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Posted at 2:13 PM ET, 11/19/2010

The magic of a millionaires' bracket

By Ezra Klein

Noam Scheiber doesn't love the policy behind a millionaire's bracket -- is it really impossible to raise taxes on people making $750,000 a year back to Clinton-era rates? -- but he does see "another big advantage to pursuing this, which lies at the nexus of politics and substance: You create a healthy precedent for separating the tax treatment of millionaires from the tax treatment of everyone else, effectively creating a millionaires' tax bracket, which is something that really should happen."

This all seems a bit absurd right now, but the magic of both inflation and economic growth means that the ranks of millionaires will grow very, very quickly in the next few decades, and so setting up a millionaires' bracket -- or even a couple of them -- will bring in quite a bit of money over time. I'd much rather see Democrats retrench to this position than fold on the tax cuts for the rich entirely.

By Ezra Klein  | November 19, 2010; 2:13 PM ET
Categories:  Taxes  
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Comments

>>but the magic of both inflation and economic growth means that the ranks of millionaires will grow very, very quickly in the next few decades>>

Tax brackets are indexed to inflation.

Posted by: fuse | November 19, 2010 2:49 PM | Report abuse

Keep it simple and don't muddle your 'message'. Don't over negotiate. One thing at a time.

Dems should simply stick to 250K line which has been argued all along.

As a policy matter we understand Ezra would have interest in all these options. But haven't we learned anything in last 2 years? Never loose the focus of 'politics' and no point churning out policy options when basic politics is not in place.

Posted by: umesh409 | November 19, 2010 3:04 PM | Report abuse

The problem with a millionaire's tax bracket is that a millionaire in ten years' time would look a lot more middle class than he does today, necessitating the threshold to be moved ever upwards after the inevitable political wrangling. A better idea is to have tax brackets automatically adjusted in response to the prevailing income/wealth inequality.

Posted by: pneogy | November 19, 2010 3:34 PM | Report abuse

My recommendation, if we're talking tax brackets, is to make them logarithmic - increase the rate at $10k, $100k, $1m, $10m, $100m. That's what the distribution of income looks like, that's where the cuts should be.

And if we're getting more creative, my wish list would be to replace income tax and payroll tax with carbon tax and a progressive consumption tax: http://economistsview.typepad.com/economistsview/2007/10/robert-frank-we.html

And instead of a mortgage tax deduction, maybe we should just increase the individual deduction for everyone and let people choose to spend it on rent or a mortgage or a car or whatever they want.

Posted by: tysonsahib | November 19, 2010 3:38 PM | Report abuse

How about letting a Republican offer up a negotiating point, and then finding common ground, rather than simply pre-emptively capitulating like they have been doing?

Posted by: burghpunk | November 19, 2010 4:06 PM | Report abuse

This is an example of yet another excellent idea that has zero chance of going anywhere because Evan Bayh and other forms of stale white carbohydrates won't vote for it.

Posted by: michaelh81 | November 19, 2010 4:55 PM | Report abuse

can everyone (including mr. klein) please go back and read fuse's post. brackets are indexed to inflation. there is no bracket that begins or ends at $250,000. the "over 250K" bracket applies to income in excess of $373,650 for 2010. i assume (although don't know) that obama would like to extend the tax cuts for all but the top bracket and not re-assign the brackets, meaning that only income above $373K (or whatever it is next year and beyond) would be subject to a rate increase. I would be very curious to know if that is in fact the case.

Posted by: radiganbrian | November 19, 2010 6:00 PM | Report abuse

We don't need a millionaires bracket as an "Excessive Income" bracket.

Define a base income as a full time annual minimum wage. Right now that is somewhere between $15000 and $20000. an excess income is that portion that is more than 100 times the full time minimum wage. Tax the daylights out of the gross income portion of all incomes that are in excess. No deductions, exemptions, credits, reductions. Every source of personal incomes is covered. Capital gains are personal income, but they are calculated in constant dollars. Everything above 1000 times the full time minimum wage is taxed so that the taxpayer keeps just 5% of his excessive income.

Yes, it is confiscatory and will discourage people from seeking such high earnings.

If it does just that it is worth it.

Posted by: ceflynline | November 19, 2010 9:02 PM | Report abuse

Logarithmic tax rates sounds great to me!

Posted by: will12 | November 20, 2010 12:38 PM | Report abuse

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