It’s worth asking: can that be done?
A reader at Megan McArdle’s blog did the math a few days ago and concluded that it cannot. Even if we accept the left’s counterfactual assumptions that skyrocketing taxes will not shrink the economy, the numbers simply aren’t there:
For anyone who wants to discuss the revenue side of the budget debate knowledgably, I highly recommend spending some time with the IRS’s Statistics on Income. Table 1.1 under Individual Statistical Tables is a good place to start: http://www.irs.gov/pub/irs-soi…
You can see, for example, that total taxable income in 2008 was $5,488 billion. Taxable income over $100,000 was $1,582 billion, over $200,000 was $1,185 billion, over $500,000 was $820 billion, over $1 million was $616 billion, over $2 million was $460 billion, over $5 million was $302 billion, and over $10 million was $212 billion. Effective tax rates as a percentage of taxable income seem to top out around 27%.
You can estimate the effects of various proposals in the best case, which is that each percentage point increase in the marginal rate translates to an equal increase in the effective rate. Going back to 2000 (“Clinton era”) marginal rates on income over $200,000, let’s call it a 5 percentage point increase in the marginal rate, would therefore yield $59 billion on a static basis. Going from there to a 45% rate on incomes over $1 million (another 5 percentage point increase) yields an additional $31 billion. Or, instead, on top of 2000 rates over $200,000, 50%/60%/70% on $500,000/$5 million/$10 million? An extra $133 billion, or nearly 1% of GDP. That’s not accounting for the further middle class tax cuts that are usually proposed along with these “millionaires’ taxes.”
Now, compare this to deficits of $1,413 billion in 2009 and $1,293 billion in 2010, and using optimistic White House estimates, $1,645 billion in 2011 $1,101 billion in 2012, $768 billion in 2013, and continuing at over $600 billion after.
If anyone wishes to dispute this analysis with actual numbers, feel free to do so in the comments.