Today’s Crazy Idea: Let’s Get Rid of Tax Brackets for the Rich!


A few days ago I wrote a post about rich people who didn’t understand how marginal tax rates worked, and therefore thought that under President Obama’s plan they’d suddenly face a big hike in their tax bill as soon as they passed Obama’s magic $250,000 threshold. Today I extend an abject apology to these people. That may not be how the tax code works now, but apparently it’s not crazy to think that negotiators in Washington are discussing exactly that:

One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula….“Would you consider that a tax rate increase?” asked one aide familiar with the idea. “It would not impact the top marginal rate, and no one would have an effective rate over 35 percent.” But, he added, taxes would rise for the rich. He, like other aides, spoke on condition of anonymity because Congressional leaders want negotiations to be kept quiet.

A Democrat familiar with the proposal called it plausible, but said its future would depend on an official scoring of how much revenue it would raise. White House and Congressional aides “are looking at lots of creative options,” the Democrat said.

I’ll make several observations here. First, it’s crazy. Under this plan, when you crossed the magic threshold from $399,000 to $401,000, you’d suddenly owe about $30,000 in extra taxes. You really would have an incentive not to make more money if you were near that cutoff point. The dumb urban legend would become fact.

Second, it’s a gift for the super rich at the expense of the merely ordinarily rich. It would have a big effect on someone making $400,000, but only a tiny effect on someone making, say, $10 million a year, since their effective tax rate would stay at 35%, instead of going up to 39.6% for the vast bulk of their earned income. This implies that Republicans are willing to throw the ordinarily rich under the bus in order to save the super rich.

Third, the Times article suggests something similar was part of the tax code “in the late 1980s.” Really? I didn’t know that. But if that’s the case, I assume it didn’t last long because, you know, it’s crazy. Why would anyone think it’s a good idea to resurrect this brain-dead idea?

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

Share your feedback: We’re planning to launch a new version of the comments section. Help us test it.