The United States already has the most progressive tax system of any developed country.
With budget deficits soaring toward the stratosphere, Congress will need to get serious about savings proposals soon. However, reforming Social Security and Medicare, the main drivers of long-term budget deficits, remains a political challenge. Neither party intends to raise taxes on the middle class. And cutting defense and social spending could save up to $200 billion a year from a deficit projected to approach $3 trillion by 2034.
That leaves you with one option. It's about taxing the wealthy. That's not enough.
There are several over-tax loopholes and under-taxed businesses that lawmakers can address. But it is a travesty to suggest that the money taxed on the wealthy is large enough to curb deficits and fund new spending programs. Garnishing all income over $500,000 would not balance the budget. Even if all of a billionaire's assets were liquidated, he would only have nine months of funding available to the federal government.
In my Manhattan Institute research, I set the top income tax rate at a revenue-maximizing level while reducing tax loopholes and combating tax evasion. By way of background, the Congressional Budget Office projects that the budget deficit, which currently exceeds 7% of gross domestic business, will exceed 10% of GDP over the next 30 years. My research shows that the “Tax the Rich” model will generate an additional income of up to his 2% of GDP in the long run.
Read the full story at The Wall Street Journal (paywall).
______________________
Brian M. Riedl He is a senior researcher at the Manhattan Institute. Follow him on Twitter here. Based on recent reports.
Photo credit: sasirin pamai/iStock