Weekend Economists Could Have Danced All Night! October 16-18, 2015

[Demeter]

19. What Could Raising Taxes on the 1% Do? Surprising Amounts

Last edited Sat Oct 17, 2015, 10:18 AM - Edit history (1)

http://www.nytimes.com/2015/10/17/business/putting-numbers-to-a-tax-increase-for-the-rich.html


...All the Republican tax proposals, in fact, cut taxes for the wealthiest Americans. Democrats, on the other hand, are prepared to raise taxes at the top, though they have not been very specific about how they would do so...Given the gains that have flowed to those at the tip of the income pyramid in recent decades, several economists have been making the case that the government could raise large amounts of revenue exclusively from this small group, while still allowing them to take home a majority of their income...It is “absurd” to argue that most wealth at the top is already highly taxed or that there isn’t much more revenue to be had by raising taxes on the 1 percent, says the economist Joseph E. Stiglitz, winner of the Nobel in economic science, who has written extensively about inequality. “The only upside of the concentration of the wealth at the top is that they have more money to pay in taxes,” he said.

The top 1 percent on average already pay roughly a third of their incomes to the federal government, according to a Treasury Department analysis that takes into account the entire menu of taxes — including income tax, payroll taxes that fund Medicare and Social Security, estate and gift taxes, excise and custom duties as well as investors’ share of corporate taxes. The tax bite on the top 0.1 percent is a bit higher. Most of those taxpayers insist they are already paying more than enough.

By comparison, the band of taxpayers right below them, in the 95th to 99th percentile, pay on average about $1 out of every $4. Those in the bottom half pay less than $1 out of every $10.

SEE TABLE AT LINK

Sidestepping for the moment the messy question of just which taxes would be increased, how much more revenue could be generated by asking the rich to pay a larger share of their income in taxes? To get the most accurate picture possible, throw in all the scraps of income, from the most obvious (like wages, interest and dividends) to the least (like employer contributions to health plans, overseas earnings and growth in retirement accounts). According to that measure — used by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution — the top 1 percent includes about 1.13 million households earning an average income of $2.1 million.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion. Even taking account of state and local taxes, the average household in this group would still take home at least $1 million a year. If the tax increase were limited to just the 115,000 households in the top 0.1 percent, with an average income of $9.4 million, a 40 percent tax rate would produce $55 billion in extra revenue in its first year...

GO BERNIE! LET THEM FEEL THE BERN!