The Tax Rates of Wall Streeters and Steelworkers

During a rousing speech in Pittsburgh on Labor Day, Joe Biden said:

Why in God’s name should a man or woman working in a steel mill making $50,000 a year pay a higher [tax] rate than someone who makes tens of millions of dollars on Wall Street? … The tax code is not fair. It’s simply not fair. The wealthy aren’t paying their fair share.

That statement is demonstrably false, and like similar claims, it is based upon incomplete measures of taxes. To determine overall tax rates, one must account for all taxes and all income. Yet, politicians, journalists, commentators, and “fact checkers” routinely flout this basic tenet of honest accounting.

With regard to federal taxes, the Congressional Budget Office (CBO) comes closer to the ideal of measuring all taxes and income than any other primary source of data on this subject. CBO accounts for nearly all income (such as wages, interest, capital gains, government benefits, and employer benefits) and 92% of all federal taxes (such as personal income, corporate income, payroll, capital gains, and excise). CBO does not account for the remaining 8% of taxes because it cannot reliably allocate them by income group.