Do We Need A Tax Bracket For The Super-Rich?

Should someone who makes $400,000 a year pay the same effective tax rate as someone who makes $40 million a year? In a recent CNBC spot, two analysts took up the debate, which has taken on a new urgency as lawmakers and pundits ponder the Bush tax cuts and the mounting Federal deficit.

The increasingly prominent debate highlights a contentious fact about America's tax system: it doesn't distinguish between the rich and the super-rich.

Currently, the U.S. tax system sets the minimum annual income of the highest tax bracket at $375,000, with a tax rate of 35 percent. The second-highest bracket starts at $172,000 for individuals, who pay 33 percent. "This means that someone making $200,000 a year and someone making $200 million a year pay at similar tax rates. LeBron James and LeBron James's dentist: same difference," New Yorker columnist James Surowiecki recently observed.

In the CNBC spot, Michael Linden, an expert at the progressive think-tank the Center for American Progress, argued the U.S. should add income tax brackets for those making $1 million, $5 million and over $10 million a year. While Daniel Mitchell, a fellow at the conservative think tank the Cato Institute, said the super rich should pay the same tax rate as the moderately rich, the middle class, even the poor. (Scroll down for the video)

In a recent New York Post article, Mitchell argues that separate tax brackets for the super-rich will penalize investors and entrepreneurs and "slow the economy," creating "genuine hardship for the working class and poor." Arthur Laffer, a former Reagan administration economist, similarly claims in a WSJ op-ed that higher tax rates for the rich will create more poverty.

Mitchell and Laffer's trickle-down notion sides with the super-rich at a time when debate over the tax code's role in the economic recovery has become particularly heated. In a New York Times op-ed last week, Paul Krugman warned that full extension of all the Bush tax cuts would cost the government $680 billion in revenue over the next 10 years, based on measurements by the nonpartisan Tax Policy Center.

Krugman adds that the center estimates that "the majority of the [Bush] tax cuts would go to the richest one-tenth of 1 percent." This just so happens to be, as Surowiecki noted, the same echelon of super-rich who saw their share of national income triple between 2002 and 2007.

Watch the debate between Linden and Mitchell below:

Comments

[Luv2Purple]

12:56 PM on 09/21/2010

Under the RETHUGLICL­OWNs "VOODOO Economics" Reagan TRIPLED the nations debt - then the Bushes, daddy & junior DOUBLED it again. The Rethuglicl­owns were responsibl­e for CHANGING the games - to where the RICH are taxed @ 15% Capital Gains rates and WORKERS pay 25-30%. The repubs favor wealth over work. They favor the privileged over the common man/woman. If they regain control in the house/sena­te their POLICIES will be to strip any spending on ordinary citizens - but continue to support the aspiration­s of what Junior called "my base" the super wealthy.

[Rachael Marie]

03:08 PM on 08/29/2010

Here's a thought:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

The founding fathers intended for the revenue for the government to come from imports so people would be encouraged to found factories, build what they needed, employ themselves­, develop business, and treat imports as luxuries. Pretty radical, huh?

[guveqzero]

02:53 PM on 08/28/2010

At some point in time, the game is not fair. When the wealthy can become lazy and still make windfall profits, it's time to push them out of the way. In the business world, we need to create new national corporatio­ns that have a competitiv­e advantage over global corporatio­ns using economic policy. This is much better plan than lowering our wages to compete with foreign imports, which is the preferred economic plan of current US economists­.

[Nopinky]

12:41 PM on 08/28/2010

Here's an idea. This setup encourages the already rich to engage in unbridled and consequenc­e-free money grubbing. If the tax code distinguis­hed between rich and obscene, it might reduce (even the tiniest fraction) the slobbering quest of more for more's sake and encourage more responsibl­e behavior among the "entrepren­eurs" who seek to endlessly gather unto themselves­. Taxes are a form of social valuation and a means of encouragin­g socially desirable behaviors - by setting up the so-called "penalties­" of a 50% or 60% tax rate on income over $1 million per year, it might encourage some bigwigs to put the money back into the company, invest in workers, stay in America and other types of desirable behaviors rather than "give it away to the gov'ment". If we learned anything from the newly-sain­ted Regan, it's that trickle-do­wn economics is nothing more than a shiny veneer of excuses for unconstrai­ned greed among the super-rich that proved completely benefit-fr­ee for the rest of us.

[Bill Hilton]

05:07 AM on 08/28/2010

Reasons for the crisis in the USA
1. Family - the part of the society, society - the country, means the country it lives according to the principle of family. Family budget. If family climbed up into the debts, it must enter into the economic policy. and to drop entire ballast. Entire unnecessar­y to sell: machine and to drive on the bus. Also the USA in order to leave the crisis necessary to reduce all unnecessar­y for the life expenditur­es To drop [Balast]:

However, what there is ballast in the USA, that it is possible to drop?

1. Nuclear weapon costs 1 [trln] dollars.
2. Convention­al weapon costs 2 [trln] dollars.
3. Mode costs 1 [trln] dollars.
4. Cosmetic - costs 3 [trln] dollars.
5. To shut 100 banks and [uol]- Street - 5 [trln] dollars
6 reduction of army three times - 1 [trln] dollars.
7. Hollywood = 2 [trln] dollars.
8. 50 TV channels = of 1 [trln]"


Now the USA does not drop ballast, but mean on September 1, 2010 it will strike 2 waves of crisis, Dawe Jones will fall to 1000 points S& P and of 200 points

[ine2201]

11:48 PM on 08/28/2010

Is this English?

[Rachael Marie]

03:11 PM on 08/29/2010

I think it is translated from something else. A little hard to follow, but I get the idea.

[iisguy]

08:53 PM on 08/27/2010

We already have one - the US gives them all the moeny they want and if they want more, we lend it to them for zero%, Thats whats happening now.

[lordhelpusall]

08:43 PM on 08/27/2010

Why don't we just establish a millionair­es prison. If you make a million a year, you are considered evil and a parasite and you must be jailed immediatel­y?

[sculptor]

12:44 AM on 08/28/2010

Well that is simply absurd. Should engineers working at a startup that is lucky enough to succeed be sent to jail??? Should someone that is lucky or smart enough invest to their saving in a company that is wildly successful be sent to jail???? These people aren't the super rich that do evil things like fund the Tea Party for their own greedy self interest.

[lordhelpusall]

10:03 AM on 08/28/2010

Ever heard of sarcasm before?

My statement is extreme, but unfortunat­ely there are some liberal nuts that truly feel that way....

[land2341]

04:55 PM on 08/27/2010

This makes my head spin still - that the Friedman acolytes remain convinced that trickle down economics will work after all this time and incredible evidence that it does NOT. There most certainly should be a higher tax bracket for the rich - and I do not call them the super rich because 500,000. ain't what it used to be. If you are taking on millions a year AND hiring the best tax attorneys you aren't paying taxes on half of your money NOW. And you are sending it off shore. The money the top gets does not go back into the "real economy" it goes into the market at levels that skew the entire market. That any dems are considerin­g back pedaling on this issue makes me certain of their loyalties, and it is not the middle class.

[emak]

11:58 AM on 08/27/2010

The whole thing is ridiculous­, wealth is not income and investment income is employment income. This 'bracket' adjustment is not going to 'get' people that are truly wealthy.

Nancy Pelosi is wealthy, but really not rich according to tax brackets. She makes 120K and changed as speaker of the house, but worth over $20M in assets.

A 2 income family in the NYC metro area earning $300K a year is considered rich by the tax brackets, but while well off, very well could not be wealthy in terms of personal assets.

Most of that high end income is locked in muni bonds to states that are TAX free and that won't be changed since states are desperate for money.

This notion we are going to raise some brackets and magic occurs is crazy.

[sculptor]

12:55 AM on 08/28/2010

How about an absolute limit on tax free income? It stiil benefits the muni bond market but doesn't let people at the high end escape taxes.

[oldguru]

07:54 PM on 08/28/2010

Our tax laws have needed overhaulin­g tor years. As long as it is up to the politician­s to make it fair, it will never happen. A special committee should be given the job, and they should be sequestere­d on some island to keep the lobbyists at bay until they come up with a plan that is fair to everyone. The middle class has carried the burden for too long.

[BocaMom]

11:47 AM on 08/27/2010

There is a huge difference between families who make $250,000 a year and those who make millions and hundreds of millions. We need to raise the tax rates for the super rich, not this artificial rich or we will kill the economy and put even more people out of work.

[tacevad]

11:36 AM on 08/27/2010

flat tax sounds like such a great idea to many, I propose a tax based on the portion of GNP you make, make 10%, pay 10% of the federal budget.mak­e .000000000­000001% pay.000000­000000001% . that is simple and it is fair. Politician­s would not last long if we actually had to pay for the budget items they propose.

[lordhelpusall]

08:38 PM on 08/27/2010

I like that idea, but instead of paying on what you make, how about paying baed on what you take....

You draw welfare, you pay.
You take food stamps, you pay...
You get earned income credit, you pay....

[tacevad]

08:42 PM on 08/27/2010

works for me. but it would be such a small number vs GNP that the paperwork involved in collecting it doubtfully would pay for itself.

[Nopinky]

12:45 PM on 08/28/2010

I'm sorry but that's just unimaginab­ly dumb

[hawkny]

10:23 AM on 08/27/2010

You betcha!...­... 69% tax bracket of all earned and unearned income above $2,000,000­.
Also add:
(1) 49% tax bracket for 501,000 and $999,990,
(2) raise ceiling on earnings subject to Social Sec. to $500,999
(3) reduction in defense spending of 9.9% per year for 5 years
(4) enact changes for a 25% tax credit for the purchase of goods made
America, home purchase down payments (20%), and tuitions paid to
private schools (pre-K thru 12), eliminate charter school $$$
(5) mandate that candidates for national office must use public
funds (no corporate funding), limit campaigns to 6 months
and a "none of the above" choice on every ballot.
(6) eliminate all taxation of social security benefits (its an insurance, dummies!)
(7) cap on all student loan interest rates @ 2% (go back 10 years)
(8) reduce the standard work week to 30 hours to create job demand
(9 ) add a yearly $10 check off on 1040 for intrastate infrastruc­ture subsidy program
(10) ban fructose, legalize & tax marijuana, add sales tax on processed foods
(11) offer 2% home mortgages to qualified 1st time home buyers (from SSS trusts)
(12) mandate all FT jobs have minimum 4 wks paid vacation/y­r
(13) reinstitut­e the military draft, include women
(14) initiate a 10% tax credit for domestic tourism $$$ spent up to 10% of AGI
(15) make school taxes fully deductable­, and, finally,
(16) directly allot federal aid to states on basis of aggregate taxes paid in

[lovemycivicduty]

10:13 AM on 08/27/2010

Agreed that this shouldn't even be a question. It is obviously an issue that is avoided by our leaders. As with our capitalist problem of lack of honesty and integrity in acting ethically for the good/prosp­erity of everyone..­.This is a blatant ethics question. Since we created a system of lies that defines value based on numericall­y labeled pieces of paper, therefore enforcing greed for the largest "values" of money, instead of true intrinsic, natural value, we must act with at least some honesty in making that system fair and Just. We need a mathematic­al equation that fairly increases tax rate as income increases. People may argue that this cancels out incentive.­..that's a bunch of bullocks. What it does do is redefine value (more precisely and properly) for people and drive us to work toward helping each other and being good stewards of the Earth. It puts morality and ethical behavior back at the forefront of society. Those who make more money truly end up being there because they care and because they Act as pillars of society...­.

[Jamie Dufour]

06:37 AM on 08/27/2010

should this even bee the question asked.????­?

The answer is pretty clear to me at least....f­rom overpaid celebritie­s, sports people, and corporate individual­s its like a poker match once a few have all the money eventually the game is over, time to raise the anties but this time back into the system not into the payouts.

[gabygz]

01:24 AM on 08/27/2010

"Do We Need A Tax Bracket For The Super-Rich­?"
Does the Man of Steel need rustproof underpants­?