Conrad Needs More Millionaires
July 12, 2011
Yesterday, Senate Budget Committee Chairman Kent Conrad (D-ND) released his own deficit reduction plan that purports to cut $4 trillion from future deficits over the next ten years. According to Conrad’s remarks on the Senate floor, roughly half of his deficit savings ($2 trillion) would come “from closing tax loopholes, cutting tax subsidies, promoting tax fairness”; meaning, higher taxes on “who are sufficiently fortunate to be earning over $1 million a year — the top 1 percent in this country.”
Setting aside the fact that the income threshold for the top 1 percent of taxpayers is roughly $370,000 not $1 million, I’m still puzzled on how Senator Conrad aims to extract $200 billion per year in additional taxes from this elite group of taxpayers since that’s almost as much as they are already paying under current tax rates.
Let’s look at the data. According to the IRS statistics for 2008 (latest available):
•· There were 321,294 tax returns with AGI above $1 million (0.2 percent of returns).
•· The total AGI for these returns was $1.076 trillion (13 percent of all AGI).
•· Their taxable income was $934 billion.
•· Their total income tax was $249 billion (24 percent of all income taxes paid).
So, if Conrad is going to raise $2 trillion from millionaires he is going to either (1) need more millionaires or (2) nearly double the amount of tax collections from existing millionaires.
How do you do the later without doubling tax rates? Good luck. As the states that enacted so-called millionaire’s taxes discovered, higher tax rates on millionaires tends to result in fewer millionaires and less taxes collected from them. Class warfare tax policy is simply not an effective means of funding government.