President Biden, Elizabeth Warren, Bernie Sanders all want to tax the rich for their goals. What’s the key problem? 
The answer is the rich do not have enough money.
Not even a 91 percent marginal rate would do it. That means the problem is spending, not taxes.
The Limits of Taxing the Rich
Please consider The Limits of Taxing the Rich by Brian Riedl at the Manhattan Institute. I recommend reading the entire article.
When pressed on how to finance budget deficits likely heading past 8% of GDP within a decade, as well as trillions of dollars in proposed spending expansions, progressive leaders and activists usually respond, “Easy! Just tax the rich!” Indeed, President Biden and many progressive lawmakers have committed to never raising taxes on the 98% of families earning below $400,000, and opposing all spending cuts involving Social Security, Medicare, Medicaid, the safety net, veterans, and most social programs.
Yet the persistence of these claims raises the important question of just how much tax revenue can be raised by taxing “the rich.” Specifying the limits of taxing the rich can help us move past the false “easy answers” and begin to explore other, less popular, options to stabilize budget deficits, such as restraining the Social Security and health-care spending that are driving deficits upward, and raising middle-class taxes.
Washington’s income taxes are extraordinarily top-heavy. Treasury data show that, in 2023, the bottom 40% of earners collectively pay no income tax and will instead receive a collective tax rebate of $123 billion.
Meanwhile, the top-earning quintile—while earning 58% of all income—pays 69% of all federal taxes and 90% of all income taxes. And the top 1% of earners—while earning 18% of all income—pay 25% of all federal taxes and 40% of all income taxes. By contrast, the bottom-earning 60% earns 23% of all income, yet pays just 13% of the total federal taxes, including a combined negative income tax
How Much Tax Revenue Can Be Raised from the Wealthy?
Point-by-point, the article examines the proposals of Biden, Sanders, and Warren to address the question “How Much Tax Revenue Can Be Raised from the Wealthy?“
This report shows that: 1) Senator Bernie Sanders’s tax agenda has not identified additional plausible tax-the-rich policies; 2) America’s upper-income-tax rates align with international norms, and Europe’s higher tax revenues overwhelmingly result from broad-based consumption and payroll taxes; and 3) the 1950s and 1960s income tax rates exceeding 90% raised little additional tax revenue.
Key Ideas
- America’s federal tax code is already the most progressive in the Organisation for Economic Co-operation and Development (OECD) and has become sharply more progressive over the past 40 years.
- Much of this tax progressivity is the result of drastic cuts to low- and middle-income taxes while leaving upper-income-tax rates closer to international norms.
- The income-tax rates exceeding 90% in the 1950s and early 1960s produced minuscule levels of additional tax revenue.
Partisan Politics?
In order to avoid the partisan misrepresentations that typify tax policy debates, it is important to clarify, at the outset, that this report is not a conservative antitax manifesto. It does not argue that upper-income taxes should not be raised at all. Nor does it claim that all tax cuts pay for themselves. Indeed, soaring deficits will require some tax increases to accompany the necessary spending reforms.
Instead, this report employs consensus economic modeling and research to build a more realistic framework for taxing the rich—and to rein in the unrealistic perception that taxing the rich can sufficiently eliminate budget deficits and finance the progressive agenda. The limits of upper-income taxes should induce lawmakers, analysts, and voters to broaden their savings proposals to include substantial spending reforms and even to consider middle-class tax increases.
What About Europe?
American progressives often hold up Europe—and especially the Scandinavian social democracies of Denmark, Finland, Norway, and Sweden—as successful tax-the-rich utopias that the U.S. should replicate. In reality, European tax systems do not fit the American progressive stereotype, as their higher revenues are overwhelmingly raised through steep income, payroll, and consumption taxes on the middle class.
Yes, Finland, Norway, and Sweden collect an average of 42.6% of GDP in taxes, versus 26.6% from America’s federal, state, and local governments. However, 14.5 percentage points of this 16-percentage-point overage comes from higher payroll taxes and VAT, which broadly hit the middle class. These nations’ individual income-tax revenues exceed those of the U.S. by just 0.8% of GDP, while their 3.5% of GDP advantage in corporate-tax revenues is overwhelmingly driven by Norway’s steep corporate-tax revenues from its massive oil and gas industry (by contrast, Finland and Sweden exceed the U.S. by 1% of GDP). These nations’ remaining taxes combine to collect nearly 3% of GDP less than those of America
Taxing the rich won’t do. The progressive goals will require huge tax hikes on everyone, especially the middle clash.
Biden’s promise of only taxing the rich, cannot work. Brian Riedl explains every Leftist proposal, and why their ideas cannot work.
Please read the report.
How Much Will That GOP Deal on Child Tax Credits Really Cost?
Meanwhile , Republicans are in la-la land with the Democrats. It’s a truly pitiful performance that is adding trillions of dollars to the deficit over 10 years.
For discussion, please see How Much Will That GOP Deal on Child Tax Credits Really Cost?
Also consider, Is Inflation Down? That’s What President Biden Says
For the 36 percent of the nation that rents, Bidenomics on top of Fed asset bubbles boosting home prices and rent has been a complete disaster.
It should be no wonder that people say they were better off economically under Trump.
Taxes are usually included in the costs of products. Most upper income people are on the top of the supply chain. Maybe you get the taxes off Wall Street, but in general business, only 3 things are likely. The tax goes into the final price. Demand falls. The good is no longer available. The customers absorb the cost.
Replace the income tax with a consumption tax. And consumption is on every dollar spent for anything.
I support a combination. I will write that idea up again.
What do you think of land value tax considering that when you tax things, you get less of them. You can’t get less land but you can get less work (income)…
Like many, you ignore all other taxes and only focus on income tax. The top 0.1% pay less in total taxes as the 99.9% do. And worse, only a small percent of their wealth gain is recorded as income to be taxed.
Jeff Bezos effective tax rate on wealth gain has been 2%
If the US tax revenue to GDP was the OECD average, we would have a SURPLUS.
you are simply preaching Envy
I think you are off base, because this is confiscation. There is one area, maybe 2 that we might agree. As long as there is a capital gains tax, which is also confiscation, estate taxes should be paid at capital gains rates, above a certain amount. Also, if property is to be put into foundations, the same should hold true.
On the other side of the coin, all this stuff has more to do with bad money and excessive credit that it does with taxes. You might look at the US debt clock. The bulk of all taxes flow through to the people who work for a living. If you note the right side of the top portion there are clocks for total government spending and compensation. The government spending is a smaller figure, but it is increasing faster absolute terms than compensation. They are going to run out of money to tax very soon. Maybe that is why they propose feeding us bugs.
Don’t tread on me! How about no taxes? Since that’s not reality…I wonder what the numbers look like under a flat tax. MISH?
10%
It’s a club and no one here is in it.
Anyone who cannot support himself (or together with spouse) should not be allowed to reproduce
– Biden, Warren, and Sanders want to tax the rich for their goals, so what’s the key problem?
> Their goals is the key problem, and it should be no more or less, for anyone else seeking to have the Taxpayers pay for their goals.
– Biden and many lawmakers, have committed to never raising taxes on 98% of families earning below $400,000. They equally oppose all cuts in S/S Medicare, Medicaid, Veterans, and Most Social Programs.
> All Politicians “Have Committed” to doing all sorts of things. That’s called a “Talking Point” or BS to be more direct.
– Yet these claims raise the important question of just how much tax revenue can be raised by taxing “the rich.”
> Thats a rather vague look at things, and quite naive as well. Simply put, it’s a finite %. Not of what you can collect in total $ from the masses, but rather 100% of what they will allow you to collect.
– Options being reviewed right now. Cutting, or restraining S/S and health-care spending, that are raising middle-class taxes.
> Notice Spending is not mentioned. Cutting promised commitments that people are depending on, will never be a so called solution. Choosing to raise middle-class taxes is a choice, not a necessity.
I think the time is now, to stop this ridiculous notion that the “American Dream” is dead. Far from it, but it has been high jacked, so to speak.
I think it’s far more likely that the breakdown in this Country’s “Rule of Law” and the wasteful spending of our “Taxpayers (i.e. Countries) Wealth” has had far, far more to do with any loss of the Dream. Maybe as more and more people become aware and understanding of this, things will begin to change more quickly?
Seems to be heading in that direction at least… God Speed
If they would quit stealing so much money, they might not need more taxes. Truth is, 95% of people in the US would be better off, if government quit trying to help us. The people would take care of the other 5%.
Haha economy was better under trump. Shuts down the economy leading to lower gas prices. Then he prints half the covid money causing inflation. That shows up on biden term. Blames biden.
Some things in the economy are cycles of boom and bust. Some are the result of decisions made years ago.
We have agreement in this country that the Feds will tax income, the states will tax production and consumption (income and sales taxes), and the locals will tax consumption and wealth (sales and property taxes). Consumption taxes are the best tax, as they tax what you draw from the planet. Who cares how much Warren Buffet makes, if he is stuck in the same traffic jam as you? However, if he took a helicoptor to avoid traffic then tax him on that, not what he produces or earns.
“What’s the Big Problem With Taxing the Rich for Progressive Goals?”
That progressive goals are exactly the problem.
“The answer is the rich do not have enough money.
Not even a 91 percent marginal rate would do it. That means the problem is spending, not taxes.”
I can’t believe that somebody as fond of investment of you needs to get this explained! All right, let me enlighten you: even if it was true that the rich don’t have enough money (and there’s room for debate, considering current levels of inequality), the purpose of taxing the rich isn’t merely redistribution. The purpose is forcing them to invest. People naturally tend to hoard money when they have it, so the only practical way of making them risk it, is taxing them, which changes incentives.
How does taxing people force them to invest unless you make the investments tax free which then leads to richer rich people which is sort of what the high taxes are supposed to be doing something about.
People tend to hoard things when they believe the item is going to become scarce. That’s why people load up on water and gas before a hurricane and don’t in normal circumstances. For rich people, money isn’t scarce.
When taxes go high, you get high tax avoidance (legal or otherwise). That’s why countries like Italy and Greece have a very large underground economy to avoid high taxes.
Economies do not last long with the kind of inequalities we have in the US today. It will not last by hook or by crook.
Typically the rich already invest most of their money. There are two complaints: 1) that the rich live too “well” on the rest of their money, and envy wants to bring them down. and 2) what they earn from their investments is called “unearned income” and government pushes harder to take it.
A big problem is with investment. The rich invest in things with a return on investment. Government (Bill Clinton) instead wants that money to “invest” in the things that they want.
Social Security and Medicare are the largest part of our budget and healthcare costs will continue to significantly increase. Even if they eliminated 100% of all spending other than SS and Medicare this wouldn’t put a dent in our debt. No politician is going to get elected if they campaign on cutting Social Security and Medicare. My husband and I are going to start collecting social security this year. We’re hoping this doesn’t implode until after we die. We’ve been saving money as we know this can implode at any time. What can’t be paid won’t be paid.
“We’re hoping this doesn’t implode until after we die.”
You’re the problem.
I am also “near retirement age”. I give serious thought to being able to finance my life in retirement without social security, however much I “have a right to receive it.”
The “progressive” approach to tax the rich is a wolf in sheep’s clothing. Whatever the tax rate imposed on the rich will be paid for by labor. The rich don’t have any money! They have assets. To get money, the rich set prices on the products they produce.
Do you think doctors pay taxes out of some pile of money they keep under the bed, or perhaps in the basement like Scrooge McDuck? No, they pay it out of their rates. They charge more to pay the taxes. Thus we all pay.
But more worrying is that the tax rates they set on the rich eventually become the tax rates they impose on all income. Once the tax rates on the rich are 90%, it doesn’t seem so unfair to move the tax rates on the middle class towards 50%. This is the ultimate objective. First you raise the taxes on the “rich”, then you redefine who is “rich”. You can do this with moral impunity because the rich are already paying 90%, so the moral argument against 50% tax rates for the middle class goes away. After all, “we all have to do our share”.
Exactly. First they just hit the billionaires … then the multimillionaires … then the millionaires … then the rank and file. And I would say that there is another factor that impacts the middle class. Tax me enough, and I start moving my business or at least my revenue. First to tax friendlier states … then eventually overseas. See Ireland, Republic of Georgia, Qatar, and numerous countries that set up tax benefits for job creators. Gates, Musk, Bezos … in spite of the perception folks have … all of these guys worked 80+ hour weeks for years (Some of them 100+ hour weeks for years. If we start saying … if you work those absurd hours and make 100 million … we’re going to take $90 million … they will not work that hard … or at least they won’t work that hard here.
I read once that the top income tax rate in Denmark kicks in at around the eqv. of $90,000.
Another corruption of high tax rates is that 90% is the advertised rate. Politicians will take bribes to give some rich special tax breaks to lower their true rate.
Yet another corruption is the intent of our economic planners to get the highest performing workers to “take more time off.” I read once that Ron Reagan back in movie-making days was offered a role in yet another film for the year. His pay for the role would pretty much all get taken by the taxman. He declined the role. Government economic planners would have wanted some “starving actor” cast in that role instead. Instead the producers never made that film.
We’re long past the point where every dollar of government spending provides less than a dollar of value to its citizens. It’s a huge parasite and it needs to be cut off. The biggest parts of the parasite are healthcare and defense. They own your congress critters, not you. They make big money in prolonging problems.
Liz Fangs, SPY [1M] : if Jan closes < 479.98 Jan 2022 high, or under 477.55,
Dec 2023 high, SPX [3M] might deflate without congress help.
Yes but Trumps 10% tariff will solve everything
Things are coming full cycle to the 1930’s. Thus Klaus Schwab’s talk of his Great Reset idea at his WEF forum of the rich and powerful. Notice than none of the poor and powerless are invited to attend.
On a side note, i noticed that powerful Nancy Pelosi’s NVDA is doing well recently. Insider trading has it’s advantages. Bill Gates had that advantage too, with vaccine maker stocks.
I wonder if Bernie and his Buddy frier Tuck knew that the Tale of Robinhood was just a myth . but hey giver heck, been workin for him and Liz
Would it make sense for a fiscally responsible President to propose a budget less than the previous year’s tax revenue, allocate an additional 1% above the interest and principal on the debt, replace gov’t pensions with defined contributions, and let Congress horse trade among themselves with the rest of the budge?
That is a great idea … but anyone who recommends it is unelectable. It would cut entitlements and we can’t do that … and it would raise taxes on the middle class and we can’t do that. So right now, we are stuck re-arranging the deck chairs on the Titanic until something bad enough happens that you can do that. Bottom line, patient has cancer but chemo and radiation hurt. Morphine makes you feel good … so let’s keep pumping the morphine
A thorough analysis would discuss capital gains, wealth taxes, and loopholes that create zero dollar corporate taxes. Not just income.
But generally agree, spending is the larger part of the problem.
With so many vested interests clawing for each federal dollar, it is hard to imagine this reversing.
Who will do anything about social security or defense benefits when each issue is easily big enough to swing an election?
The only solution to the conundrum of those willing to slash the goodies won’t get elected is to LIE. Sweet talk the voters just like every politician aiming to get elected. Don’t tell the sheep that you plan to slash the budget until after the election. Then bring out the axe, the red marker pen and some bean counters and give the economy the hard medicine it needs.
By the time of the following election the economy will be healthier and hopefully enough voters will give you another mandate to keep the reforms going.
The situation is the vast majority of these billionaires wealth has never been taxed because it’s not income. It cannot be taxed until they die but even then I bet they avoid paying by leaving it to their foundations. I wonder if Bill Gates, Jeff Bezos, and Elon Musk are even in the top 1% of taxpayers. I doubt it.
Two words: Debt jubilee
The very minute SCOTUS ruled on Citizen’s United, that bribery is free speech, this was inevitable…. I wouldn’t want to be a treasury holder when it happens.
Ah Citizens United … the bogeyman of the left. Do you know they are 15th in their political contributions. Soros is #1 and 6 of the top 10 are unions. The left never complains about these … they complain about CU since all of the others support the left pretty much exclusively. Complaining about CU is like sitting in a burning building and complaining that you really don’t like the paint color
Not one word I stated had anything to do with the left, and, it’s spelled “Boogeyman”.
This is correct. Citizens was the end of the republic. It made buying politicians 100% legal. Called it “free speech” in the biggest irony of humanity.
The problem is:
1. nobody ever got a job from a poor man.
2. The rich pay for your shovel and improve productivity and the value of labor. Without a shovel you dig with your finger nails.
3. The reach are mobile. They leave when taxes are too high.
4. Taxing the rich is like killing the goose that lays the golden eggs. There is not enough meat on the rich to pay for more than a day or two of government welfare expenses.
For 45 years, since Reagan’s “trickle down” theory, the wealthy have been given massive tax breaks under the guise of “job creation”.
In that 45 years, the bulk of those jobs were created in China, Mexico, Taiwan, where labor is a fraction our rates.
Not what I call a good ROI.
Conservatives opposed free trade agreements when they voted for Ross Perot. If you ever held a job you owe it to trickle down fact.
“If you ever held a job you owe it to trickle down fact.”
Millions of Chinese workers certainly agree, fact.
Who care about progressive goals? These warmed over, socialist ideas have never worked but they are constantly pushing for a rinse a repeat. The intended recipient are the large crowd of neerdowell voters who love the prospect of a free lunch. They give these bankrupt ideas traction in the political landscape !nd keep the careers of these loathsome politicians alive.
America’s problems are solvable but it’s going to take real leadership pushing practical solutions. Unfortunately our political process seems to keep such men far away from the levers of power and instead offers up clowns and grifters. It’s sad to see.
While I agree with your underlying message, I think this statment is incorrect “…Unfortunately our political process seems to keep such men far away from the levers of power and instead offers up clowns and grifters…”
Your statment here is the real reason why the problems are proving difficult to fix at least in my view. “…The intended recipient are the large crowd of neerdowell voters who love the prospect of a free lunch…”
In others words, the problem is the body politic not the process or the politicians who are the fruits of that process. You could have a government with all sorts of checks and balances (we did at one time) and still end up where we are if the voters wish to dsimantle it. The politicians are simply giving the neerdowell voters what they are asking for….a free lunch. That’s not an endorsement of free lunches either. I’m heavily opposed to hand outs from government entities to anyone. I’m simply stating reality.
I think this monologue from Paul Harvey given in 1965 titled “Freedom to Chains” ties in nicely with the message I’m attempting to convey.
link to youtu.be
I fear you may be right. The giant shif show that is coming is inevitable and can’t be stopped.
As Margeret Thatcher famously said… “The problem with socialism is that you eventually run out of other people’s money.”
Take California’s example and do the opposite.
California GDP is 2.58 Trillion which makes it the 6th largest world economic power — United States: $18.036 trillion China: $11.007 trillion Japan: $4.123 trillion Germany: $3.363 trillion UK: $2.858 trillion. So, what is wrong with California? Do what Californians do & you will be better off.
He’s speaking of their 68 billion budget deficit, not their 2.58 trillion economy.
California’s tax base depends too much on high-net worth individuals cashing out on stock options so revenues are good in a good stock market and economy but swing deep into deficit in bad ones. That is ok as long as these people stay in California throughout the cycle. If however, they leave for whatever reason (taxes too high, crime, woke policies), that gravy train collapses and in the next down cycle those deficits become permanent and deep.
DC politicians of BOTH major parties have a spending problem, not a revenue problem.
It’s the spending. But the politicians and lobbyists aren’t poor or middle-class, do something doesn’t make sense.
Everyone needs to set up an off-shore non-profit LLC shell company on Epstein Island.
Suppose increased spending does occur at the rate projected in the first graph. If the rich don’t have enough money to finance it, then how would it get financed? How do deficits get financed now? Well the answer is the issuance of treasuries. But if the government is creating all of this money and spending it, where does it end up? I think the answer is that it flows through the economy as companies, employees and other beneficiaries spend it. And it finally ends up being distributed to shareholders from the companies that sold the products that all of those folks purchased. So, if these shareholders are the net beneficiaries of this excess government spending, wouldn’t it be morally correct to tax them?
I’m retired, not yet taking SS, and living on interest and dividends. Believe me, I am taxed. When I do get SS 85% of that will be taxed as well.
Me too. Suck it up.
As for spending, we had a chance to tackle medical costs 14 years ago, Republicans shut that down by spreading mass scare tactics about “death panels” and “government takeovers”.
The U.S. spent a total of $6.6 trillion in 2022 – $4.5 trillion on healthcare.
Our healthcare is the most expensive in the world, and the lowest quality of all OECD’s.
As long as “money is free speech” and corporations can continue owning candidates, it’s going to stay that way.
*Edit: $4.5 trillion was total healthcare spending, roughly 1/3rd of that was government paid.
“Vote for me and i will create a new 100 billion dollar government program.” Money as free speech. Using tax payer money to buy votes.
The U.S. has 5% of the worlds population and allegedly uses 55% of the world’s drug production. Are drugs with a myriad of potential serious side effects, health care? Iatrogenic is the 3rd leading cause of death. Is that health care? Whistleblowers are coming out and stating that some 90% of Covid deaths in the U.S. were iotrogenic, not the virus. Is that health care?
Corporate or government, a monopoly is a monopoly.
I largely agree, but for a missed detail-
With private corporate control, you have no say, no vote.
In the time since Citizen’s United, we’re all under corporate control anyway.
We only vote for the candidate with the wealthiest corporate donor.
Most elections are won by the candidate with the most campaign funds.
I think we are focusing on the wrong target. how about raising the taxes of Congressmen and women, perhaps to 91% as well as taxing their assets. let them lead the way in terms of showing us all why paying more taxes is appropriate
The answer: GET RID of BIG GOVERNMENT.
The first order of business for the Biden Admin: SILENCE Brian Riedl.
The problem is not to find ways to boost tax revenue but to reduce spending
“The answer is the rich do not have enough money.”
After 45 years of extreme tax cuts & credits in the name of “job creation”, only to create jobs in 3rd world countries – the working class certainly isn’t going to pay the resultant debt.
Nobody is going to pay the debt. We have spent our way into an intractable position, and yet we still insist on paying for Europe’s and Israel’s military needs while fueling the DC graft furnace.
Always creating this scare that taxing the rich and corporations is bad for America. In the meantime, regular people do not really get any benefits because the rich and corporations still squeeze workers compensation and benefits, while outsourcing jobs at will. The rich get big tax cuts with no real accountability to create ‘real’ jobs (i.e. jobs that pay on par with the cost of living). Besides, the rich also benefit from Government spending. Ask the CEOs of the defense industry.
I think the point is, we can tax the rich, but it isn’t going to make a dent in our spending problem.
Excellent points!
Spending must be curtailed drastically!!!
Let’s not forget there is a tax increase every year (has been for many years). Social security taxes more dollars each year.
Abandon the income tax.
Tax corporations, if located outside US tariff the imports.
Corporations will organize much better against the government and will be able to fight tax increases better than we can since we are so divided.
This should lower the CEO ‘s pay.
I believe this is how the founding fathers originally set up how to pay for most of the government expenses.
Tariffs are a tax on us. You do not get my vote.
Maybe this is just semantics, but maybe instead of taxing high “income” we should tax high “wealth.” As long as we’re a democracy it will be impossible to cut Social Security and Medicare. My guess is that we will solve the problem by just continuing to “print the money.”
This is the Discussion for the Ages . . . A Consumption`s Tax on every Purchase other than Food, Health Care and Energy would be one hell of a lot fairer and easier to manage. It is well documented that the more you make the more you spend. So those persons consuming more would pay more. Just the savings on Government tax management of the current system would be in the Billions. A small tax on investment gains would bring in a Wealth of revenue. Problem is it´s never going to happen because they will continue to try to teak the current system until the whole thing collapses.
You are talking about the VAT.
Investment gains are already taxed at 15%. Gains in precious metals and art are taxed at 28%. Have you actually sat down with the instructions for form 1040 and Schedule D?
The article said that the European VAT is the difference between what they collect in tax revenue vs. what we collect in tax revenue.
The social democracies also collect more income tax revenue because it’s broader. Meaning the middle class, not just the rich share in the burden.
How about a deal?
I’ll agree to tax the rich if you”ll agree to balamce the budget?
Im certain thats a non starter for the statists. But it highlights their insatiable appetite for money.
Might as well cut taxes as nothing will stop the spending. Spending doesn’t seem to really be driven by revenues and DC doesn’t care about deficits or debt.