Former Federal Reserve chief Alan Greenspan believes Congress should let the tax cuts enacted by President George W. Bush expire for all Americans in order to address the widening deficit, according to a TV interview airing Friday.As to Obama's promise to people making less than 250K, it would necessarily involve deal cutting which would require some sort of very expensive sop to the rich, so just put this in the category of another Obama promise not kept, and let the rich pay more.
"They should follow the law and let them lapse," Greenspan told Bloomberg TV's Judy Woodruff.
The 2001 and 2003 tax cuts are due to expire at the end of the year. President Obama had promised to make them permanent for families making less than $250,000.
The amount saved by folks making less than 250K amounts to just a few bucks a week.
Of course, that is not what is going to happen. Instead, Obama will propose an extension on the lower income tax cuts, and then he will propose tax cuts for the wealthy, basically giving away the store at the start of negotiations, and then the Republicans, and Ben Nelson, and various Blue Dogs, will go and lard it up with more give aways for the rich, most likely give aways on interest, capital gains, and dividend income, and Obama will declare victory, and sign it.
My suggestion would be to make the proposal, and raise the marginal tax rate for folks over 250K, to something on the order of 85% for income over $10 million a year.
Start there, and you may actually get a good tax bill.
Seriously, soaking the rich is good policy and good politics.
Those households making over $10 million a year make about 0.01% of the popoulation. Yet they control about 5% of the national income. Taxing them at 85% instead of the current 30% would raise about 2.5% of the national income in taxes. This is over 10% of total federal revenue. (Data source: Saez and Piketty.)
ReplyDeleteSo in addition to the clear advantages of reducing the power of the rich and reducing the motivation to exploit and swindle, taxing the super-rich would have real effect on tax revenue.
(BTW, I am not sure why you would stop at 85%, leaving those households with income of over $1.5 million a year. In fact, leaving the rich with so much money would allow them to retain enough political power to, over time, roll back any tax progressivity you managed to achieve. This is essentially what happened over the last half century.)