The Washington Post gets it right:
THERE IS a serious case to be made that the U.S. income tax system should become more progressive. . . In principle, higher taxes for the well-heeled could make sense — as part of a broader rationalization of the unduly complex tax code.
If you say so.
But there is no case to be made for the House Democratic majority’s proposal to fund health-care legislation through an ad hoc income tax surcharge for top-earning households. . .
The traditional argument against sharp increases in the marginal tax rates of a very narrow band of Americans is that it could distort their economic behavior — most likely by encouraging them to put more of their money into tax shelters as opposed to productive investments. . . The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.
That moment may be approaching faster than they would like. Even if Congress pulls off a budget-neutral expansion of health care, the gap between federal revenue and expenditures will reach 7 percent of gross domestic product in 2020, according to the Congressional Budget Office. And that’s assuming that the economy returns to full employment between now and then. The long-term deficit is driven by the aging of the population as well as by growing health-care costs, both contributing to Social Security and Medicare expenses. There is simply no way to close the gap by taxing a handful of high earners. The House actions echo President Obama’s unrealistic campaign promise that he can build a larger, more progressive government while raising taxes on only the wealthiest.
The tax code is already the most progressive it has ever been. In 2006 (the latest year for which data seem to be available), the top 1% paid 40% of all taxes, while earning just 22% of all income. What percentage is progressive enough?
I wish the Democrats would be forced to answer that question. Their answer seems only to be, as high as possible. Even the peak of the Laffer curve is no limit. President Obama has spoken of raising taxes on the rich even when doing so would actually reduce revenue, in the interest of “fairness”.