Beginning in 1981, repeated and major changes in the federal tax structure have taken place. At the same time, its overall level remained practically unchanged, with a revenue/GNP ratio of 23.3% in 1980 and 23.2% in 1993. Did this stability extend to the degree of progressivity as measured by the pattern of effective rates? Spanning the entire income scale, the ratio of effective rates payable by the top to that payable by the bottom quintile dropped from 3.41 in 1980 to 3.17 in 1993, suggesting a slight flattening of progression. But a closer look at what happened over various ranges in the scale is needed to understand what went on.

For this we may draw on data presented earlier in this volume (Kasten, Samartino, and Toder, Table 1). Beginning at the top, the ratio of effective rates for the fifth to the fourth quintile dropped from 1.21 in 1980 to 1.01 in 1993. With benefits accruing mostly to the highest 2 percent of income recipients, this flattening reflected the drastic cutback in top income and corporate tax rates under the 1980 legislation. Moving down from the fourth to the third and from the third to the second quintile, the ratios changed but little, falling from 1.16 to 1.14 and from 1.27 to 1.26, respectively. This stability over the middle range reflected the offsetting effects of rate reduction and base broadening under the tax reform of 1986.