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On taxing the rich
June 25, 2008
Greg Mankiw links to this recent column by Larry Lindsey on what Obama’s tax proposals would imply for taxes on the highest earners.
Larry points out: “A high-income entrepreneur would see his or her federal marginal tax rate rise to 53% from 37.7% under Sen. Obama’s tax plan.”I believe this would be the highest tax rate on earned income since 1971.
As I mentioned in this recent piece, that is putting it mildly–since many states also levy an income tax of their own. Top marginal income-tax rates in the country would rise not to 53%, but to more than 60%.This is assuming that Obama applied the full payroll-tax rate to very high incomes. (In Britain, when then-finance-minister Gordon Brown abolished the earnings cap on “national insurance contributions”, the UK equivalent of the payroll tax, he extended the tax above the old ceiling at a rate of just 1%.) Obama has not yet been explicit about the rate at which his extended payroll tax would apply, leaving people to think that it would be at the full rate, once it kicks in at $250,000-plus. His campaign says that nothing has been decided. I’m surprised he is not being pressed harder on this.
Note that the $250,000 is per household, not per individual. So if a family makes 250K today, they each pay only on the first 102K (or 204K combined), regardless of the combined incomes.
The donut hole is between 204K and 250K, not much of a gap there for those that Sen. Obama has chose not to penalize.
JBP
Posted by: John Powers | June 25th, 2008 at 4:41 pm | Report this commentWhat would be the income after tax of someone falling within this ‘high income’ bracket?
What proportion of this ‘high income’ bracket are in fact ‘entrepreneurs’?
Posted by: David | June 26th, 2008 at 9:59 am | Report this commentQ - “What would be the income after tax of someone falling within this ‘high income’ bracket?”
A - A lot less than it is now.
Q - “What proportion of this ‘high income’ bracket are [sic] in fact ‘entrepreneurs’?”
A - Who cares, why would that possibly matter?
Posted by: Craig | June 28th, 2008 at 12:57 am | Report this commentThe present observations by Clive Crook are very interesting and lead to the open public debate on the taxation and its impacts on the economy and society. I would like to add that the taxation by itself can’t resolve the crisis in economy and restore the justice in wealth redistribution among the different social groups. We have to understand that the wise governmental policies can do it only! Therefore, the main task is to introduce the wise governmental policies and complete the execution of the sound economic strategies in the USA in very nearest time. I am confident that the new American President will do it.
Posted by: Viktor O. Ledenyov | July 1st, 2008 at 1:27 pm | Report this comment