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Thanks to Obama, the rich paid more in taxes in 2013 than they did in 1980

Rich people
Rich people in their natural habitat.
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Dylan Matthews is a senior correspondent and head writer for Vox's Future Perfect section and has worked at Vox since 2014. He is particularly interested in global health and pandemic prevention, anti-poverty efforts, economic policy and theory, and conflicts about the right way to do philanthropy.

President Obama has raised taxes on the richest 1 percent of Americans so much that they actually paid more in 2013 than they did in 1980, before the Reagan and Bush tax cuts and the huge recent increase in inequality.

That's the surprising conclusion of a new report from the Congressional Budget Office. The report tracks how incomes and taxes have evolved for different parts of the income distribution from 1979 to 2013. And one thing it suggests is that Obama's tax policies have led to a very significant increase in taxes for the richest 1 percent:


What's being tracked here is the "average tax rate," or the percentage of your income you pay in taxes, for each income group. This is not the same thing as your marginal tax rate, which just applies to the last dollar earned. A variety of factors can affect this measure, including the overall state of the economy; if people are making less money, then they're likely to either be bumped down into lower tax brackets or have less money taxed in their highest bracket, lowering their average rate.

But the main thing that changes average tax rates is public policy. You can see that in the big jump from 1986 to 1987, when the rich paid more after Ronald Reagan signed tax reforms raising the rate on capital gains, and after 1993, when Bill Clinton and Democrats in Congress raised top rates to balance the budget.

And you can see it in the jump from 2012 to 2013, when the average federal tax rate on the rich grew from 28.7 percent to 34 percent in a single year. That's a massive gain. One-percenters paid, on average, about $83,000 more that year than they would've paid if their average tax rate had held constant.

So what happened? Two things, mainly. First, Obama used the expiring Bush tax cuts as leverage to force Congress to accept higher tax rates for the rich. Couples with more than $450,000 in taxable income faced a top rate of 39.6 percent, not 35 percent, and the top capital gains rate went up from 15 percent to 20 percent; income taxes were back to where they were for the rich under Clinton.

Second, 2013 was the first year that many of the taxes in the Affordable Care Act took effect, including a 3.8 percent surtax on investment income (including capital gains) and a 0.9 percent increase in the Medicare payroll tax, only applying to income above $200,000 for individuals or $250,000 for couples. The expiration of the Social Security payroll tax holiday, in effect since 2011, also played a role, but a comparatively small one.

In short, Obama raised taxes on the rich a lot, between Obamacare and the late 2012 repeal of some of the Bush tax cuts. And the result was a large increase in the progressivity of the federal tax code. The change wasn't big enough to reverse recent increases in inequality, of course, but it was still a major shift that's gotten surprisingly little notice in the inequality debate.

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