There is no one, single thing that will fix the deficit.
Even If the Deficit Goes Down by $1, It Is Offset If Only In Part
Some of the $1M+ earners actually make a lot more than $1M
It's not a matter of fully offsetting
Incentives change behaviour
Taxing the rich will not solve the deficit problem
Math is math
Even the upside would generate an additional revenue equal to 3% of the deficit
Does this mean fiscal Revenue today YES, is it Long-Term sustainable NO. Higher taxes for highest earners means lower investment and economic growth.
Luis Perez Nov 19, 2012
Santelli talked about taxing $1M from each of the person that makes $1M or more. This would be 100% tax rate for anyone that makes $1M. However, the $1M is a very small number for someone that earns say $400M (of which there are very few). Thus the higher rate would certainly bring more than $1M in revenue for those earning much more than $1M.
J Womack Nov 19, 2012
There is a top-down, supply side argument that lower marginal tax rates leads to higher rates of investment and subsequent GDP growth. The Congressional Research Office recently released a report that analyzed every tax cut for which there was a subsequent measure of GDP growth and Investment growth. That report found no evidence of a relationship between tax cuts and subsequent GDP growth and investment. Some may argue that the report misses something because they hold fast to the "Field of Dreams" theory of economic growth - i.e. build it and they will come.
Taxing the rich will serve to right a errant legislative move made when Bush entered office. While it may not completely offset the deficit, it will offset part of it. Furthermore, if you believe that people maximize utility, the wealthy will adjust to account for the higher tax rate.
Over the long-term, as real growth takes hold and we move toward balanced budgets / surpluses, presuming a large part of our debt has been paid down, I think all would welcome lower tax rates. That future outcome depends on our willingness to share in sacrifice today, and to hold the government accountable for its actions between now and then.
E Jay Chavez Nov 19, 2012
Of course it will offset the deficit, just like peeing in the ocean will also raise it. "May not completely offset the deficit" is probably the understatment of the year. A 100% tax, assuming all income/work remains at the same levels, doesn't even rise to a drop in the bucket (or a piss in the ocean).
The purpose of taxing the rich, beyond the class warfare, is to enable an opportunity to increase taxes on everyone, which 0bama has already done through a few different efforts. "Shareing" in the sacrifice implies that those who are "rich" (250k and above) don't already share in the sacrifice and the cold reality is that they pay far more than any definition of fair can support.
J Womack Nov 20, 2012
If allowing the Bush tax cuts to roll off is "class warfare", isn't it then implicitly class warfare by having cut the taxes in the first place? Furthermore, taxing those who make a million or more per year is a 'blunt force' way of increasing the effective rate. I think both sides have indicated a preference for broader tax reform and a reduction in rates. The problem is the underlying thought behind how that takes place.
With respect to the argument about the rich paying more than their fair share of taxes, it's a very simplistic view that leads one to that conclusion. Yes, if you look at income - a flow number - and allow for all the adjustments, that's the case. What if we looked at total revenue paid in vs potential (i.e. revenue that could be generated minus writeoffs)? I'm sure you'd find that the rich pay a lower proportion of actual taxes vs 'potential' to borrow language from physics. Furthermore, if you compare taxes paid relative to the country's overall wealth, it's not even close.
Pablo Osinaga Nov 19, 2012
Even if it accounts for ~50-60B per year, the question is what would get cut otherwise? I.e., I don;t think it is a question of absolutes but rather of tradeoffs. What is the alternative for getting those 50-60B in defficit reduction? I think it is fair to ask the rich to contribute a bit more.
What is "a bit" more? You mean more than the 70%, or whatever it is, that the top 5% taxpayers already pay? In 2009 the top 400 taxpayers paid nearly as much as the bottome 50% and this is just aggreage numbers, it doesn't include the "returns" on those dollars, which accrue far more to the lower 50%, who we know are actually net tax beneficiaries.
Pablo Osinaga Nov 21, 2012
Of course the top taxpayers will pay more taxes than the rest (by definition). But we are not talking about top taxpayers, but rather "the rich". Of course all top taxpayers are rich, but not all rich are top taxpayers, or at least not to the extend there is agreement they should be. It is simple. The delta between someone like (say) Romney in what he paid of taxes (12.9%) and what has been proposed as fair (let say 35%) is a specific number that if he doesn't start paying, will have to come from somewhere else. Where should that come from? In an ideal world taxes should be 0, but we live in reality. There are teachers that need to be paid, there are bridges that need to be built. That is the discussion. It is a discussion of tradeoffs not of absolutes. 0% taxes is wonderful, of course.
It won't offset the issue in any way that is meaningful, even if we, as Santelli did, assume that collections remain the same with a 100% confiscation of value from "the rich."
Ana Luisa Nov 20, 2012
The amount collected will be negligible but yet cause a damper in work incentive.
Instead, if the government wants to get more money from its citizens, they would raise more money by collecting it from the inefficiencies created by the complicated tax system. Such a case would be with mortgage deductions; whereby people who can pay taxes are not paying them because they are legally entitled to a mortgage tax deduction. By reducing or eliminating this the government can collect much more money (ie: from the rich) than by continuing to disincentivize people to work.
Michael J. Kelley Nov 20, 2012
There is no budget line that can be cut or tax levied that will completely fix close the deficit. It will need to be many items, and raising taxes on the wealthy is one part of the solution.
Jon Adler Nov 25, 2012
"The rich" will restructure arrangements, convert income to capital, move assets between jurisdictions and/or increase leisure time such that little if any extra revenue will be raised. Taxation revenue as a % of GDP has rarely been above 18% regardless of rates
This is leaving aside the moral issue of forcibly confiscating people's assets and the disgusting envy involved in labelling people "the rich", "1%-er" etc - envy encouraged and promulgated by the President, his administration and its surrogates of the MSM.
Luis Perez Jan 09, 2013
I agree, all the current loopholes and higher taxes ensure one thing - job security for accountants.
Gabriel Senior Dec 12, 2012
The Patriotic Millionaries, a group of high-earning individuals pushing for the removal of the Bush tax cuts, estimates that this would generate $500-$600B of additional revenue over 10 years. This plan would actually raise $40-$50B of additional revenue a year, less than 3% of the deficit.
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