Wednesday, July 15, 2009

Moar Tax Brackets! Woo!

While I probably would have preferred to finance the upcoming health care bill through either reducing deductions for high-income earners, or capping the deduction for employee-sponsored health insurance at some fixed number, socking it to the super rich isn't a bad idea. In particular, it appears that the House plan creates three new tax brackets above the current $250,000 threshold leaves plenty of room to tweak top marginal rates down the road.

One of the great magic tricks of the right-wing anti-tax crusade of the previous generation has been to convince the country that a key element to a simple tax code is having very few tax brackets. In reality, the real reason Americans spend so much time filling out IRS forms is the complications added due to deductions for college tution, being a parent, having out-of-pocket medical expenses, and so forth, as well as other idiosyncracies such as treating capital gains income different from wages. Historically, the tax code has been one of the primary methods of curbing income inequality; when the income tax was first created, the top marginal rate applied to exactly one person: J.D. Rockefeller. There's every reason to return to such tax treatment for extremely high incomes; the upper-upper-middle class of New York and California ought not to have political solidarity with the 400 or 1,000 richest taxpayers in the country.
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