First let him establish where we are at,
the top marginal tax rate is now higher than it was under Reagan, but lower than it was under Clinton, and much lower than it's been at various other points in history. (The average top marginal tax rate since the income tax was established is 60 percent).
But what about where the top marginal rate applies? I've been wondering why we don't assess a much higher marginal rate (say 60%) on those making $XX Millions of dollars. Nate has the goods,
In 1940, for example, the top marginal tax rate was 81.1 percent -- but this rate only kicked in once you made $5,000,000 or more in income, which is equivalent to about $75,000,000 in today's dollars.
But today, the threshold where the top tax bracket kicks in isn't $75 million, or $5 million, or even $1 million ... it's a mere $357,700. The progressivity of the tax code stops there.
Silver continues,
The median top income tax threshold since 1913 -- adjusted for today's dollars -- is a little over $1.3 million, almost four times higher than it is now. This is one thing that advocates of more progressive taxation (of which I am one) need to keep in mind: although the top tax rates have been much higher throughout much of the country's history, they also kicked in at much higher thresholds of income than the ones we see today.
The question, of course, is why there isn't a millionaires tax bracket now ... or even a multi-millionaires tax bracket. I haven't run the numbers, but I'm guessing that if you established a new tax bracket at, say, 40.5 percent, that started at incomes of $1,000,000 or more, this would bring in as much revenue to the government as restoring the $250K tax bracket (which is really $360K now given indexing to inflation) to 39.6 percent, as it was under Clinton.
I don't have a whole lot to add but I thought this was interesting food for thought. We're dealing with a massive budget deficit which needs new revenue and at the same time we're seeing exponential growth in wealth for the richest and wage stagnation for the middle and working class. Instituting a "millionaires bracket" could help us address both problems.
1 comment:
Part of the reason that there isn't much political pressure for a millionaries bracket, is that the bulk of the income of the highest earners are predominantly in the form of capital gains and qualified dividends (which are taxed at a top rate of 15% and are FICA free), or are not taxed at all (e.g. gains within retirement accounts, capital gains in non-retirement assets for assets held at death, capital gains on investment real estate proceeds rolled into new investment real estate, gains in cash value within whole life insurance policies, municipal bond interest, and gains on the sale of a principal residence).
For tax reasons, it is rare for executives to have ordinary annual cash incomes of more than $1,000,000.
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