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The 2010 debate over extending the 2001 and 2003 Bush tax cuts often focused the fairness of the tax distribution in the United States. Unfortunately, discussions of tax fairness rarely take into account the distribution of the overall tax system, typically focusing only on the federal income tax or on federal taxes without consideration of the state and local tax system. This paper updates a 2003 analysis (Roach, 2003) to present a current assessment of the distribution of all components of the U.S. tax system, including recent trends. The results show that the overall federal tax system is quite progressive. But when state and local taxes are included as well, the overall U.S. tax system is only slightly progressive. Further, most of the progressivity of the overall tax system occurs in the lower half of the income spectrum. At upper-income levels, progressivity levels off and actually reverses at the highest income levels. Medianincome taxpayers pay about 25% of their total income in taxes, while taxpayers in the top 1% pay about 31% of their income in taxes. Thus claims that America has a “highly progressive” tax system do not appear to be valid. There is no clear long-term trend in the progressivity of the federal tax system – it is about as progressive now as it was in 1979 with progressivity generally declining in the 1980s and rising since then. The limited data on state and local tax progressivity also fail to indicate a trend in either direction over the last 15 years. Relative stability in tax progressivity stands in stark contrast to rising economic inequality. Since 1979, lower-income households have seen their real incomes stagnate, median households have experienced modest gains, while those in the top 10%, and in particular to the top 1%, have realized dramatic gains. While changes in tax progressivity could have partially offset the rise in income inequality, this has not been the case. Analysis of the compromise plan to extend the Bush tax cuts shows that the progressivity of the plan is much closer to the original Republican proposal than President Obama’s proposal that would have eliminated the Bush tax cuts for high-income households.

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