Name: Will Taxing the Rich Fix the Deficit?
Uploaded: 2014-05-14T16:08:32.000Z
Duration: 3 min 7 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Can we balance the budget by taxing the rich? Let's look at how much Americans pay in

federal taxes compared to their incomes. Accounting for federal income taxes and tax credits,

Adverbs of degree

the richest 5 percent of Americans paid almost 30 percent in taxes in 2009. The 20 percent

of poorest Americans paid negative 1 percent, that is, they received more money back than

they paid in. Some argue that the rich aren't paying their fair share of taxes. Yet the

tax rate on the rich is almost three times the tax rate on all other Americans.

In 2009 the government's budget deficit was $1.5 trillion. Let's see how much we'd

have to raise taxes to balance the budget. We'll start by raising taxes on the rich

by half, from 29 percent to 44 percent. Increasing taxes on the richest 5 percent of Americans

by 50 percent only raises about $400 billion, leaving us with a deficit of $1.1 trillion.

Let's go back to the rich. How much would we have to tax the top 5 percent in order

to raise enough money to balance the budget? The answer is 88 percent. Of course, the average

household in this top bracket earns $300,000, which means that the 88 percent tax reduces

their income to $36,000, making the average rich household worse off than the average

It's true that back in the 1960s, the top income tax rate was 90 percent, but that was

the top marginal rate. After adjusting for the various tax brackets and deductions and

exemptions, people in the 90 percent marginal tax bracket actually paid an average effective

rate of about 50 percent. That is nowhere near the 88 percent we'd need to tax the

rich in order to balance the budget. In addition, in the 1960s there were only about 5,000 households

that earned enough to be in the 90 percent tax bracket. To balance the budget, we'd

have to apply our 88 percent tax rate to almost 9 million households. This means that to balance

the budget we're going to be forced to raise taxes on those earning between $100,000 and

Suppose we raise taxes on this group as well. How high do the taxes need to go in order

for us to balance the budget? To balance the budget, we'd have to more than double taxes

on everyone earning $100,000 or more. This means that a household with two wage earners,

each of whom earns $50,000, would pay an additional $21,000 in taxes annually. The lesson is that

arguing about taxing the rich wastes our time and diverts our attention from meaningful

solutions like cutting spending. The budget deficit is so large that there simply aren't

enough rich people to tax to raise enough to balance the budget.