Sen. Mitch McConnell (R-Ky.), the minority leader, is also among those who have pointed to a recent Wall Street Journal op-ed that said that taking every taxable dollar of top earning Americans still wouldn’t fully take care of the current deficit.
The NR article points to a Jeffry Sachs HuffPo entry that lays out the numerical facts.
The Journal writes that it is impossible to get enough income out of the top 1% to close the deficit, and invites us to undertake the "thought experiment" of taxing all of the income this group. In other words, the Journal claims that even the total income of the richest taxpayers wouldn't close the deficit. This claim is nonsense.
If the tax rate were 100% rather than 23% (and assuming in the Journal illustration an unchanged AGI), the extra revenues would be $1,300 billion, or 9 percent of GDP. Even allowing for other taxes already paid by the richest 1%, the incremental federal tax revenues would be at least 6 percent of GDP. Since every baseline scenario by the Congressional Budget Office and the Office of Management and Budget shows a deficit between 2013 and 2021 that is less than 6 percent of GDP, the total income of the top 1% would close the budget deficit entirely.
With great bravado, the Journal claims that even the income of the top 10% of the taxpayers wouldn't close the deficit. The top 10% reported $3,856 billion in AGI, equal to 46% of total reported income in the United States, almost 27 percent of GDP. On that, they paid $721 billion in personal federal income taxes, or an average of 18.7% of income. If the remaining 81% of income were paid in federal income taxes, the increment in tax revenues would be more than $3,100 billion, or roughly 21% of GDP. The budget deficit would obviously be closed many times over.
The real point is obvious. The money received by the richest households is vast, and higher taxes on the rich will make a major contribution to closing the deficit. Nobody says that the rich should carry the entire tax burden* or that spending cuts shouldn't play a role.** The waste in military spending alone is so large that we can and should save at least 2 percent of GDP per year from the defense budget alone.
America's richest households have enjoyed quite a ride in recent decades as they've accumulated a mountain of wealth unprecedented in human history, at a time when much of the rest of society has been suffering. The average income tax rate paid by the top 1% has declined from 34.5% in 1980 to just 23.27% in 2008. During this period, the share of total income accruing to the richest 1% has soared from 8.5% in 1980 to 20% in 2008. The share of total AGI accruing to the top 10% of taxpayers has similarly risen from 32% in 1980 to 46% of income in 2008.
In one of his closing paragraphs at NR (linked above,) Johnathon Chait points out the "problem involved in wasting one's time examining very bad arguments." Indeed, the righteous are always at a disadvantage, since it is a lot of work to track down and present the truth, while the lying liar can always just pull another lie out of his - well, whatever lie reservoir he finds handy. I think they store their heads there, as well.
Well, I've done all the leg work for you -- but at least click through the first NR link. The angelic photo of halo-adorned St. Thinlips McChinless is worth the trip, all by itself
* Well not in so many words, perhaps, but I came pretty damned close, just today.
** Further, I'll say that spending cuts shouldn't play much of a role, or at least that the role needs to be specifically defined and carefully delineated. Domestic spending has never been a major portion of deficits. It's always been military spending and under taxation. So go after military earmarks, weapons programs the army doesn't need, and needless wars in far-away places. Get real and sensible about solutions to rising health care costs that don't continue to protect and favor big insurance and big pharma. That is just about the extent of it.