Soaking the Rich Won’t Work

[Valin]

Via Meadia:

Sep 28, 2015

 

Peter Orzsag, director of the Office of Management and Budget for two years under President Obama, is out with a new paper with a conclusion that is sure to disappoint the increasingly restive Bernie Sanders wing of his former boss’s party: Jacking up the top marginal tax rate barely has any effect on income inequality. Orzsag and two Brookings colleagues, William G. Gale and Melissa S. Kearney, calculated how the U.S. income distribution would change if the top rate increased to 50 percent from 39.6 percent and the new revenue were redistributed to the poorest fifth of households. They found that such a shift would barely make a dent in the Gini coefficient (a standard metric that expresses the level of income inequality as a decimal between zero and one). Orzsag, Gale and Kearney write in their report:

 

 

 

Increasing the top rate to 45 percent would bring in an additional $49.4 billion in revenue. Dividing that evenly among the 36.1 million households in the bottom income quintile (defined over households) would give each of those households an additional $1,370 in post-tax income.

 

Increasing the top rate to 50 percent with the same redistribution scheme would bring in an additional $95.6 billion in revenue, leading to an additional $2,650 in post-tax income for the bottom fifth of households. Applying a new top rate of 50 percent to income above $1 million for married filers and above $750,000 for single filers would bring in an additional $63.5 billion in revenue, which would result in $1,760 in additional post-tax income for households in the lowest quintile.

 

The reduction in income inequality resulting from each of these tax and redistributive plans is quite modest. The Gini coefficient falls from .574 under the current income tax schedule to .567, .560, and .565 respectively. These are very small reductions in the calculated statistic: .007, .015, and .010, under the three tax increase scenarios.

 

(Snip)

 

 

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Back in the 70's I heard an interview on NPR (the bastion of right wing thought ) with a rich guy. He said (I paraphrase) "I don't care if they raise my taxes or not, I'll just hire the best tax accountants I can, and they'll make sure I don't pay."