How high should the top tax rate be?
Some economists say Americans making $3 million or more can handle a levy of up to 66% with no harm.
Andrew Fieldhouse at The Fiscal Times put the nation's upper economic echelons on notice last week by letting them know they're not paying anything close to what economists feel is their fair share.
Amid stifled economic output, stagnant job growth, sequestration cuts, the expired payroll tax cuts, the stonewalling of the American Jobs Act and the gradual replacement of stimulus with European-style austerity, Fieldhouse says a dollar of government spending cuts will do four to seven times as much economic damage than an additional dollar of revenue collected from upper-income taxpayers.
Economists Peter Diamond and Emmanuel Saez estimate that a combined federal, state and local tax rate of 73% for the top tier would maximize revenue while minimizing damage to the rest of the economy. In a recently released paper, Fieldhouse says this implies that lawmakers could feasibly raise the federal income tax rate from 39.6% to roughly 66% before maxing out.
Unfortunately, this doesn't exactly work when the top threshold starts at $450,000. Fieldhouse points out that the top income tax rate of 91% from the 1950s, consistently referenced by tax advocates, worked only because it directly attacked skewed market distribution of income. In the 1950s, the threshold for that 91% tax rate was the equivalent of $3 million in 2012 dollars.
But why ratchet up the taxes on those making $3 million or more? Fieldhouse argues that the decline in that top tax rate over the last half century or so has had a statistically insignificant effect on economic growth. At the same time, it has had a profound effect on the concentration of wealth and imbalance in income in the U.S. during that time.
Although he acknowledges that "political realities stand in the way of optimal policy," he insists that such a hike would be the best way of hammering at the deficit while letting the greater economy heal.
“When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.” – Frédéric Bastiat,"The Law"1850
That's right, it's all about money. Always has been, always will be. It's not about paying your fair share, health care, immigration, guns, etc...
It's all bs to get more of your money!
I'm all for making sure the rich pay their fair share of taxes, but no - this is too much. How is it fair for anyone to lose 73% of their income to federal & state taxes?
To some extent we should all be striving to be taxed at the top rate - to be as successful as possible in our chosen profession. Once you get to 73% taxes or 91% from the 50s what's the point in working any harder? I don't care if there are/were loopholes either - why encourage people to skirt the system? What's the point?
Too much of anything is a bad idea.
For such intelligent men (both economist are professors with UC Berkley roots and one is French, which may explain the love of taxes) this is a very limited, low brow method for reducing a government debt. First inflation (the more something cost, the more tax you pay on it) will be the largest unavoidable tax for all soon enough, off-shoring of wealth can’t protect against inflation. Second the best thing the government could do to get the economy rolling is reduce the number of effective monopolies and duopolies in our economy. Create more competition, which leads to more hiring, more innovation and a larger tax base. Competition, it’s where we start.
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