April 14, 2009
Given the opposition that some of President Obama's existing tax proposals have encountered, no grand new proposals are likely anytime soon. But there is a basic economic reality that will force taxes onto the agenda well beyond this year's budget fight. The federal government simply isn't raising enough money to pay for its obligations, says New York Times economics columnist David Leonhardt.
Even though Obama's agenda to tax the wealthy is bold, his tax code would still look more kindly on wealth than that of his predecessors, says Leonhardt:
- It's well known that tax rates on top incomes used to be far higher than they are today -- the top marginal rate hovered around 90 percent from the 1940s-1960s, today it's at 35 percent -- what's much less known is that those old confiscatory rates were not as sweeping as they sound.
- They applied to only the richest of the rich, because yesterday's tax code, unlike today's, had separate marginal tax rates for the truly wealthy and the merely affluent.
- For example, for a married couple in 1960, the 38 percent tax bracket started at $20,000 (about $145,000 today) and the top bracket of 91 percent began at $400,000 ($3 million today).
- Today, the very well off and the super-wealthy are lumped together; the top bracket starts at $357,700, and any income about that is taxed at the same rate of 35 percent.
This change is especially striking, because there is so much more income at the top of the distribution now. A tax rate for the very top earners would apply to a far larger portion of the nation's income than it would have years ago, says Leonhardt.
Source: David Leonhardt, "Richly Undeserved," New York Times (Magazine), April 12, 2009.
Browse more articles on Tax and Spending Issues