% of all income and pay 39% of all income taxes.
How do you qualify that very progressive tax code as "stopped taxing rich people"?
Simultaneously the US welfare state has massively expanded since 1970. Poverty and homelessness have declined by a lot, while healthcare coverage expanded dramatically. The US spends the equivalent of 20% of its GDP on social welfare programs. That's higher than Canada and Australia, just slightly behind the UK at 22%. All of that is paid for by the top 25% of income earners.
We had large numbers of mostly independent economic centers populated with local businesses owned and operated by local individuals. In many ways it's something akin to what you can find in many parts of the developing world today. And it's awesome. But as the economy 'globalized' we've reached a point such that an urban business streetscape in California can very often look effectively identical, in terms of businesses in operation, to one all the way on the other side of the country in New York. You're never going to have anything even vaguely resembling economic equality when a handful of companies control immense amounts of the entire economy.
This also distorts governmental systems since extensive wealth means the reach of companies is practically unlimited. Civil servant versus a company sitting on billions of dollars with international connections spanning the entire globe and the best legal and public relations teams that money can buy? That's not even David vs Goliath, that's ant vs foot.
How exactly is that worked out? Income taxes ($1.6t) and payroll taxes ($1.2t) are a similar level, and rich people tend not to pay payroll taxes as they aren't on a payroll.
Payroll taxes cover social security payments ($1t), so that leaves income taxes paying for things like Defence ($1.2t for military and veteran affairs), which wealthy people disproportionately benefit from.
Medicare and medicaid are the unusual ones, for the cost of those two alone ($1t, or $3000 per head) you could afford universal healthcare in other western countries.
That's not how that works. The U.S. has become massively more disparate in income and wealth, which alone would explain why more taxpayers fall into high tax brackets: the middle class is evaporating, leaving a somewhat larger upper class (more high-income taxpayers paying a lot!) and a massively larger lower class (also more low-income taxpayers paying very little), thus shifting the balance of how much the wealthy pay for the poor: with less of a middle class, the wealthier are the originators of a higher percentage of the tax revenue just by mathematics. That's not the tax code becoming "more progressive over time," that's the US having more inequality over time.
But it didn't happen alone. It also happened under repeated tax cuts for the wealthy. The U.S. tax code has become demonstrably less progressive over time, just as the U.S. has become demonstrably less economically equal.
> The US spends the equivalent of 20% of its GDP on social welfare programs. That's higher than Canada and Australia, just slightly behind the UK at 22%.
Right, but that's because the health care system of "no preventative care for the poor, but massive spending on medical procedures once you're already dying" is incredibly inefficient. Single-payer healthcare is cheaper than what we have, demonstrated by almost every large country with it spending less (while often getting better results). It's not because the tax system is progressive, or because the social safety net is somehow better or larger than countries with free healthcare and cheap higher education.
Focusing on how much the wealthy pay, as a proportion of all taxes paid, is rolling up the progressiveness of the tax code with the income inequalities that already exist. Why do you rob banks? That's where the money is. Why do you tax the rich? They're the ones who can afford to pay.
I really don't see why income tax can't be defined as a polynomial equation in a single variable (for gross income) and an additional constant, equal to median income for the previous year. With a floor function to obviate negative taxes.
The tax can be zero up to the median income, ramp up quickly to an inflection point at about 30% for the dollar at 3x median income, then increase at a decreasing rate to asymptotically approach 100% for infinite income. For the purposes of argument, I'll say that the dollar at 100000x median income would be taxed at 90%.
As long as it's a continuous and increasing function--after the first "median income" amount of one's income--every additional dollar of gross income is still a positive amount of additional net income. Only the winners pay. It's always worth something to increase your gross income. It could also be a viable strategy to reduce your own taxes by spending a lesser amount on increasing median income--i.e. pay your below-median workers more money.
your math is way off because your're mixing nominal, ordinal, interval and ratio[1]
e.g. ten people in econony 9 poorest make $100/year 1 richest makes $200/year
poor tax rate: 5% rich tax rate: 20%
rich pay 42% of taxes 40 / (40 + 45)
now, lower tax rates on the rich and at the same time his income explodes (what's actually happened since early 1980's)
1 richest person makes $1000/yr rich man tax rate 15% rich pay 76% of all taxes (150 / (150 + 45)), which is much higher than before (your progressive argument)
but you claim that tax rates have become more progressive, when in fact and in example above they have become more regressive.
[1] https://www.mymarketresearchmethods.com/types-of-data-nomina...
Even when the US had high marginal tax rates for the wealthy, there were tons more loopholes so the effective tax rate was significantly less. That’s the reason people were on board with lowering the marginal rate in exchange for the elimination of lots of deductions.
Not sure how income tax would apply to that