An opinion piece in the Wall Street Journal (subscriber link) points out one unfortunate side-effect of the Democrats’ proposed tax plan:
Last week, Democrats on the House Ways and Means Committee released a draft of their tax plan that would raise the highest income tax rate by 4.3 percentage points to 39.3% immediately. And because the proposal doesn’t extend the Bush tax cuts, the highest income tax rate would rise to the neighborhood of 44% after 2010. This would lift the top federal income tax rate higher than it was even under Bill Clinton.
And get this: For families with incomes between $250,000 and $500,000, the “marginal” tax rate paid on the next dollar of earned income could soar to 80%, or in some cases even above 100%. Why? Because when income rises above $250,000, some taxpayers would be kicked into the Alternative Minimum Tax—which means that they lose tens of thousands of dollars of write-offs for state and local tax deductions, marriage penalty relief, certain child credits, and so on. The value of the lost deductions can exceed the value of the extra income earned. So some Americans could pay more than $1 in taxes for every $1 they earn under the House tax plan.
While I’m less inclined to buy into the Journal’s shrill cries of (essentially) “you’re going to impoverish the rich”, they do have a point that having a marginal tax rate of 100% any place on the income curve is idiotically unfair.
Perhaps it’s time that the congresscritters considered taking a math class, looking at the impact of raising taxes on part of the income curve on future investment in the country, and (heaven forbid!) considering austerity rather than a drunken-sailor spending philosophy.