Make no mistake; I hated Reagan but primarily because of his nasty Orange County social policies and, in a general way, the patent absurdity of trickle down economics but, at 25 years old, I didn’t quite understand the nuts and bolts of tax policy (probably because I had no money). I’m no maven now. Economics is not my strong suit but I’ve had a chance to look back and it kind of shocks me the extremity of the changes he made. I know, I’m behind the Marxian curve, but the degree to which capital holders were favored (corporate tax reduction, capital gains reduction, reduction of personal rates at the high end) over labor looks vengeful today (sorry Paul Ryan), an empty heart carrying out the orders of wealthy cronies and corporate masters, and those changes largely remain in place in the USA today and, as to reduced corporate tax rates, have permeated the world economy. Now, I don’t have any big ideas as to how to unmix that batter but I do have an opinion on how to raise much needed federal revenue and increase fairness to the personal income tax: go back to the pre-Reagan tax brackets. I’m not talking about reinstating 1970’s tax rates which were up at 70% for the top bracket. I’m agnostic on rates. However it works out. Let’s take a look at the current rates and brackets, shall we:
| Table 1. 2016 Taxable Income Brackets and Rates (Estimate) | |||
| Rate | Single Filers | Married Joint Filers | Head of Household Filers |
|
10% |
$0 to $9,275 | $0 to $18,550 | $0 to $13,250 |
|
15% |
$9,275 to $37,650 | $18,550 to $75,300 | $13,250 to $50,400 |
|
25% |
$37,650 to $91,150 | $75,300 to $151,900 | $50,400 to $130,150 |
|
28% |
$91,150 to $190,150 | $151,900 to $231,450 | $130,150 to $210,800 |
|
33% |
$190,150 to $413,350 | $231,450 to $413,350 | $210,800 to $413,350 |
|
35% |
$413,350 to $415,050 | $413,350 to $466,950 | $413,350 to $441,000 |
|
39.6% |
$415,050+ | $466,950+ | $441,000+ |
Right now, a single filer making $415,051 (assuming all his dough is ordinary income which, for guys at that level, is rarely the case and some day I’ll get around to writing just as ignorantly about the carried interest loophole) is at the top of just seven brackets. In 1979 there were 16 brackets and, at other times in history, even more. As it stands, the 415,051th dollar earned by a taxpayer is taxed at the same rate as the millionth or ten millionth. What if you created a new bracket beginning at $1,000,000 and earnings above that level were 1% higher than immediately below? What if you added another 1% at $5,000,000 and another 1% at $10,000,000? Would that be excessive or unfair? The fact is that more brackets create more progressivity and more graduated increases from bracket to bracket. Even if you made the changes revenue neutral, it would still be more fair than the current allocation but, with the way new income has migrated to the wealthiest, it’s fairer still for them to pay more. W don’t need to soak the rich. We’ll just rinse them off a bit.
If you’d like more information, here is an article from the Northwestern Law Review making the case in much greater detail than I have here (http://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1016&context=nulr)
and a chart detailing brackets and rates from 1913 to 2011 (file:///Users/davidbreger/Pictures/fed_individual_rate_history_nominal&adjusted-20110909.pdf).
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