Soak the rich?

August 9, 2010

It worries me when I hear folks, mostly liberals, speak fondly of the 1950s economy and its 90 percent marginal tax rates. In this piece, James Surowiecki advocates soaking the super-rich:

A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there’s no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue.

There would be political advantages, too: the reform could actually make tax hikes on top earners more popular. Critics like to describe tax hikes as hurting small business, because small-business owners make up a sizable percentage of people in the top two brackets and because small-business owners, unlike Wall Street traders, are popular on Main Street. It would be harder to mount a defense of millionaires, which may be why this year a Quinnipiac poll found overwhelming support, even among Republicans, for a millionaire tax.

And the economic reason would be what, again? You’re not going  to balance the budget that way, and you only feed the mistaken view that taxing “somebody else” will bring fiscal solvency.

2 comments

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That’s fine, we don’t need to raise taxes on the rich – but why not tax their ‘pay in stock’ at income tax rates instead of capital gains rates? THAT will leave small business untouched and really only attack the egregious pay-outs that were conceived of with a mind to avoid taxes. But then I guess that would be considered punishment to those that found the loopholes in the system and exploited it…

Also want to add that I think the estate tax is a lot more punitive (and should be minimized or abolished) than taxing people that make $5m+ per year at roughly 50% (ya, 50% should be a hard cap… 90% is silliness).

Posted by CDN_finance | Report as abusive

It is certainly true that you will never bring in enough tax revenue to erase these deficits, and most likely it will have the worst impact on the middle class if the tax cuts are allowed to expire. The storied American middle class is already being wiped out. I am a proponent of a flat tax though I do not know how politically viable it is at this time. The compromise I would strike is to add more brackets on the top end on the income tax but abolish the estate tax (its flat out immoral) and eliminate/reduce the capital gains tax for 5+ years. The very rich will have a choice…invest in American businesses or start to pay down the deficit. My guess is that you will see a sharp increase in investment in energy and new technologies that would increase the potential of job growth.

Posted by CraigRock | Report as abusive