Paul Ryan's brilliant idea:
Yglesias has commented
on it, but he failed to mention any specific numbers that Paul Ryan detailed in the "GOP's Alternative Budget". Ryan, writing
in the Wall Street Journal
, proposed that in addition to permanently restoring the Bush tax cuts of 2001 and 2003, that people have a choice between that system and another one. What's the other one?
If you are single and make over $50,000 ($100K for couples) the tax on income is 25%.
If you are making not $50 thousand, but $50 million
, you can opt for system2 and instead of a marginal rate of 35%*, pay 25%, a savings of five million dollars
. (And capital gains and dividends are taxed at 15%, so any taxes on those items is substantially reduced as well.)
We all know that a single person living in a metro area (like Los Angeles) making $50K has, after food, shelter, insurance, and transportation costs, about the same percentage of "spendable money" as the $50 millionaire. So it's logical that they both be taxed at the same marginal rate.
Brilliant. We need more thinkers like Ryan.
* 35% was the Bush top rate. 39% was the Clinton top rate which becomes effective if/when the Bush tax plan expires.
So what happens when that $50 millionaire has to give another $5 million to the government?
What does a person like that do with their money anyway? It isn't like the loss is going to force them to change their lifestyle (unless they are living crazy -- but most multimillionaires -- entertaimment stars aside -- don't get that way by living crazy.)
Answer -- they invest it in the market. So, by "sticking it" to the multimillionaire, all we do is pull $5 million out of the market and spend it by the government. So in reality, Mr. Multimillionaire sells $5M in market assets, thus pushing down the value of those stocks. The "ordinary Joe's" take the real loss in their 401Ks. The Multimillionare grouses about his taxes but doesn't really care, but the office worker with the 401K has to put off his retirement.
Class warfare sucks.