But it got me to wondering: How much revenue do you lose if you create a top marginal rate well above the $250K limit that Obama had proposed? To answer this, it's time to hit the IRS data, from which I produced this breakdown of total declared adjusted gross income for 2007:
(Note that I used 2007 as a more representative year than 2008 because 2008 was really, really bad.)
A few things of note here:
- The mode--the category with the highest total declared AGI--is the $100K-$200K category.
- If you were to set the top rate bracket to start at $200K, you'd get 33% of all revenue subject to whatever you set the top marginal rate to. Presumably, you'd get a little less than that at $250K.
- If you were to move the top bracket up to $1M, you'd get about half of that--16% of all revenue, and there's only a little difference between that and $1.5M, where you'd get 14% of all revenue.
I didn't do the analysis on how much of this is dividend income. I still maintain that that sort of passive income could be taxed with few consequences.
The Democrats would have been much better off trading a top bracket above $1.5M, taxed at, say, 41%, for a permanent extension for everybody else. Let's see what becomes of the deal.