As to the claim in question, in this Vox piece Cathie Jo Martin and Alexander Hertel-Fernandez claim that taxation in the U.S. is more progressive than in Sweden. Similarly, in this New York Times op-ed Edward Kleinbard claims that U.S. taxation is progressive enough to achieve liberal goals and is more progressive than taxation in Germany, making it even more progressive than necessary to achieve the liberal goals that Germany does.
These claims are potentially powerful points in arguments over American tax policy, given the importance of the European, and especially Scandinavian, model of social democracy in our discourse on political economy.
To quote Konczal at length:
They are measuring how much of tax revenue comes from the top decile (or, alternatively, the concentration coefficient of tax revenue), and calling that the progressivity of taxation ("how much more (or less) of the tax burden falls on the wealthiest households"). The fact that the United States gets so much more of its tax revenue from the rich when compared to Sweden means we have a much more progressive tax policy, one of the most progressive in the world. Congratulations?
The problem is, of course, that we get so much of our tax revenue from the rich because we have one of the highest rates of inequality across peer nations. How unequal a country is will be just as much of a driver of the progressivity of taxation as the actual tax polices. In order to understand how absurd this is, even flat taxes on a very unequal income distribution will mean that taxes are “progressive” as more income will come from the top of the income distribution, just because that’s where all the money is. Yet how would that be progressive taxation?
Konczal make a pretty obviously important point that is neglected when drawing the conclusion about the extent of U.S. tax progressivity from the researchers' statistical analysis: higher levels of revenue could come in from the upper sections of the income distribution because of those sections' higher levels of pre-tax market income, not because of the progressivity of the tax structure (or despite only marginal progressivity, or even regressivity).
As Konczal says, using this definition and measurement of tax progressivity, an economy with a single tax bracket on incomes (a flat income tax) with high income inequality could come off as having a more progressive system of taxation than an economy with lower income inequality that does have multiple tax brackets, applying higher rates to higher incomes.
A flat tax can be more progressive than a system of genuinely graduated increasing income tax rates? Q.E.D.: this method of determining the progressivity of a tax system is wrong.
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To finally get to my possibly original point, I've often argued with those who favor a flat tax and oppose progressive taxation on grounds of justice and property rights that our difference of opinion is a matter of degree, and not type:
under their preferred flat income tax, people with higher incomes still pay more tax than those with lower incomes, so they of course can't oppose a system in which people with higher incomes contributing more toward the costs of government. So if collecting more money from people with higher incomes is ok, what's wrong with doing so at differing tax rates? It seems arbitrary to support or accept one as justified, and oppose the other.
One possible response to my point is that taxing all people, with all different levels of income, at the same percentage rate is ok (even though doing so results in some people paying more than others) because those larger contributions toward the Treasury are proportional to the larger benefits they enjoy as recipients of higher incomes? For example, assuming that the flat income tax rate is 20%, a person with an income of $100,000 who pays $20,000 in income tax is getting twice the benefit than the person with an income of $50,000 who pays $10,000 in tax.
But this rebuttal conceptually limits benefits to income*, while higher income people are getting more benefits than just that. Ignoring even the psychic benefit of being at the top of the income hierarchy (and the psychic loss of being at the bottom of it that subtracts from the benefit lower income people get without proportionately lowering their contribution), the continual protection of their likely higher levels of wealth and maintenance of a system of property rights enforcement is another benefit. This rebuttal also ignores the incidence of the benefits of other government policies; for example, the home mortgage interest deduction, like many other deductions costly to the government, benefits higher income people more than lower income. So we have to figure out who is benefitting and how much from all policies, not just people's incomes, if we want to match tax bills proportionally to benefits of the system.
If the purported principle of justice in taxation is that people should pay in proportion to what government does for them, then wealth is definitely relevant, and not just income. Indeed, maybe wealth and consumption in combination is better a better proxy for benefit than income. This veers toward the position, preferred by many on the libertarian side of the political economy debate, that taxing consumption is better than taxing income (which does follow the compelling logic that people should be taxed as they take out of the common stock of produced property rather than add into it), while liberals are skeptical as lower income folks spend a higher proportion of their income, and so would pay a higher proportion of their income in tax. If taxing consumption came in combination with taxation of wealth, I would not dismiss this alternative out of hand. This would also refute the potential objection that taxing wealth is somehow unjustifiable as "double taxation" as income would go untaxed. (Although maybe taxing accumulated wealth on a regular basis also counts as double taxation as the tax would presumably apply to wealth holdings, including the principal and the profit/interest, so the principal would be taxed multiple times as would each year's profit/interest after its initial generation?)
A final note: my entire analysis here relies on a "just desert" theory of political economy and taxation (as that's the framework in which the argument against progressive taxation is usually made), and has not even begun to get into other views, especially a utilitarian one in which the fact of money's diminishing marginal utility is paramount, or a pragmatic one about the conditions necessary for a well-functioning economy.
*It also presupposes a neoclassical economic theory of frictionless markets of perfect information and liberty, in which all people are paid their marginal product value. This assumptions is, at the least, doubtable.
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