Who Would Argue with a U.S. Millionaire Tax Hike?

Agenda-Setting Financial Insight.
Nov. 12 2012 5:27 PM

Who Would Argue with a U.S. Millionaire Tax Hike?

Would anyone really argue with hiking tax rates on Americans making over $1 million a year?

Photo by Daniel Barry/Getty Images

Would anyone really argue with hiking tax rates on Americans making over $1 million a year? OK, the millionaires might. But selling out the country’s 250,000 super-rich by taxing them at Clinton-era rates might be the needed political compromise to avert the fiscal cliff - if only one of many financial sacrifices required to right Uncle Sam’s finances. 

Negotiations will soon begin between the two parties to prevent scheduled tax increases and spending cuts expected to send the economy spiraling. The Congressional Budget Office predicts that if Washington does nothing, unemployment could return to 9.1 percent. The Republican Party isn’t keen to raise taxes on anyone - House Speaker John Boehner said so. And President Barack Obama thinks that the top two tax brackets could rise to the rates that prevailed in the 1990s for families earning more than $250,000. 


But compromise is about meeting in the middle. So why not sacrifice just those with indisputably large incomes who can clearly afford it? For simplicity’s sake, consider what would happen to those earning, in the words of Austin Powers super-villain Dr. Evil, “one m-ill-ion dollars.” Using that as a threshold for returning to the top rate of 39.6 percent that prevailed during Bill Clinton’s reign would cut a big chunk of prosperous (if not necessarily filthy rich) Americans out of the equation. 

Raising rates on Americans earning more than $200,000, the Democrats’ single-person threshold, would affect 2.4 million taxpayers, according to 2010 data from the Internal Revenue Service. Boosting the floor to $1 million saves 2.1 million families from higher taxes, leaving just around 250,000 facing increases of just under 5 percentage points. Yet this tweak has a much smaller impact on revenue. Taxing just millionaires would bring in about $250 billion over 10 years, according to Breakingviews calculations using IRS statistics. That’s only one-third less money collected than if the entire group of 2.4 million people got hit with a tax hike. 

Republicans are ideologically opposed to raising taxes on anyone. But if the wealthy state of California is any indication, the people are OK with letting the very rich pay more: 54 percent of voters approved a ballot measure that hiked state taxes on households making over $1 million. For the Republicans, failure to clinch a deal that avoids an economic shock for the benefit of “millionaires” comprising 0.2 percent of the population would make associations with Dr. Evil too easy. The millionaire’s tax is a political winner. 

Read more at Reuters Breakingviews.    

Daniel Indiviglio is a Reuters Breakingviews columnist, based in Washington, where he covers the intersection of politics and business. He joined from The Atlantic, where he provided analysis on topics such as financial regulation, housing finance policy, the Treasury, and the Fed.



Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Two Damn Good, Very Different Movies About Soldiers Returning From War

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Students Aren’t Going to College Football Games as Much Anymore, and Schools Are Getting Worried

The Good Wife Is Cynical, Thrilling, and Grown-Up. It’s Also TV’s Best Drama.

  News & Politics
Sept. 19 2014 9:15 PM Chris Christie, Better Than Ever
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 3:07 PM Everything Is a "Women's Issue"
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
Brow Beat
Sept. 19 2014 4:48 PM You Should Be Listening to Sbtrkt
Future Tense
Sept. 19 2014 5:03 PM White House Chief Information Officer Will Run U.S. Ebola Response
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.