Income Tax Proposal

The Problem:  A series of tax breaks has been given to the rich since the start of the Reagan administration in 1980.  Then, income above $215,000 was taxed at 70%.  Reagan's tax breaks for the rich were projected to cost $200 Billion.  (He introduced the term "supply side" to replace the discredited term "trickle down".  It is the same thing.)  He said that these tax breaks would spur the economy and there would be no deficit.  The deficit was more than $200 Billion. (See the U.S. Debt/Yearly Deficit History.)   Tax breaks for the rich do not spur the economy! 

Under George W. Bush the deficit has been from $400 to $596 billion. The national debt has risen from $5.7 to $9 trillion. We’re paying $300 billion a year in interest on the debt.

The gap between the rich and the poor has increased dramatically.  and we are moving toward an economic collapse, depression and being a third world nation.

I propose higher progressive personal income tax rates on adjusted gross incomes above $200,000.   My proposal: for adjusted gross incomes up to $200,000 same as now; 40% from $200,000 to $300,000; 50% from $300,000 to $500,000; 60% from $500,000 to $1 million; 70% for the income above $1 million. See the specifics? Long term capital gains will be taxed at 40%. This will increase tax revenues by more than $475 billion annually.   See computations. 

We need to simplify the personal income tax.  This is easy to do.  The new law starts out with something like, "This law rescinds all previous personal income tax provisions and replaces them with the following:".  The tax rates are then specified followed by the specifications for a short list of tax deductions and credits.  It has been estimate that such a simplification would result in $150 billion in increased annual revenue.

Thankfully, with the Democratic majority in Congress, we will not have to worry about the Republican plans to implement a flat tax or Fairtax.  These are plans to further shift the burden of taxation from the rich to the poor.  Either would result in massive increases to the deficit.

As a related matter,  see my discussion of Reagonomics.