$1m Not Equal To $250K

October 11th, 2011 at 4:52 pm

I get that the Senate D’s want to pay for the President’s jobs bill by raising a tax surcharge on millionaires and billionaires, and I understand the rationale.

I also get that red is the new black, or something to that effect.

But it’s very important that we don’t allow $1 million to become the new $250,000.

That is, when people talk about sunsetting the highend Bush tax cuts, we’re using $250K as a cutoff, not $1m.   To switch to the higher number makes an already tight tax base too tight to raise the revenue we need.  Remember, just above 2% of households, and about the same share of small businesses,* are above $250K, so the lower cutoff is not biting the middle class.  And moving to the $1m cutoff loses you slightly less than half the revenue from the highend sunset.

*The majority of “small businesses” above $1m are law practices, hedge funds, self-incorporated consultants who are not going to hire anybody, etc…not mom and pop shops.


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10 comments in reply to "$1m Not Equal To $250K"

  1. Justin says:

    Great work on MSNBC just a moment ago and it’s sad that I’m sitting here in S.Fla listening to you and saying “DUH!” and people from other places, that shall remain unnamed, in this country would call you and the President communists or socialists for these ideas! It’s just plain frustrating! Keep up the good work!

  2. Wayne says:

    How about some pro-growth policies to grow the entire base instead of figuring out who you can take more from?

  3. tom says:

    It is ridiculous to apply the same rate on income just over 250000 as income over 10 million; that is my interpretation of “$1m ~= $250K.” In the good old days, (1950’s) we had more brackets, and the legendary 91% brackets started at $400000, well over a million in today’s dollars. Even the 70% brackets of the 60’s started at 200000, probably close to a million in today’s dollars. Having one big bracket keeps the rate low, since 70% on income over 250000 today is unreasonable.

    IMO, part of the reason for high rates on obscene income isn’t to raise revenue, it’s to change the mentality of the super rich to reinvest in their enterprises rather than take the money home to count.

  4. Tucker says:

    I think the arguments change at the different incomes though. People making $250k-$1M can pay Clinton’s tax rates. $1M+ they can pay over 50% in marginal taxes as far as I’m concerned.

  5. Geoff Freedman says:

    The whole tax structure needs to be redesigned, from corporate taxes, to income taxes to excise taxes – everything to deal with our structural problems, and income and wealth inequity. We need a tax structure that effectively deals with a global economy environment.

    If you frame the Bush era tax cuts in increase in after tax dollars and its impact on the cost of goverment services, it is more regressive than most people imagine. We need to sunset the whole bush era tax cuts, and redo the whole tax structure.

    Right now, the aggregate net worth of the lower 80% in this country is less than 15% and the upper 20% has the rest. How do you expect to increase aggregate demand if noone has any money to spend?

    By the the accumulation of wealth at the top end has increased since the global economy era began, and this does not bode well for the future.

  6. Fred Donaldson says:

    Did someone say Eisenhower era income tax brackets might represent a compromise grounded in a Republican era? Heck, even Reagan era rates would eliminate the deficit screaming.

  7. perplexed says:

    Keep up the good fight Dr. Bernstein!

    This is why I suggest using targets for wealth & income Gini’s. You’re having to come down in income only because you’re using the same marginal rate. But its still a Willie Sutton thing; 20% goes to the top 1%. Your goal is revenue, but at the same marginal rate. But shouldn’t we be trying to accomplish more with our tax policies to improve the economy and the lives of the majority of Americans?

    Here are a couple of links to more recent “discoveries” of what Keynes’s told us 70 years ago: http://www.washingtonpost.com/blogs/ezra-klein/post/imf-income-inequality-is-bad-for-growth/2011/10/06/gIQAjYADQL_blog.html & http://www.democracyjournal.org/20/growth-and-the-middle-class.php?page=all.

    There seems to be a lot of evidence supporting an “optimal level” or “optimal range” for wealth and income concentration. Gini’s for wealth and income provide objective measures (with easy to understand graphs)for both. Maybe what’s “fair” is what’s best for most of the population. Let’s have wealth and income inequality levels that provide incentives without slowing down growth, destroying the middle class, and impoverishing the rest. I would guess that getting from where we are now to any reasonable level would require both starting at the $250k level and considerably increased marginal rates; but that the greater impact in getting to a a level of Gini from the standpoint of growth would come from higher marginal rates on the winners of the lottery.

    People in the “middle class” (whatever is left of it anyway) need to understand how taxes work to their benefit to control inequality, improve growth and provide services that make the country stronger. The republicans aren’t going to tell them how this works and that there are objective measures we can use to manage it. The middle class used to fear taxes when they had good incomes; that shouldn’t be too much of a problem now. Using measures like Gini will likely show there’s not much reason to raise their taxes for a long time to come.