13 August 2010
GOP Actually Not So Serious About Deficit
The source for the graphic is Daily Kos, whose source is the Washington Post (August 12, 2010) whose source is the Congressional Joint Committee on Taxation.
Republicans in Congress want to pass a tax bill that would add $36.6 billion per year to the deficit, of which $31 billion per year is in the form of a cut of an average of $100,000 per family to families with incomes of $1,000,000 a year or more (there are about 315,000 such families in the United States).
The impact of the less expensive Democratic plan is displayed for comparison purposes. Under the Democratic party plan, the average federal income tax rate imposed on those making $1,000,000 or more per year will increase from a current 24.6% to 29.9%. In most cases, the marginal tax of these taxpayers is actually lower than 29.9%, because their marginal income is taxed at capital gains tax rates (typically in the form of stock options or carried interests), rather than at ordinary income tax rate.
The tax rates paid by families making $1,000,000 for federal taxes other than income taxes is also low. They generally have a marginal FICA tax rate of 1.45% employer and 1.45% employee, since they are generally over the top rate for Social Security taxation, and do not pay FICA at all on their income from sources like interest, dividends and capital gains, including compensation related stock options and carried interests.
In other words, any concerns about tax rates on the rich being so high that the incentive to earn more income will vanish producing lower tax revenues are inaccurate in this case. Tax rates on the highest income taxpayers will remain lower than they have been at any point other than during the Bush tax cuts even after the Bush tax cuts for them expire at the end of 2010.