The “Millionaire’s Tax” — an idea for when you’ve run out of ideas
I am scheduled to go on CNBC later today to chat about the idea of a millionaire’s tax bracket. To me, this is a solution in search of a problem. You cannot deal with America’s long-term budget problems by raising taxes on the rich. Even as a short-term fix, it makes for poor policy. As the Tax Policy Center notes:
A study we conducted at the Tax Policy Center found that Washington would have to raise taxes by almost 40 percent to reduce — not eliminate, just reduce — the deficit to 3 percent of our GDP, the 2015 goal the Obama administration set in its 2011 budget. That tax boost would mean the lowest income tax rate would jump from 10 to nearly 14 percent, and the top rate from 35 to 48 percent.
What if we raised taxes only on families with couples making more than $250,000 a year and on individuals making more than $200,000? The top two income tax rates would have to more than double, with the top rate hitting almost 77 percent, to get the deficit down to 3 percent of GDP. Such dramatic tax increases are politically untenable and still wouldn’t come close to eliminating the deficit.
A few more from me:
1. You would also create new tax avoidance and income sheltering problems that would cut into the amount of revenue collected.
2. Higher marginal rates create a disincentive to work, save and invest.
3. This distracts from the real issue of cutting government spending.
4. Since this won’t really help the deficit or boost growth, the only reason to levy such a tax is a punitive one. And the reason punishing the rich helps America is what exactly?