Re: Distribution.

SENATOR OBAMA says, "For decades, America has been victim to an anti-tax sentiment that has led to tax cuts that favor wealth, not work." The implication seems to be that the U.S. has pursued a tax policy that is radically different from that of other countries because it favors the wealthy. Does the U.S. favor the rich in comparison to other countries? The nearby chart addresses this question. It plots for the years 1981 through 2007 the ratio of the tax rate faced by the rich to the tax rate faced by a typical blue-collar worker. If a country's tax code is highly progressive, then this ratio will be quite high, as the rich will have tax rates that are much higher than those faced by the poor. In a flat-tax economy, the ratio would be 1.0, since everyone would face the same tax rate.

In the United States, we have a top statutory income-tax rate of 35 percent. The Social Security tax does not raise this rate, as it goes to zero for incomes above $102,000, but the Medicare tax of 1.45 percent on employers and employees does raise it, making the top rate on labor income in the U.S. about 38 percent. In 2007, a person who earned half of the average income (as measured in GDP per capita) earned about $23,000 and faced a federal income-tax rate of 15 percent. This person also, however, faced Social Security taxes and Medicare taxes. Accounting for these, the income received by the ...