Restore the Economy in One Move: Soak the Rich

Fuck Wall Street and the repugs. Do it anyway. Call it the Eisenhower Bring Back the '50s Tax.

Bryce Covert at Think Progress:

A 90 percent tax rate on the top 1 percent of American earners wouldn’t just significantly reduce income and wealth inequality and boost government tax revenues. It would also be the optimal level for Americans’ welfare, according to a new paper from economists Fabian Kindermann and Dirk Krueger.

They find that the top marginal tax rate that maximizes government revenues before being so high as to discourage the wealthiest from earning more is very high, or 95 percent on those who are among the top 1 percent of earners. They also find that a 90 percent tax rate on the richest 1 percent could significantly reduce the Gini index, a measure of income inequality, and wealth inequality would also steadily decline.

But these effects aren’t worth the policy change in and of themselves, they argue. In an email to ThinkProgress, Krueger wrote, “One could certainly reduce inequality in the economy to zero, by the government confiscating all income and wealth and redistributing it equally among all households… Of course people would stop working and saving and the outcome would be disastrous.” But the interesting finding in their paper is that the same tax rate that would maximize revenues and drive down inequality is nearly the same one that would make everyone better off, or what they call the optimal top marginal tax rate.