In his nightly note, BTIG’s Dan Greenhaus digs into the “Buffett Tax” and some math on the deficit.
First he notes that over the next 10 years, estimated deficits are estimated at around $6 trillion.
Then he looks at what socking it to the rich actually gets us.
Conclusions. It doesn’t get us THAT far towards balancing the budget, but it’s not nothing.
The below table breaks down actual tax return data from the IRS from 2009, showing how many returns were filed at each income level, what their taxable income was, what tax they paid and what percentage of the total income tax they paid. The first thing that should jump out when looking at this table will explain why the President focuses on individuals making more than $200,000 (but less than $500,000); they pay more than 20% of all income taxes. Those making more than $200K but less than $1,000,000 pay 30% of income taxes. Focusing only on higher income brackets would ignore a significant amount of taxable income at the $200K+ level.
Nonetheless, if we add up the $1,000,000 and above categories, we get taxable income of $623.6 billion that resulted in $177.5 billion in income tax paid, a rate of less than 28.5%. If we were able to somehow change that tax rate to say 35%, an increase of more than 7 percentage points, the income tax paid in 2009 would have been over $218 billion or an increase of a bit less than $41 billion. If we were able to do this over ten years, the U.S. would have extra income of $410 billion. All from raising taxes by seven full percentage points on those making income over $1,000,000.
Unfortunately, $410 billion is “only” about 7% of the deficit we expect to incur over the next ten years. That is not an inconsequential portion but considering the debate surrounding hiking tax rates by any amount, let alone generating an increase sufficient see a seven percentage point increase in taxes paid, as well as the negative consequences such a sharp adjustment would engender, this hardly seems to be the “only” place to go to achieve debt reduction.
Read more: businessinsider