Over the last few decades, the rich have not only enjoyed the largest pre-tax raises, by far. They have also received big tax cuts. The middle class and poor, meanwhile, have suffered from slow-growing incomes — and from overall tax rates that are higher today than in the mid-1960s.
The first part of that story is widely known. The rich have gotten richer, for a whole variety of reasons.
The second part of the story is less known. But it’s also crucial. The great tax-cutting revolution of the last half-century hasn’t actually been a tax-cutting revolution for most Americans.
True, they have benefited from a series of cuts in income-tax rates, signed by Lyndon B. Johnson, Ronald Reagan, George W. Bush and Barack Obama. At the same time, though, another tax has been rising. It is the quiet giant of federal tax policy: the payroll tax.
It funds Social Security and Medicare, and it has been rising in response to the aging of society and rising medical costs. It increased from 2 percent just after World War II to 6 percent in 1960 to 15.3 percent in 1990, where it is today. It has risen so much that it’s now the largest tax that 62 percent of American households pay — larger than the income tax, which gets much more attention.
– The New York Times