Friday, June 05, 2009

How will Obama raise tax revenue?

Robert Reich hypothesizes that Ben Bernanke is helping the Obama administration prepare the ground for new taxes on the wealthy:
But Bernanke also wants to deliver a message to Congress, a message the White House doesn't want to deliver because it's politically awkward: Congress will have to raise taxes on the wealthy in order to finance universal health care and reduce looming budget deficits. Such tax increases won't slow down the economy because the wealthy don't spend that much anyway (that's what it means to be wealthy -- you've already got most of what you need), but may be necessary, at least to ward off inflation fears.

What sort of higher taxes on the wealthy? Bernanke didn't say, of course, but the White House has already floated limits on deductions and seems willing to consider taxing employee-provided health benefits for employees over a certain income. And maybe lifting the cap on Social Security payroll taxes, at least for workers earning over $250,000 a year.
More radical ideas batted around by Matt Yglesias and Nate Silver a couple of months ago: create new tax brackets far above the current top level of $357k -- or make tax brackets "infinitesimal," i.e. ratcheting up proportionately for every extra dollar earned. As Silver pointed out, the current top bracket threshold is anomalously low compared to those of prior eras.

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