There were 3,912,980 tax returns in 2009 that had a taxable income of $200,000 or more. These 3,912,980 households combined for a total taxable income of $1,625,622,124,000. That is $1.6 trillion. A lot, right?
Well, in 2009 our deficit was $1.4 trillion.
Imagine if you were to raise the tax rate on our richest friends and neighbors to 100%. Not marginal mind you. Marginal is where an individual is taxed at one percentage for a certain amount of his income, then another higher percentage at the next set of income and then more yet again at the next set.
That is, say the marginal rates were something like this:
|Low Boundary||High Boundary||Rate|
And someone made $200,000. She would be taxed 10% on her first $20,000 for a total of $2,000. Next she would be taxed 20% on her next $30,000 for a total of $6,000. Her next step is to be taxed 30% on her income from $50,000 to $100,000, or $50,000 for a total of $15,000. Last is her income above $100,000. Because she makes a total of $200,000, she is taxed 40% on the remaining $100,000, or $40,000.
So, adding her taxes up as she climbs the progressive tax system, her tax is $2,000+$6,000+$15,000+$40,000 for a grand total of $63,000.
Imagine making $200,000 and having to give $63,000 of that to the government. Ugh!
Anyway. That’s how the system works today, in general; I didn’t use real numbers. So, in our NEW tax world, we REALLY hate the rich so we’re gonna tax ’em at 100% total tax. That is, for every $1 they earn, we’re gonna tax ’em $1.
If they make $285,000 we’ll collect $285,000 from ’em. Alex Rodriguez and his $22 million contract? All ours. All of it.
The United States government would bring in $1.6 trillion. After paying off the deficit we would have $200 billion left. Not enough to even dent our remaining debt.
But guess what happens when people work their freakin’ asses off and get no money? They conduct a value analysis and conclude that they could work for a whole year and make zero dollars OR they could do NOTHING and and make ZERO dollars. Actually, what they’d ‘prolly do is accept a salary of $199,999 and be allowed to keep at least some of it. But…but they probably wouldn’t do as much work as they were doing when they were earning all that money before.
The point is this. You can tax the wealthy at 100% REAL tax and it wouldn’t even make a difference. Raising the rate by 4 points isn’t gonna make a difference either.