Reverse the Great Tax Shift
Few Americans realize just how incredibly little, historically speaking, our nation’s wealthy now pay in taxes. In 1955, America’s top 400 taxpayers paid three times more of their income in taxes than the top 400 of 2006, the most recent year with IRS data available. According to a new Tax Day report that we co-authored, if the top 400 of 2006 had paid taxes at 1955 rates, the federal treasury would have collected — from these 400 taxpayers alone — an additional $35.9 billion more in revenue in 2006.
The 139,000 U.S. taxpayers who made over $2 million in 2006, our report also notes, averaged $5.9 million in income. They paid 23.2 percent of their total incomes in federal income tax. The comparable rate for equivalent high-income Americans in 1955: 49 percent.
If the over-$2 million set in 2006 had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006, an additional $202 billion.
So what can we do, as a nation, to start turning this situation around? Our Institute for Policy Studies report — Reversing the Great Tax Shift — advances a set of specific steps that would generate over $450 billion in annual revenue, dollars that would help finance our recovery fairly. We recommend that lawmakers:
Tax income from capital gains and dividends at the same rates as wage income. Under current law, income from investments gets taxed at 15 percent. Income from work gets taxed at up to 35 percent. No coherent moral justification exists for such an enormous tax preference for income from wealth. According to Citizens for Tax Justice, taxing all forms of income the same would generate $80 billion a year.
Create a new top tax rate for incomes over $2 million. Presently, a person with an income of $300,000 faces the same tax rates as a person with an income of $3 million. Instituting a top tax rate of 50 percent on incomes over $2 million would generate over $60 billion a year.
Levy a progressive estate tax on large fortunes. The federal estate tax, our nation’s only levy on grand accumulations of private wealth, will expire in 2010 and revert to the 2000 status quo the following year. Lawmakers aren’t going to let that happen — if, for no other reason, to take inflation into account — and that reality creates an opportunity to make the estate tax more progressive. One reform would be to institute graduated tax rates on large estates, while exempting estates worth under $2 million, or $4 million for a couple. Such an approach would generate over $100 billion a year a decade from now — while taxing no more than one of every 200 estates.
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April 15th, 2009 at 1:32 am
I found your blog on MSN Search. Nice writing. I will check back to read more.
Eric Hundin
May 7th, 2009 at 8:10 pm
Really seems as if you have a complete lack of economics understanding or knowledge. Taking money away from the rich never helped the poor. This is just an attempt at class warfare. Attempts at more $$ redistribution using Government confiscation of wealth would bring the economy down as a whole … never got a job from a poor man …
And while we’re on “fairness” do you or your readers know that 50% of wage earners already pay 96% of all income taxes??
Your social equity argument defies common sense economics and would hurt those you purport to help.
see:
http://www.rushlimbaugh.com/home/menu/top_50__of_wage_earners_pay_96_09__of_income_taxes.guest.html
May 16th, 2009 at 5:47 am
Dear Booogie-Mann,
Actually your response defies common sense and illustrates a complete lack of economic understanding. Have you noticed what has happened over the past thirty years? Despite the supposedly onerous tax burden on the wealthy, their share of the nation’s wealth has increased to levels not seen since the great depression. Interestingly, the economy is now once again on the brink of another great depression. It is remarkable how clueless people are in the face of overwhelming evidence. When a small percentage of people amass all the wealth, the rest of us don’t have any money to spend to keep the economy going. Class warfare? Give me a break. The rich declared war on the rest of us a long time ago, and you’re just unwittingly doing their bidding. Keep up the good work.
May 18th, 2009 at 7:13 pm
Boogie-Mann:
Oh! well if Rush says it of course it’s right!
I have a word for you.
Propaganda.
April 2nd, 2010 at 5:46 am
my God, i thought you had been heading to chip in with some decisive insght at the end there, not leave it with ‘we leave it to you to decide’.