A new federal income tax bracket. All income over $1,000,000 will be taxed at 90%. Oh, and your capital gains loopholes and whatnot will be closed.
What, that sounds crazy to you? Here's a little history of income tax in the United States. That's right, the last time the highest tax rate was lower than it is right now was during the Regan/Bush years. Before that, it was in the early part of the Great Depression. In fact, for the period between 1932 and 1981 (when the US was at its height of power, I might add) the top tax bracket never dropped below 63%. From 1936 through 1981, it never dropped below 70%. For fifteen of those years, it was over 90%. So I don't think what I suggest is crazy. To the contrary, it has been done before.
So, what would this solve?
First off, it will be an enormous new source of revenue for the federal government. I haven't been able to find good recent numbers in my research (perhaps someone will have better luck than me and can post in the comments or write another diary that expands on this one). But according to the IRS (2005), there where 303,817 tax returns with income over $1M, resulting in an income of 1,026,045,266,000. Subtracting out the million for each return that would be taxed at a lower rate leaves 722,228,266,000 affected by the new tax. A 90% tax on this yields the government $650,005,439,400. About $650B. In 2005 dollars. Consider that the income inequality gap is widening dramatically, and inflation is somewhat high when estimating what the number would be today.
The bottom line is that this is one fuckload of money that our government could desparately use. This completely covers our budget deficit with billions to spare.
The consequences would be far reaching. No more turning a blind eye to China's human rights abuses because they lend us money. No more super-rich donating millions to the RNC and 527s to fund the propoganda machine, because now they can't as easily afford it. No more golden parachutes for CEOs because the government takes the vast majority of that parachute. Etc.
Anyway, I have not heard this idea mentioned, and it needs a place in the dialog, at least. Otherwise, we get what has happened since 1982 - a deterioration of the top tax bracket and a country in decline.
One last note: There is not one single person living in the United States today that needs an annual income over $1M. Not one single person. Phase the tax in over 3 or 5 years to avoid the shock if you must, but this is something I think we need.
Discuss in the comments: