A 62% Top Tax Rate? Democrats are Planning to Restore Tax Rates Like Those Under Carter

Wall Street Journal ^ | 05/26/2011 | Stephen Moore

[SeekAndFind]

Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions.

If the Democrats' millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That's more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.

Here's the math behind that depressing calculation. Today's top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. The 3% millionaire surtax raises that rate to 44.5%.

But payroll taxes, which are income taxes on wages and salaries, must also be included in the equation. So we have to add about 2.5 percentage points for the payroll tax for Medicare (employee and employer share after business deductions), which was applied to all income without a ceiling in 1993 as part of the Clinton tax hike. I am including in this analysis the employer share of all payroll taxes because it is a direct tax on a worker's salary and most economists agree that though employers are responsible for collecting this tax, it is ultimately borne by the employee. That brings the tax rate to 47%.

[SeekAndFind]

[Paladin2]

The ‘Rats need to invite Art Laughterer(sic) to ‘splain and predict the future for them, LOL.

[ClearCase_guy]

I see two options:

1) We go back to 1978 and have the original lineup of The Clash reunite
2) We have a civil war

(BTW: Joe Strummer is dead.)

[Christian Engineer Mass]

They won’t. Those people are dem voters now.

They’ll hit up the middle class republucans some more, while **talking about** “sticking it to the rich”.

[Red Badger]

A surtax?
They already have a ‘surtax’.
The AMT.............

[skeeter]

If Democrats are going to demogogue medicare, etc, why the hell won't the republicans demogogue the income tax issue?

That strategy would have the added advantage of being true.

[Red Badger]

Can I get my hair back?.....................

[scooby321]

With this hanging out there it should inspire more and emplyment and investment.

Just when I the GOP is dead they bring it back.

[Bean Counter]

We will be heading back to 20% Prime rates again like it was under Carter as well. I have a friend who bought a small house, and got a great deal (at that time) on his mortgage at only 16.2%...

[Texas Eagle]

Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues.

Yeah? One smarr probrem, Glasshopper. House Republicans.

[kosciusko51]

From the Department of Numbers:

Total US Tax Revenue as a Percentage of GDP

So, no matter the tax rate, tax revenue remains at roughly 15 to 20% of GDP over the last 60 years. After 60 years of empirical evidence, our government should realize that its expenditures should not exceed 20% of GDP.

[C. Edmund Wright]

Going.....going...Galt!

[bilhosty]

Since they voted for him and 80% of Wall street cash went to Obama. I would say they deserve to pay it. Obviously lib rich deserves to pay. But since what is left of Conservative money wont pay for media I think they deserve it as well.

But, on the other hand when those rates go up their will be attempts for loopholes and the Dems will stand there with their hands out to allow the GOP to let them go through. If that happens I will oppose it until their campaign contributions and the lack of propensity for wealthy conservatives to invest it in media changes.

[MinorityRepublican]

In Greece, no one pays their taxes.

[wayoverontheright]

Whenever we try to combat the argument for higher taxes, we tend to dwell on the harm it will do to investment. This is incontrovertibly true, however, the more powerful argument lies in the fact that the CONSUMER will end up paying all of these increases. The "rich" happen to be composed of investors and employers. Employers and corporations will attempt to maintain profits, and since everyone in their respective markets will have the same expense increase, they will raise prices in unison, and the poor consumer ends up paying the tab....read inflation.

Liberal fiscal arguments always leave the consumer out of the equation. There are more votes among consumers than investors, so that's where our pundits and politicians should make their case, IMHO.

[kosciusko51]

In the context of this discussion, I am not worried about Greece. I am just saying that for the US taxpayer, 20% of GDP is the maximum we are willing to pay to the government, regardless of the tax rates. So, until the government reigns in its spending to those levels, we will never fix the problem.

[griswold3]

I guaran-damn-tee that the recession started when Charlie Rangel, chairman of the ways and means committee in 2007, proposed a 3% surcharge on incomes over $1M. (Meaning the tax is paid from gross receipts.) Of course, the ‘Progressives’ believe that they are subsidizing businesses and that the businesses OWE their very existence to the government.

Black market, ho!

[The Great RJ]

Please Obama if you are going to bring back 1978, don’t revive disco and leisure suits. The thought of Mooschelle doing shake your booty is the stuff of nightmares.

[griswold3]

20% is Hauser’s Law. It is the contract commerce has with government. When it is proposed to increase the overall rates on the ‘Productive’, commerce responds in kind. Always has, always will.

Go Galt!

[kosciusko51]

20% is Hauser’s Law.

I did not realize that it had a name. I appreciate the info.