Sunday, October 9, 2011
Democrats' Millionaire Tax (49% Top Rate, 29% Capital Gains Rate): Smart Politics, Bad Tax Policy
Reid’s bill won’t become law, of course. But that’s the point. Reid wants to be able to say that Republicans blocked a critical jobs bill just to protect their fat-cat millionaire pals. Give him credit for smart politics: By replacing the potpourri of tax increases Obama would have used to pay for his stimulus bill with a simple, easy to understand millionaire tax, the Senate Democratic leader has done a wonderful job clarifying his party’s message. Too bad it’s such awful tax policy.
- Bruce Bartlett, 7 Top Republicans Who Taxed the Super Rich
- Bloomberg editorial, Atlas Should Shrug at U.S. Senate Proposal for Millionaires’ Surtax
- Citizens for Tax Justice, State-by-State Figures on Proposed Millionaire Surcharge
- Democratic Policy and Communications Center, Time for Millionaires to Pay Their Fair Share
- The Hill, Paul Ryan Slams Dems' Millionaire Surtax
- Joe Kristan, President Embraces 'Millionaire' Surtax
- Janet Novack, Obama Endorses Millionaire’s Surtax; Tax Bite Could Hit 49%
- James Pethokoukis, Obama’s Millionaire’s Tax Is Double Trouble
- Ira Soll, Reid's 5.6% Millionaire Tax
- Wall Street Journal editorial, Harry Reid's Household Remedy
- Washington Post editorial, A Flawed Surcharge on Millionaires
https://taxprof.typepad.com/taxprof_blog/2011/10/democrats-millionaire-tax-.html
Comments
WWII pulled the US out of a depression in 1939 by massive government spending and income tax rates as high as 94% in 1944-The policy of continued depression/recession is no government spending and lower taxes which is what is the current policy. My call is for a lasting recession.
Posted by: Nick Paleveda MBA J.D. LL.M | Oct 10, 2011 9:47:27 AM
Jim Harper wrote - "Simply not so. One of the side-effects of our rising income inequality is that the money is with the wealthy, as the article obliquely admits. That wasn't so true 30 or 40 years ago."
RM3 Frisker replies - 30-to-40 years ago we were crawling out from under a regressive tax code, that had companies hiding compensation in such things as: company cars, three-martini lunches, on-campus bars, country club memberships, travel for employee and spouse to company meetings at exotic locations, and the like. On paper the income inequality was not there, in reality it was there all the time. Reagan killed off a bunch of tax-shelters (raising tax revenue) while lowering taxes (lowering tax revenue). Suprisingly, tax revenues increased when overall taxes were lowered.
Maybe now is a good time to have a claw-back tax, such that:
(1) no-one involved with the making of a movie can make more than 10x the lowest person’s salary/wage
(2) no-one involved with a sporting event can make more than 10x the lowest person's salary/wage employed/contracted by that sporting event
I would also go for a 'luxury' goods & services tax on:
(1) fractional jet ownership/membership (Warren Buffet where are you?)
(2) boats, planes and cars costing more than $30k (the New Englanders will scream at this one, as it destroyed their boat building industry)
(3) jewelry, clothing, electronics costing more than $1000 (polyester suits look cool)
(4) airplane tickets costing more than $500 (so much for international vacation travel)
Posted by: RM3 Frisker FTN | Oct 9, 2011 10:39:23 PM
i have to draw the line on the 'smart politics'...
we are at a point, where the govt has to use the new revenue to reduce our deficit, instead of using it to justify an increase in govt spending, to meet with the 'populist' expectations.
pure speculation-
if a poll was run asking the following choices-
a. no new taxes
b. tax the millionaires, and lower the budget deficit
c. raise taxes to pay for more govt, forget the deficit
imho...30%, 50%, 20%, respectively.
************************
side note...
this policy isn't taxing the rich. it's taxing the people with the highest income from jobs. the rich don't have to work.
keep seeing how the top 1% has gone from owning 9% to 23%...
how does an income tax change that?
it makes the people with the existing wealth even more powerful, since an increase in taxation will have a limiting effect on individuals entering the stage of uber wealth.
Posted by: mark | Oct 9, 2011 10:12:52 PM
"President Obama's plan to modestly raise taxes on those making $250K per year would have solved 25-30% of the deficit by itself, with effects on only the top 1% of taxpayers."
It wouldn't have reduced the deficit at all. Politicians always spend more than the revenue raised by taxes. California is the model. The only solution is to starve the beast. If we willingly hide our capital and devote ourselves to electing people who genuinely care only about drastically reducing spending, we just might survive.
Posted by: Llarry | Oct 9, 2011 6:49:23 PM
It's a good thing Republicans invented evil millionaires and billionaires in the last "30 or 40 years" so Democrats can "modestly raise taxes" on them to save us all from this "punk economy"..... that "no adjustment to taxes will fix" and no doubt was created by that damn Bush.
Posted by: Pitbullll | Oct 9, 2011 6:37:37 PM
"President Obama's plan to modestly raise taxes on those making $250K per year would have solved 25-30% of the deficit by itself, with effects on only the top 1% of taxpayers.
Of course, the biggest cause of the deficit is the punk economy. No adjustment to taxes will fix that."
And this is assuming spending remains static? That congress will not look at the influx of tax money they assume this will bring in and raise spending accordingly? Like they have done every single time? Once you tack on the 49% plus any other payroll tax, local taxes etc, you dont think this will have ANY effect on the economy?
Posted by: buzz | Oct 9, 2011 6:24:59 PM
AD you falsely conflate wealth with income, and income with taxable income. They are not the same thing. No one is actually proposing a tax on wealth. Income taxes tax productivity, not wealth. There is no place on the 1040 to put down what you are worth. Just how much you produced.
Posted by: EconRob | Oct 9, 2011 6:24:15 PM
jim harper, you are exaggerating the amount of revenue that would be contributed by the tax proposal from Obama greatly.
Posted by: SPQR | Oct 9, 2011 6:01:36 PM
For California, that actually reaches 60%.
Hrmh... People leaving California for Nevada.
Maybe we could call this "Reid's Screw California Tax".
Posted by: Dishman | Oct 9, 2011 5:42:17 PM
Wait a second, I thought Obama was advocating a tax cut for the millionaires? He kept saying something about them paying the same rate as their secretaries?
Posted by: John | Oct 9, 2011 5:40:39 PM
Add State and Local (and the uncapped Medicare Tax) and, in Manhattan, that number gets close to 60%. Shouldn't the protests d'jour be called: Occupying 40% of Wall Street?
Posted by: MG | Oct 9, 2011 11:46:19 AM
Simply not so. One of the side-effects of our rising income inequality is that the money is with the wealthy, as the article obliquely admits. That wasn't so true 30 or 40 years ago.
President Obama's plan to modestly raise taxes on those making $250K per year would have solved 25-30% of the deficit by itself, with effects on only the top 1% of taxpayers.
Of course, the biggest cause of the deficit is the punk economy. No adjustment to taxes will fix that.
Posted by: jim harper | Oct 9, 2011 9:33:11 AM
Let us try some facts for a change.
First, I took the data for these tables from:
http://www.cbo.gov/publications/collections/tax/2007.cfm
Their tables are much more extensive, but I thought that the two years 1979 (Carter Administration Heavily Democrat Congress), and 2010 (Bush 43 Administration), made my point adequately. They show the share of the total tax burden bone by the top 20, 10, 5, and 1% of all earners, and their share of the individual income tax for the indicated years. The difference between the two table is that the total taxes includes Social Security, Excise, and Corporate Income taxes.
Top 20% 10% 5% 1%
Share of Individual Income Tax Liabilities
1979 64.9 48.1 35.6 18.3
2007 86.0 72.7 61.0 39.5
Share of Total Federal Tax Liabilities
1979 56.4 40.7 29.6 15.4
2007 68.9 55.0 44.3 28.1
Allow me to observe that the individual income tax is highly progressive, and if anything, it has gotten more progressive over the last 30 years.
Second, the available evidence is that the the Federal Governments take is a dependent variable tightly correlated (R^2 99.6) with median household income.
http://politicalcalculations.blogspot.com/2011/09/biggest-driver-of-us-government-revenue.html
And that this relationship has held unchanged for the last 40 years, despite dramatic changes in the tax code, and top marginal rates, from the 1954 Code with a TMR of 70% to the 1986 Code which has had TMRs that were as high as 39.6% and as low as 28%.
http://politicalcalculations.blogspot.com/2011/09/why-hiking-top-income-tax-rate-wont-fix.html
I note that this relationship is stronger, and more causally meaningful than "Hauser's Law".
http://online.wsj.com/article/SB121124460502305693.html
I think that, in light of this research, fiddling with TMR is a waste of time, and which can only hurt. I would be opposed to it.
Thank you for your time. We now return to our regularly scheduled broadcast.
Posted by: Walter Sobchak | Oct 10, 2011 3:46:35 PM