Last night, the National Journal Congress Daily reported President Obama is considering extending all tax rates that expire at the end of this year for at least one year and maybe more. That would keep the top rate on individual income at 35% and the top rate on dividends and capital gains at 15%. This would give Democrats a tax cut to vote for going into the 2010 election for all Americans. There are plenty of House Democrats who would object to extending upper income tax cuts, but, if President Obama supported it, enactment would be likely.
Last May, President Obama proposed extending most Bush tax cuts, except for those with incomes over $250,000. He would have raised the top rate on individual income to 39.6% and the top rate on dividends and capital gains to 20%. The revenue impact is shown in Treasury’s 2009 Green Book on page 129. If Mr. Obama also refrains from reinstating the phaseout of itemized deductions and personal exemptions of those over $250,000, the whole package would raise the deficit by approximately $28 b. in FY11, $47 b. in FY12, $56 b. in FY13, and $65 b. in FY14. Those estimates were made a little over a year ago and would change somewhat with this year’s revised economic assumptions. In comparison to underlying deficits estimated by OMB last July at $1.5 tr. in FY10, $1.1 tr. in FY11, and approximately $0.8 tr. each fiscal year after that, it doesn’t seem like much. However, $196 b. of deficit reduction over the next four years and $615 b. over the next 10 is a lot larger than other deficit reduction measures that have any chance of passing Congress this year.
There’s also the issue of whether those earning over $250,000 benefited disproportionately from the financial excesses of the last nine years and bore relatively less of the costs than middle class America did. Whatever one’s view on that, it appears that it will be trumped by fearful Democrats bent on political survival.Last night, the National Journal Congress Daily reported President Obama is considering extending all tax rates that expire at the end of this year for at least one year and maybe more. That would keep the top rate on individual income at 35% and the top rate on dividends and capital gains at 15%. This would give Democrats a tax cut to vote for going into the 2010 election. There are plenty of House Democrats who would object to extending upper income tax cuts, but, if President Obama supported it, enactment would be likely.
Extending the Bush tax cuts
Extending the Bush tax cuts is a BIG mistake. Main Street is hurting badly right now.
Instead, raise the standard deduction to 100K. Make for the loss of revenue, about $400Billion, by higher capital gains tax and a top rate of 50% of income over 1 million; 75% over 10 million.
The recession will continue until main Street can grow their income.
Hahahaha
sorry...just read the first dudes comments....75% tax rates...How did Jimmy Carter get to post on here?
Top tax rate was 91% not so long ago
It's a viable idea . . . we had a 90% top tax rate through WWII and beyond.
http://www.huffingtonpost.com/dave-johnson/bring-back-the-90-top-tax_b_9...
Nonsense, a tax urban legend
Nobody paid anything like a 91% rate, ever.
Income at that level was investment income, and for investment income back then (1) the maximum capital gain rate was lower than under Ronald Reagan's tax reform that dropped the maximum tax rate on anybody to 28%; and (2) owners' gains, interest, rents and other investment income exploited massive tax shelters, preferences and loopholes that always accompany confiscatory tax rates as a matter of practical necessity and political reality (and which make such rates pretend.)
Even worse, all these preferences and loopholes enabled the very richest to pay lower tax rates than those poorer than them.
For instance, looking at IRS historical Statistics of Income data for 1965 -- the days of the good old 70% top tax bracket -- we see effective tax rates by income level, i.e. tax actually paid/income -- in 1965 dollars of ...
income: rate
>$1 million: 30.8%
$500k to $1,000k: 32.8%
$100k to $500k: 36.4%
$50k to 100k: 31.2%
So the people who had income of $50k to $100k paid a higher effective tax rate those who had twenty times more income.
So much for the good old liberal 70% tax bracket being so "progressive".
BTW, the same thing exits today with the estate tax. The returns to tax planning scale up rapidly with the size of the estate, so the biggest estates pay a lower effective tax rate than smaller estates.
The idea that "the rich" ever actually paid a 90% or 70% income tax rate is an urban legend of the left. It is a true fact, though, that the tax shelter industry made a fortune gaming those rates until the '86 Reform lowered top rates enough to put it out of business.
And now, as we keep pushing the top rates up, we see that industry coming back.
Actually it's worse I imagine
Since the first poster is likely referring to the Federal income tax rate, the 75% rate would need to have 2% (for the new, higher Medicare tax) plus any state and local taxes added. Throw in the phase out of deductions and you'll come close to 100%, certainly in the 90 ish range on a marginal basis.
But, of course, people who make that much money don't deserve it unless they are athletes or work in Hollywood.
The funnier point is the math comes nowhere close to working, you can't make up $400 billion a year even if you confiscated every dollar made above $1 million by every person in the country.
Minnesota Mom
True enough but the rate applied at much higher incomes and there was a lot more deductibility in those days (remember when you could deduct credit card interest?)
Furthermore, take a look at income tax receipts as a percentage of GDP and you'll find that they have been between 18 and 21 percent since roughly the 1960s, regardless of the marginal tax rate.