Jul 10th, 2009 at 4:44 pm
Surtax Plan Details Firming Up
Jeff Young outlines House Democrats’ plan to raise $540 billion over ten years in new “surtaxes” on high-income taxpayers: “There would be different surtax rates, ranging from 1 percent to 3 percent, for workers with annual earnings of $350,000, $500,000 and $1 million, Rangel said.”
This is not my favorite financing idea, but it works just fine.
39 Responses to “Surtax Plan Details Firming Up”
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July 10th, 2009 at 4:51 pm
This is a good idea, but they could add a couple higher rates.
And I think it applies to AGI, which means it includes capital gains income, which is also good.
July 10th, 2009 at 4:56 pm
I don’t know why they don’t start super-taxing those who make huge amounts–amounts that are beyond the imaginations of Teabaggers and Joes the Plumber. Taxing the hell out of those who make, say, $2mil a year and up would generate a huge amount of money.
July 10th, 2009 at 5:01 pm
Good lord, you can raise that much from just a 1-3% hike?
Why not up the rates by 10% and erase the budget deficit over the same period?
July 10th, 2009 at 5:02 pm
…or institute a major jobs program, establish free child care, make college tuition-free, etc.
July 10th, 2009 at 5:04 pm
Because, because, shut up you dirty socialist that’s why!
July 10th, 2009 at 5:05 pm
Why not up the rates by 10% and erase the budget deficit over the same period?
Because the fake Democrats who run the Senate would never go for it.
July 10th, 2009 at 5:06 pm
I think an additional 50% surcharge on income from hedge funds, private equity funds and shadow banking is totally called for here.
July 10th, 2009 at 5:08 pm
This is not my favorite financing idea . . . .
Well, why not? Matt has written in the recent past:
This is basically a variation on such a plan.
Moreover, Matt also recently wrote:
Properly understood, by applying this tax directly to AGI, it does exactly that (de facto broaden the tax base).
Finally, I know Matt is in the habit of ignoring the politics of this, but a tax that doesn’t violate Obama’s campaign pledges is a pretty good idea.
July 10th, 2009 at 5:13 pm
Is this a parody? Every tax that will hit the poor hardest you advocate, and now a tax on the wealthy and you have issues. How is this surcharge fundamentally different than progressive taxation?
July 10th, 2009 at 5:18 pm
It appears that the pinko, communist, subversive, maoist, red motherplunkers in the house are starting to hit their stride.
July 10th, 2009 at 5:32 pm
You’re still considered a worker if you make more than $1 million per annum? Because chances are you’re money is in the bank or stocks or something, doing all the work for you (okay maybe not so much in this economic climate).
July 10th, 2009 at 5:32 pm
Max (#9), I’m guessing it’s because the regressive taxes discussed this week would potentially have public health benefits.
However, I’m confused as to why the surtax is a bad idea. Perhaps Matt prefers a formal change to the tax brackets to a (presumably) temporary surtax.
July 10th, 2009 at 5:35 pm
This is a great idea and much better than trying to set limits on compensation. Just tax it away. I’d like to see higher rates, butn this is a good start. And I’d like to see the 15% rate for dividends disappear. But a 3% surtax on AGI is a good start.
July 10th, 2009 at 5:36 pm
The regressive tax discussed earlier this week (and there is a talk on regressive taxes every week here) was an argument in favor of such taxation, despite the admission that any health benefits would be marginal or nonexistent.
From the opening lede of http://yglesias.thinkprogress.org/archives/2009/07/the-impact-of-soda-taxes.php
Like I said in the comments there: rich kid supports regressive taxation, news at 11.
July 10th, 2009 at 5:38 pm
And I really like sticking it to the Dlue Dogs. They went on and opn about needing to pay for health care. Let’s see them support these tax increases.
July 10th, 2009 at 5:43 pm
Why not go all the way to 90% over, say, $20 million? I know it would never pass the Senate, but it would be hilarious to see who would defend the multi-millionaires.
July 10th, 2009 at 5:49 pm
Actually, though I don’t have the figures handy, I think it would raise a hell of a lot more money to simply reinstitute the tax rate on the wealthy to what it was at the end of the Reagan years.
What amuses me (well, pisses me off, actually) are the right wing wackos who resent all taxes, who think that there should be no fee imposed that improves either society or infrastructure. I suppose none of them drive on roads and highways, none of them use city water, none have flush toilets hooked up to a sewage treatment plant, none every fly in a plane that lands at a municipal or international airport, none have attended public schools or public community colleges, universities, that none have ever had any benefit from police protection, have ever used a public library, have never found any use for the court system, none ever use public transportation of any kind, esp. a city bus or an Amtrak train; and, I’m sure each and all of the anti-tax crowd would far rather dispense with the hugely expensive Border Patrol completely. Right?
But for chrissake, DON’T CUT DEFENSE AND WAR SPENDING! “THEY” ARE WAITING TO GET US, YOU KNOW!
Morans.
July 10th, 2009 at 5:50 pm
9, 12:
I think what Yglesias was referring to was his preference for limiting the deductions by richer folks as opposed to raising the rates, which he argues would be more efficient. I guess because less money/time/effort would be spent in trying to avoid the higher rates by finding new deductions.
July 10th, 2009 at 5:50 pm
this is a good start but there should be higher rates at 2 mil, 3 mil, 4 mil, etc
July 10th, 2009 at 6:07 pm
Moreover, Matt also recently wrote:
When possible, it’s better to raise money by broadening the tax base.
Properly understood, by applying this tax directly to AGI, it does exactly that (de facto broaden the tax base).
=========================================================
I won’t argue as to whether this is a good idea or not – but I don’t see how this is *broadening* the tax base at all. You are just stacking higher rates on the upper income levels.
July 10th, 2009 at 6:20 pm
“There would be different surtax rates, ranging from 1 percent to 3 percent, for workers with annual earnings of $350,000, $500,000 and $1 million, Rangel said.”
How would this “surtax” work?
In particular, suppose I make $450,000 and fall in the 35% tax bracket.
1) Does the 1% surtax apply only to my income in excess of $350,000 (i.e., $100,000)? That’s the way that progressive taxes usually work; if you move from one tax bracket into another, only the amount in the new bracket gets the different rate.
2) Does a 1% surtax mean I pay 1% more tax or 1% more of my income? In other words, am I paying an effective tax rate of 35.35% or 36%? I’m guessing the latter, but if so, why not just change the tax brackets? (To carry the example forward, assuming the surtax only applies on the excess over $350,000, the question is whether I would be paying an extra $350 or an extra $1000.)
3) Let’s suppose I’m sitting on a stack of investments and therefore mostly pay tax at the long term capital gains rate of 15% (actually, the LT rate is moving all around in the next few years, but I’ll ignore that). Do I pay the surtax on capital gains taxes as well? If so, am I paying 15.15% or 16%?
@11: You’re still considered a worker if you make more than $1 million per annum? Because chances are your money is in the bank or stocks or something …
High paid professionals make more than $1m/year in labor income. I don’t know if you’re still a “worker” if you make that kind of money; presumably you aren’t in the Bolshevik sense of the word.
July 10th, 2009 at 8:38 pm
CRNholm, that may be what he tells himself, but all avaliable evidence indicates that taxes such as he prefers would have a negligeable impact at best. His June 8th post even admitted as much. He just wants money to pay for medicare. Given that, why then is he opposed to this?
No, the only reason that makies any actual sense is simple class biad: Taxes are for little people who just waste their money anyway. Better to steal it from them, give most of it to rich people, and use the rest to shore up medicare so taxation on the wealthy never has to be raised!
Arguments against taxing rich people because they would jsut break the law and not pay them are pathetic. We don’t eliminate the age of consent because child molestors don’t obey it. We don’t
July 10th, 2009 at 10:36 pm
Um….this has nothing to do with eventually rolling back the Bush tax cuts, does it? I mean, these “surtaxes” won’t be implemented in lieu of repealing the Bush cuts in 2010, right?
July 10th, 2009 at 10:43 pm
I think this means ‘$350,000, $500,000 and $1 million’ thresholds for a joint filing household, or half that for single filers. Why not just say that — it is much easier for a dual earner household to get to $350,000 than for a single earner. It would nice to see the breakdown of income by earner for a $350,000 household.
July 10th, 2009 at 11:06 pm
I don’t see how this is *broadening* the tax base at all. You are just stacking higher rates on the upper income levels.
Assuming the reports are correct and this is a tax on AGI, then this isn’t just equivalent to raising the rates on taxable income, but rather is a new tax on income not currently taxed (the income removed from AGI to calculate taxable income by things like personal exemptions, the standard deduction, or itemized deductions).
To give some illustrative numbers, I believe in 2007 AGI was $8.5 trillion, but taxable income was only $5.9 trillion. Now of course this plan would only tax a portion of that gap (namely the part of the gap attributable to filers in the relevant AGI brackets), but nonetheless hopefully that comparison helps illustrate how taxing AGI directly de facto expands the tax base.
July 10th, 2009 at 11:16 pm
alkali,
See my comment above: assuming this would indeed be a tax on AGI, it actually doesn’t work as a modification of existing tax rates, but instead is actually a new tax on a broader base of income (meaning a base including but not limited to income currently taxed as ordinary income, long-term capital gains, and qualified dividends).
I assume they are in fact talking about marginal rates (meaning rates applying only to AGI in the relevant brackets).
July 10th, 2009 at 11:23 pm
I mean, these “surtaxes” won’t be implemented in lieu of repealing the Bush cuts in 2010, right?
Keep in mind the Bush tax cuts don’t have to be repealed: they just sunset after 2010. So I think the fair assumption is that if people aren’t mentioning saving the Bush tax cuts from sunsetting, they are still dead.
July 11th, 2009 at 12:47 am
I’m sorry, but this is egregious.
Matt wants to tax healthcare benefits as a means of funding healthcare plans, but does not want to raise taxes directly on the wealthy.
If I recall, you were advocating the virtues of taxation for healthcare in general. What is the problem? Is it because they are too rich? I mean, taxation levels are at such a low level relative to net worth, it is pathetic.
I really question one’s moral and political compass, when they find this troubling.
July 11th, 2009 at 1:31 am
“It appears that the pinko, communist, subversive, maoist, red motherplunkers in the house are starting to hit their stride.”
We’re here to save the country, just in the nick of time.
July 11th, 2009 at 6:01 am
I’d really like MY to elaborate on why he’s not a big fan of this plan. I thought he was in favor of more and higher brackets? I certainly am…
July 11th, 2009 at 7:47 am
We’re still waiting for the quid pro quo from the financial industry for hitting the reset button for them at great cost. Steeper upper bracket taxes would be an appropriate part of the quid pro quo.
July 11th, 2009 at 9:11 am
First things first. A surtax is a tax on a tax, not AGI. So if someone pays a dollar income tax, a three percent surtax adds 3 cents.
In 2007 total individual income tax collection came to $248.6 billion. Three percent of that is about $7.4 billion. Obviously the surtax scheme won’t collect much money and just serve to piss off people that make large amounts of money, create jobs, and pay taxes. Kinda like California, and you can see how well that’s worked out.
I agree. 28% would suit me just fine.
There is no one that believes there should be no taxation.
July 11th, 2009 at 9:56 am
I just want to check — are we really interpreting “this is not my favorite financing idea, but it works just fine” as a disapproval of the idea? Given all the discussion this blog has seen of the issue until now, I very much interpreted that literally — “I have seen ideas I like better, but this one’s certainly good enough, so let’s run with it.”
I’d really like MY to elaborate on why he’s not a big fan of this plan. I thought he was in favor of more and higher brackets? I certainly am…
Arguably, curbing deductions and loopholes, followed by extending the brackets upward to $2 million or whatever, produces a simpler tax system that draws in more revenue and (ideally) minimizes tax-avoiding behavior, so a broad change of this sort is superior in the long run to a tacked-on surtax.
July 11th, 2009 at 12:28 pm
Shooter,
Read the linked story. Your assumption about how the tax would be levied is inaccurate.
It is not based on taxes paid.
July 11th, 2009 at 2:05 pm
charlequin,
I guess the question is why would Matt be only luke-warm, when this seems to hit all his stated tax policy goals. Speaking of which, again assuming it is correct that this is a tax on AGI, it does in fact bypass a large number of deductions and loopholes.
July 11th, 2009 at 2:11 pm
By the way, I’m guessing shooter242 is a victim of Wikipedia, which for some reason does in fact define a surtax as a tax on a tax. The actual concept of a surtax is broader than that, and basically includes any additional or extra tax on top of the regular tax scheme, usually for a specific purpose and sometimes for a limited time. In that sense, a surtax is similar to a surcharge (e.g., a firm collecting from its customers a fuel surcharge during periods of high fuel prices).
July 11th, 2009 at 7:48 pm
I did read the linked story. As per quote…
Relevant percentage of what, income or the tax? It doesn’t say. But, if it’s AGI then we are talking about new tax brackets, which the story doesn’t mention.
As for the possible idea of temporary brackets, I believe we are still paying for taxes levied during the Spanish American war. Whatever else it might be, it won’t be temporary.
July 12th, 2009 at 10:27 am
Shooter 242,
As you say, Surtaxes are calculated by adding the relevant percentage to workers’ regular yearly tax bill.?
Not multiplying – taking their tax bill and then finding a percentage of that – but adding.
From the story: for workers with annual earnings of $350,000, $500,000 and $1 million
Since workers with annual earnings of $350,000 can pay hugely different amounts of taxes, based on mortgage interest, types of income, etc., this would seem to indicate that it’s a % of income.
Also, as you point out, a tax on a % of your taxes paid would generate far less income – an order of magnitude less – than the estimate provided for this plan, which also suggests to me that it’s not being calculated that way.
July 15th, 2009 at 3:35 pm
As some one who is currently assuming massive student loan debt and working my ass off on the hope I will reach that top 1%, I pity everyone here who has so little faith in themselves to better their own situation through more education and hard work and risk taking; as opposed to sitting around on blogs acting bitter because some people are better off than them. I’ll tell you all how the view is from the top after I make a fortune. Live and let live.