Taxing the Rich won’t get you there

One of Megan Mcardle’s readers did the math on “taxing the rich” and how it would “help” with the budget:

[T]otal taxable income in 2008 was $5,488 billion. Taxable income over $100,000 was $1,582 billion, over $200,000 was $1,185 billion, over $500,000 was $820 billion, over $1 million was $616 billion, over $2 million was $460 billion, over $5 million was $302 billion, and over $10 million was $212 billion. Effective tax rates as a percentage of taxable income seem to top out around 27%.
You can estimate the effects of various proposals in the best case, which is that each percentage point increase in the marginal rate translates to an equal increase in the effective rate. Going back to 2000 (“Clinton era”) marginal rates on income over $200,000, let’s call it a 5 percentage point increase in the marginal rate, would therefore yield $59 billion on a static basis. Going from there to a 45% rate on incomes over $1 million (another 5 percentage point increase) yields an additional $31 billion. Or, instead, on top of 2000 rates over $200,000, 50%/60%/70% on $500,000/$5 million/$10 million? An extra $133 billion, or nearly 1% of GDP. That’s not accounting for the further middle class tax cuts that are usually proposed along with these “millionaires’ taxes.”
Now, compare this to deficits of $1,413 billion in 2009 and $1,293 billion in 2010, and using optimistic White House estimates, $1,645 billion in 2011 $1,101 billion in 2012, $768 billion in 2013, and continuing at over $600 billion after.
Alternatively, you might also notice that while taxable income in 2008 was $5,488 billion, adjusted gross income on all returns was $7,583 billion on taxable returns only (with an additional $680 billion on untaxable returns), which means that $2,095 billion isn’t even in the tax base. $592 billion of that difference is exemptions, which are not tax expenditures, and $1,512 billion is deductions, which are mostly tax expenditures.

Gee, now what? Maybe serious attempts at addressing ballooning entitlements should be listened to.

0 0 votes
Article Rating
Subscribe
Notify of
guest
5 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
OldTimeLefty
10 years ago

If you are poor and you receive government help, it’s an entitlement. If you are rich and receive government help it’s a tax break or a subsidy. If one is an “entitlement” so is the other. If one is a “subsidy”, so is the other. The words become meaningless, crushed by the sly innuendo that the Parties try to force feed us every day.
Cut the damned rhetoric. What we need are adults on both sides of the aisle and less posturing end runs around serious issues.
It would be refreshing to hear someone in power talk about poor people. Their numbers are growing and they are ignored, sacrificed on the altar of “middle class”. Nobody sees the poor. Nobody talks about the poor. Nobody seriously proposes to help the poor. It’s sickening.

BobN
BobN
10 years ago

So after 40 years of Leftist government programs costing trillions of dollars there are still poor people, and the solution is to spend even more on the same failed Leftist government programs?
How is that different from saying that the cure for poison is more poison?
The problem with Leftists making comments like these is that they cry about “the poor” and complain that other people aren’t doing enough but never contribute a single workable idea for a solution, nor do they every do anything themselves.
They’d rather just make snarky jibes at the people who are honestly working on the problems. Which is what you are likely to read shortly below this post.

dave
dave
10 years ago

More Poor = More Government
Which is why Obozo is DESTORYING the lower middle class. His Trickle Up Poverty is to simply get more people under the control of his leftist regime.
He has clearly stated, with his actions, that he would rather have his way for 4 years than compromise and stay for 8.

Dan
Dan
10 years ago

“The poor” are growing in numbers and are ignored, says OTL. In America, the poor are provided with free housing, utilities, education, significant (soon full) health care, food, and receive a stipend if unemployed. They can on average afford cars, smart phones, jewelry, pets, air conditioning, and digital music.
But because the statistical number of people below an arbitrary cutoff salary has grown during our current recession (that is generally what happens), there is some kind of silent genocide taking place in this country according to bleeding heart progressives like OTL. Throw more money at the problem, that will solve it.
Every day on my way to work I walk past 10-20 individuals sitting around in a public park doing absolutely nothing all day. How do they stay clothed, fed, and cared for if they are ignored and forgotten, OTL?

OldTimeLefty
10 years ago

Since BobN, dave and Dan speak only in terms of doctrine and beliefs, and do not address my questions regarding the difference between “entitlement” and “subsidy” “or tax break” I will respond with doctrine from Mikhail Bakunin. I realize that we will be shouting in a wind tunnel, but it is the game they like to play.
Is it necessary to repeat here the irrefutable arguments of Socialism which no bourgeois economist has yet succeeded in disproving? What is property, what is capital in their present form? For the capitalist and the property owner they mean the power and the right, guaranteed by the State, to live without working. And since neither property nor capital produces anything when not fertilized by labor – that means the power and the right to live by exploiting the work of someone else, the right to exploit the work of those who possess neither property nor capital and who thus are forced to sell their productive power to the lucky owners of both.
Mikhail Bakunin

Show your support for Anchor Rising with a 25-cent-per-day subscription.