Let’s do the numbers

from David Ruccio

The usual right-wing response to the idea of taxing the rich is that it’s not enough to close the budget deficit. Well, let’s do the numbers.

Actually, let’s let Jeffrey Sachs do the numbers (he certainly owes us):

Consider the top 1% of taxpayers. Even in a year that the Wall Street Journal acknowledges “was a bad year for the economy and thus for tax receipts,” the top 1% reported to the IRS an Adjusted Gross Income (AGI) of $1,685 billion dollars, amounting to 20% of the total reported household income that year, and around 12 percent of GDP. On this sum they paid $392 billion in taxes, an average tax rate of 23%. . .

If the tax rate were 100% rather than 23% (and assuming in the Journal illustration an unchanged AGI), the extra revenues would be $1,300 billion, or 9 percent of GDP. Even allowing for other taxes already paid by the richest 1%, the incremental federal tax revenues would be at least 6 percent of GDP. Since every baseline scenario by the Congressional Budget Office and the Office of Management and Budget shows a deficit between 2013 and 2021 that is less than 6 percent of GDP, the total income of the top 1% would close the budget deficit entirely.

With great bravado, the Journal claims that even the income of the top 10% of the taxpayers wouldn’t close the deficit. The top 10% reported $3,856 billion in AGI, equal to 46% of total reported income in the United States, almost 27 percent of GDP. On that, they paid $721 billion in personal federal income taxes, or an average of 18.7% of income. If the remaining 81% of income were paid in federal income taxes, the increment in tax revenues would be more than $3,100 billion, or roughly 21% of GDP. The budget deficit would obviously be closed many times over.

The real point is obvious. The money received by the richest households is vast, and higher taxes on the rich will make a major contribution to closing the deficit. Nobody says that the rich should carry the entire tax burden. . .

I agree: rich individuals shouldn’t carry the entire tax burden. Large corporations should carry the rest of the burden.