off the charts
BEYOND THE NUMBERS
BEYOND THE NUMBERS
After decades of sharp increases in income inequality and dramatic tax cuts at the top, the case for reversing course and raising taxes at the top is overwhelming. That’s especially true given the sacrifices that policymakers will likely ask of Americans of modest means to help reduce long-term deficits. Below are three good first steps:
- Sunset the high-end Bush tax cuts. President Bush’s tax cuts are an obvious place to start. They were unaffordable from the start and are heavily tilted toward the nation’s richest people (see first graph).
- Implement the Buffett Rule. The tax code should not be so easy to manipulate that millionaires can pay a smaller share of their income in federal taxes than middle-class people. But today’s tax code is: 21 percent of millionaires — about 50,000 people — pay a lower tax rate than 3 million people making between $50,000 and $100,000, according to the White House National Economic Council.
The Buffet Rule would ensure that people earning $1 million or more a year pay at least middle-class tax rates. By itself, it would raise only a small share of the extra revenue the country needs. But it would mark an important step in making the tax code fairer.
- Reform tax expenditures. Tax expenditures (tax credits, deductions, and other preferences) are expensive, costing $1.1 trillion in 2011. They’re also tilted towards the top of the income scale. The top 20 percent of tax filers received 66 percent of the benefits of tax expenditures that year (the top 1 percent alone received 24 percent of the benefits), while the bottom 20 percent of filers received only 3 percent of the benefits, according to the Urban-Brookings Tax Policy Center (see graph).Image
- Full Series: Thinking About Tax Policy
- Thinking About Tax Policy, Part 1: The Most Important Tax Reform Chart
- Thinking About Tax Policy, Part 2: Taxes Today Are Low
- Thinking About Tax Policy, Part 3: In the Search for More Revenue, Start at the Top
- Thinking About Tax Policy, Part 4: Ryan Plan a Costly Step in the Wrong Direction
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