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The top marginal income tax rate should be about 65%...

Tony Wikrent's picture

by Mike Kimel

Cross posted at the Presimetrics blog.

To maximize real economic growth in the United States, the top marginal income tax rate should be about 65%, give or take about ten percent. Preposterous, right? Well, it turns out that’s what the data tells us, or would, if we had the ears to listen.

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john.halle's picture
Submitted by john.halle on

Here's an article in le Monde which reports on the range of taxation proposals from the French left-including a 100% tax on incomes over 400,000 euros.

Also, we should be discussing a wealth tax and taxing rich non-profits (e.g. Ivy League universities) along the lines discussed here:

Why not take these as the base line proposals?

beowulf's picture
Submitted by beowulf on

If you click through he suggests taxing unrealized capital gains of individuals and non-profits.

Adding accrued gains to the tax base is the economic equivalent of a wealth tax, without the constitutional issues (related to wealth taxes being a direct tax that doesn't fall under 16th Amend. income tax power).

Submitted by Hugh on

It seems to me that what this describes is a correlation between two variables but how closely are they related not just absolutely but over time. Currently, the wealthiest 1% own 1/3 of the country and the wealthiest 10% own 2/3 of it. Raising marginal rates might slow or stabilize the transfer of wealth to the already very wealthy but unless you can reverse those flows in a substantial way, the very wealthy are going to continue to monopolize society's resources for a very long time.

beowulf's picture
Submitted by beowulf on

Investment returns that have accrued and not been realized (i.e. sold) are a Mississippi River of wealth that year after year grows until the property owner dies... The property passes to the heirs with a "stepped up" tax basis (which means the heirs can sell the property owing then no capital gains accrued before they inherited it). It bugged the crap out of William Vickrey his entire career...

Vickrey’s four urgent tax reform proposals are taxation of accrued capital gains, elimination of tax-exempt interest, taxation of life insurance buildup, and taxation of undistributed corporate profits…Vickrey viewed changes in the tax treatment of capital gains as the most important income tax reform:
"Nothing short of full taxation of such gains, including those accrued at the death of the taxpayer, can be accepted as an adequate solution. Any less than this means a continuation of a wide open avenue of tax avoidance that completely frustrates any attempt at equitable progression of the tax burden and seriously interferes with the efficient functioning of the economy."

Supply side economist Arthur Laffer, to his credit, includes unrealized capital gains in his flat tax proposal. He has some charts that show what kind of revenue we're talking about, even with Laffer's 13% flat tax rate (("the potential addition to the U.S. tax base from taxing unrealized capital gains is enormous").