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Saturday, September 29, 2012

'For the Wealthy, a 28 Percent Solution'

Richard Thaler likes the number 28:

For the Wealthy, a 28 Percent Solution, by Richard Thaler, Commentary, NY Times: Everyone knows that America’s tax code is a mess... But there is a possible solution. ...
I can state my idea in just one sentence: All income above $1 million a year for a household will be taxed at 28 percent. There are no deductions, and all income, including capital gains and dividends, is included. President Reagan favored something like this...
While we’re at it, let’s make the corporate tax rate 28 percent, too, because our current rate is high by international standards. Oh, and the estate tax exemption? On amounts above $3.5 million for individuals, the rate would be, of course, 28 percent. ...
But what about the argument that taxing capital gains and dividends at the same rate as ordinary income will discourage investment? I don’t find this claim convincing. ...
Of course, I haven’t said what would happen to the households in the middle, or what the taxes would be on the first $1 million for the rich... One possibility is to scale back deductions smoothly, starting at household incomes above $250,000, and completely eliminate them for incomes above $1 million. ... A more radical plan, curtailing deductions for this large group, is probably politically infeasible...
And what if the resulting revenue falls a bit short...? I suggest that we get our gasoline tax more in line with those of the rest of the world. Gradually raising it to something like $1 a gallon would both bring in revenue and help reduce emissions. In the long term, we could set the rate as a percentage of the price at the pump. Maybe 28 percent?

    Posted by on Saturday, September 29, 2012 at 09:39 PM in Budget Deficit, Economics, Taxes | Permalink  Comments (40)


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