Reason Writers Around Town: Shikha Dalmia on the Harry Reid's Millionaire Surcharge

Democratic Senate leader Harry Reid’s plan to use a millionaire surcharge to fund President Obama’s jobs bill went down to defeat in the Senate Tuesday night. But that doesn’t mean that Democrats are going to abandon their soak-the-super-rich rhetoric going forward, notes Reason Foundation Senior Analyst Shikha Dalmia in her latest column at The Daily. If anything, they will drag the country through a new era of class warfare.

The Reid plan would have left everyone else’s taxes essentially untouched. But super-rich people faced an additional 5.6 percent tax on every dollar of their unadjusted gross income beyond a million, pumping $450 billion into Uncle Sam’s pocket over 10 years. Obama at least felt the need to soft-pedal the soak-the-rich aspects of his plan by trying to spread the tax burden as widely as politically possible. Reid experienced no such compunctions.

 She notes:

Separating the rich from the poor always involves some arbitrariness. But the Reid tax schema completely dispensed with ordinary understanding, classifying folks earning $999,999 among the middle class subject to ordinary tax treatment while labeling super-rich those earning $1 more…

[M]ost Americans expect to move several quintiles up the economic ladder during their lifetimes. Only the rarefied top seems out of reach. Placing people who occupy that spot into a separate political class is the only class-warfare strategy that won’t generate widespread opposition.

Read the whole thing here.

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  • Suki||

    Every time I think that the people of Nevada are bright products of the American frontier tradition, I am reminded they keep electing this ass to the Senate.

  • Pantless Deviant||

    Shikha Dalmia on the Harry Reid's Millionaire Surcharge

    The Harry Reids -- didn't they open the Altamont Festival in 1969?

  • cw||

    The Hell's Angels pummeled them first.

  • QD||

    The pendulum is swinging to far in the government direction. There's folks who have been dependent on the government for multiple generations. We have younger voters coming up who can't seem to get their noses out of "Das Kapital" or the equivalent web site manifesto.

    They think *any* business is horrible and evil. I know this because the Twitter about it on their iPhones.

    The main Party that even pays lip service to smaller government is completely subverted by Jesus freaks who think My Little Pony is Satanic. People can't stand the mothereffing Jesus crap anymore.

  • ||

    Since those making $1M or more typically have a fair amount of flexibility in how they earn their income, I would think an unintended consequence of this bill would be to reduce the taxable income of those taxpayers. This would have the effect of reducing the tax receipts that would have otherwise been collected, as well as reducing the expected additional revenue. Paging Dr. Laffer.

  • sevo||

    "Since those making $1M or more typically have a fair amount of flexibility in how they earn their income, I would think an unintended consequence of this bill would be to reduce the taxable income of those taxpayers."

    By Jove! I think you're on to something!
    Prediction: If it passes, whole lots of incomes will somehow equal $999,000.00 or thereabouts.

  • 16th amendment||

    It's only the income over $1M that has this surtax. So if you make $1,000,001 your extra tax is only 5.6 cents.

  • cynical||

    You understand that the proposed tax is on marginal income, yes? They might stop at $1000000 if their effective after-tax-income/work-hour drops below what they consider worthwhile, but the only impact of making $1000001 is that the government takes a bigger bite out of the $1.

  • Apostate Jew||

    I might agree with you if the marginal rate was 90 percent but it's not.

    Only an idiot would say, I am going to give up the 10,000 in after tax income I would have made because it's only going to be about 9,400 dollars.

  • cynical||

    Only an idiot would say, I am going to give up the 10,000 in after tax income I would have made because it's only going to be about 9,400 dollars.

    It really depends on how many hours you have to work to get that and what else you could be doing with your time.

  • Sparky||

    classifying folks earning $999,999 among the middle class subject to ordinary tax treatment while labeling super-rich those earning $1 more

    Hey, thanks for defining arbitrary number settings. We probably wouldn't have been able to figure that the arbitrary $1 million is just $1 more than the arbitrary $999,999. Why didn't you just say that $1 million is only 1 cent more than $999,999.99. Why do you think stores price things at $19.99 or car dealers price cars at $39,999? It's so they can say "BUY NOW FOR UNDER $X", where X = some arbitrary large whole dollar amount that people might think is too expensive.

    If you have to pick an arbitrary number it's always going to be one more than the number right before it. It certainly doesn't make you look intelligent to point that out.

  • Brandon||

    It certainly doesn't make you look intelligent to have to point out that you were smart enough to figure that out on your own.

  • Sparky||

    And it doesn't make you look intelligent pointing out that I don't look intelligent by pointing out that she doesn't look intelligent. It's a no-win scenario. Plus, I'm not really trying to look intelligent, I'm just calling her out on a pet peeve.

  • ||

    But many of the people cheering for the new tax miss this point, obvious as it is.

  • Sparky||

    Yes, people are oblivious. That's why marketing works. If they had picked $1,728,492.67 as the arbitrary cutoff would we need someone to say "but that's just $1 more than $1,728,491.67"?

  • jtuf||

    A few years ago, the NJ Dems wanted to charge a statewide Millionaire tax to anyone earning $500,000 or more. Math isn't a strong point 'round here.

  • Michael||

    Does anybody know where the Democrats' Automated Totally Arbitrary Income Number Generator 5000 is housed? Is anyone else besides me interested in rounding up a posse so we can go smash it to pieces with sledgehammers?

  • 16th amendment||

    Marriage penalty. No one talks about it. If two single people make $999K they won't have to pay this tax. But once they get married they have to pay this tax. California's millionaire tax (the mental health services tax) works the same way, although it is a "mere" 1%. But of course, no one has sympathy for those making so much, so they don't see the problem.

    Obama's medicare tax affects single people making over $200K and married folks making over $250K. So if two single people making $199K or even $126K they wouldn't have this tax. But once they get married they have to pay this tax.

    I've heard talk about the marriage bonus. But I think this mostly applies to those where only one person works. Although if the tax thresholds for the imposition/phaseout of a tax were double that of single, they would have an even bigger marriage bonus, and those where both people work would have no marriage penalty.

  • Sparky||

    But you still have the option to file separately when you get married.

  • 16th amendment||

    MFS is not the same thing as single. With MFS the tax kicks in at $500,000. Basically the thresholds for MFS is exactly half of MFJ. In addition, with MFS you lose many deductions.

    With MFS you most often end up paying even more tax than MFJ.

    In California, which is a community property state (so that half of your income belongs to spouse and vice versa), both couples will have about the same again and MFS will always be more than or equal to MFJ. If the spouses have separate income, or a prenup/postnup specifying that their income is separate and they really don't use joint accounts, then MFS may be better than MFJ in California.

    I prepare taxes professionally. I know what I'm talking about!

  • Sparky||

    I prepare taxes professionally. I know what I'm talking about!

    In that case, THANKS FOR THE LESSON!!!111!!!111!!11

  • MJ||

    Under a progressive tax system, there is no equitable way to account for married couples where both persons work and where only one spouse works and unmarried couples. Depending on which side the law favors one group or the other is going to get screwed, and the code must favor one group.

    You cannot make the progressive tax equitable as it is designed to be inherently unequal.

  • 16th amendment||

    I disagree. You can just make the thresholds for each tax bracket for married people twice that of single. Even two people making $90K will have a marriage penalty upon getting married. This is because the 28% tax bracket starts at 83,600 for single people but 139,350 for married people. So two single people making 83,599 won't be in the 28% tax bracket, but upon getting married they will be well into this bracket.

    CA has almost no marriage penalty. The thresholds for each tax bracket -- 1% to 9.3% -- are doubled for MFJ versus single or MFS. Only the mental health services tax has marriage penalty in it.

    So the thresholds for all taxes, as well as the amounts for phaseouts, can be doubled for MFJ. For those who happen to have one spouse working they get even more money too.

    Another way to eliminate the marriage penalty is to have a flat tax. Cain's 9-9-9 plan looks to be a flat tax.

    Another way is eliminate the marriage penalty is to have zero tax. That would be the 0-0-9 plan.

  • MJ||

    "But if the rich can’t flee, they can hire high-priced lawyers to find tax loopholes. They can also stop working and investing before they hit the million-dollar mark — hardly a formula to grow the economy or jobs."

    This is the aspect of this that few are really pinning the Dems down on. Obama and the other Dems have been on record saying that what concerns them about taxes is "fairness", albeit the very twisted, subjective notion of fairness that only a progressive could buy into, and every other consideration be damned. We already know they will keep a policy around for imaginary fiscal benefits (the CLASS program). Likely, this new tax will result in a loss of revenue and they will not care because it serves their notion of inequitable fairness.

  • Invisible Finger||

    [M]ost Americans expect to move several quintiles up the economic ladder during their lifetimes.

    Can we trust Ms. Dalmia if she can't even figure out basic math. If you are in the 3rd quintile (the middle) you CAN'T move UP several quintiles; unless you want to fall into poverty first you can only move up a maximum of 2 quintiles.

  • ||

    I agree entirely with the liberals and the Buffet-rule folks about the problem: The middle class tax rates are close to or even higher than the rich.

    And therefore we should lower middle class taxes.

  • 16th amendment||

    I like your idea. The real Buffet tax is to lower the maximum ordinary tax rate to 15%.

    Of course, my instinct tells me that capital gains and qualified dividends should be taxed as ordinary income.

  • 16th amendment||

    I disagree. You can just make the thresholds for each tax bracket for married people twice that of single. Even two people making $90K will have a marriage penalty upon getting married. This is because the 28% tax bracket starts at 83,600 for single people but 139,350 for married people. So two single people making 83,599 won't be in the 28% tax bracket, but upon getting married they will be well into this bracket.

    CA has almost no marriage penalty. The thresholds for each tax bracket -- 1% to 9.3% -- are doubled for MFJ versus single or MFS. Only the mental health services tax has marriage penalty in it.

    So the thresholds for all taxes, as well as the amounts for phaseouts, can be doubled for MFJ. For those who happen to have one spouse working they get even more money too.

    Another way to eliminate the marriage penalty is to have a flat tax. Cain's 9-9-9 plan looks to be a flat tax.

    Another way is eliminate the marriage penalty is to have zero tax. That would be the 0-0-9 plan.

  • cynical||

    What about the 0 0 0 plan?

  • IceTrey||

    45 billion a year extra, that's about a day and a third's spending. That should solve the problem.

  • mad libertarian guy||

    $450B over ten years. So the extra nearly 6% in taxes on everyone making more than $1M a year over a period of 10 years will cover 1/3 of the deficit for one year in those 10.

    Great plan guys, great plan.

    What they don't get is that they could outright confiscate every penny from every person in the demonized 1% (we could even go so far as to say 10%), and they'd still not have enough to pay off the debt. Yet they still insist that it's TEH RICH not paying their fair share that is the problem.

    Can someone explain to me why these people are laughed at in public? Can someone explain how this kind of thinking is legitimized as anything other than pure envy?

  • mad libertarian guy||

    Why they AREN'T laughed at . . .

  • cynical||

    One of my relatives posted an article on Facebook that proposed to pay 1 million dollars each to the 40 million people over the age of 50 (according to the article) to retire. I pointed out that this was 40 trillion dollars, 10 times as much as the government spends in a year on everything. They laughed and said, "no, it said -million-". My wife's family, so I dropped it since I couldn't see any way to respond without pretty unsubtly insulting their intelligence.

    These people vote.

    I think we should bring back double-blind poll testing, for math as much as literacy.

  • Mr. FIFY||

    The entry-level income to be in The Evil One Percent Club is around $380K.

    These same people, inexplicably, are called "millionaires and billionaires", a phrase which - if we could ever find who first coined it, and strangle that person on live television - means bupkis other than being a useful tool for useful tools to bash anyone who has marginally-nicer/more stuff than other people.

    Fuck that shit.

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