Book SummaryThe Triumph of Injustice, by Emmanuel Saez and Gabriel Zucman

1-Page Summary1-Page Book Summary of The Triumph of Injustice

Problems With U.S. Taxation: Regressive Effects and Growing Inequality

Saez and Zucman argue that the U.S. tax system has become deeply unfair, enriching the very wealthy while taking away from the working and middle classes. That's not the way taxes should function in a democracy. They highlight two core issues: an overall regressivity at the highest income levels, where billionaires pay less than everyone else, and a broader trend of capital income (income from investments and wealth) being taxed far more lightly than labor income (wages). These trends fuel a vast and harmful rise in wealth inequality.

U.S. Tax System: Regressive Flat Rate for Top Earners

The authors analyze data on every type of tax Americans pay, not just federal income tax. This gives the full picture: state, sales, property taxes, etc., matter too! What they find is alarming. The taxation framework is essentially flat throughout much of the income range—meaning everyone pays roughly the same percentage, around 25-30% of their income. But at the highest income levels, it inverts, becoming regressive. The wealthiest few, by exploiting loopholes and legal structures, pay a lower percentage than the rest, closer to 20%. This is the reverse of a system where the burden increases as one's ability to pay does.

Highest-Earning 1% Pay Lower Taxes Than Working, Middle Class Despite Inequality Rise

This regressive effect is especially problematic because it coincides with a dramatic rise in economic disparity. The top 1% of earners now make a far larger slice of the national income pie than they did decades ago, nearing 20%, while the bottom 50% has seen their share shrink. Saez and Zucman emphasize that what the top 1% have gained equals the losses of the bottom 50%. However, tax legislation reinforces this rather than mitigating it. Billionaires are taxed at lower rates than teachers, secretaries, steelworkers, and retirees. The authors highlight that this is historically unprecedented - the first time in a century that the top 400 have paid less than those with the lowest incomes. This resembles a plutocratic taxation approach.

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Other Perspectives

• The top 1% often pay a significant amount of taxes in absolute terms, contributing a large portion of the total tax revenue, even if their effective tax rate may be lower.
• The framing may not consider the mobility between income brackets, where individuals in the bottom 50% can move up to higher income brackets over time, and vice versa.
• The statement may not reflect recent changes in tax legislation aimed at addressing these disparities, as tax laws are frequently amended and what was true at one point may not be accurate at a later date.
• The statement may not consider the philanthropic contributions of the top 400 earners, which can be substantial and reduce taxable income but also provide public benefits that might otherwise require government expenditure.
• Taxation based on income does not account for wealth accumulation, which could mean the system is not plutocratic if it effectively taxes wealth through other means such as estate taxes or capital gains taxes.

Taxes on Capital Income Are Lower Than Those on Labor Income

This regressivity at the top is driven by the way different types of income are taxed. Labor income, earnings from work, is taxed consistently. But capital income, from investments, wealth, and company ownership, receives far more favorable treatment. Saez and Zucman identify several reasons for this:

• Gains from capital, earned by selling appreciated assets like stock, are taxed at a lower rate. Historically, this was intended to encourage investment. However, the authors argue that it primarily creates loopholes for wealthy individuals to convert other income into this lower-taxed form.

• Corporate taxes on company earnings have been lowered. This benefits the extremely wealthy, who own most corporate shares. Plus, corporations have become adept at shifting their profits to low- or zero-tax havens, further reducing their tax burden.

• Various exemptions and deductions disproportionately favor capital income. Dividends from companies, as well as the income that professionals like doctors or lawyers make, enjoy reduced rates and deductions. This explicitly favors capital-derived...

The Triumph of Injustice Summary Precedents and Justifications for a Graduated Tax Structure

Saez and Zucman counter the common argument that taxing the wealthy harms the economy with a look at historical precedents. They point out that, for half a century, America had extremely high top income and wealth tax rates, and this coincided with robust economic growth and a reduction in inequality. They argue that these high rates were not just an artifact of wartime, but reflected a deliberate effort to reduce extreme pre-tax income inequality and curb harmful rent-seeking.

Mid-20th Century U.S. Had Top Rates Over 90% on Earnings and Wealth

The authors highlight that from the 1930s until the end of the 1970s, the US had top income tax rates that were 78% on average, going as high as 91%. On top of this, taxation on estates from large inheritances came close to 80%. This degree of progressivity was unparalleled in Western countries (aside from the UK). It is important to note that these high rates affected income earned above extraordinarily high thresholds, equivalent to millions of dollars today.

Compressed Income Inequality and Reduced Earnings Aggregation Pre-Tax

The authors emphasize that the purpose of these high tax percentages wasn't just to increase...

The Triumph of Injustice Summary Restoring Progressive Taxes, Curtailing Avoidance, Ensuring Global Justice

The authors don’t just diagnose the problems; they propose practical solutions for reestablishing progressive taxes and ensuring a fairer, more sustainable global system. Their plan has several key points, addressing both domestic and international aspects of avoiding taxes.

Nations Must Regulate Multinational Companies to Ensure Fair Taxation

The authors argue that globalization doesn't make us fated for a downward spiral in corporate taxes, where companies pay lower and lower rates as they shop for the most favorable jurisdiction. They propose concrete steps that countries can take to regain control over tax revenue.

Unilaterally Impose Taxes on Income Moved to Tax Shelters

The authors propose that countries should start imposing remedial taxes on the earnings their multinational companies divert to low-tax jurisdictions. They highlight that this can be done unilaterally, without requiring any cooperation from low-tax jurisdictions themselves. This is possible because most countries now collect data on the profits and taxes of their own multinationals, broken down by country. The US, for example, could impose a global tax floor of 25% on all profits that American...

The Triumph of Injustice Summary Fair Tax System's Role In Funding Public Goods and Institutions

Saez and Zucman emphasize that increased tax progressivity isn't just about fairness but about ensuring adequate funding for essential public goods and institutions, especially health care and education. They criticize the American system, where private health insurance costs impose a huge and regressive burden on the working and middle class, and propose an income tax on a national scale to support a more comprehensive social safety net.

Unfair Taxes on Working and Middle Class Via High Insurance Expenses

The authors highlight the high cost of private health insurance in the US, where it operates like a giant poll tax, burdening the working and middle class far more than affluent people. Unlike most other developed countries, where health care is financed publicly through progressive taxes or contributions, the US relies heavily on compulsory private insurance, often acquired through employers. This has created a system where a secretary literally spends as much money on health insurance as a multi-millionaire executive. The authors argue that this approach is both unfair and unsustainable, placing a disproportionate financial burden on those with lower and middle...