On Tue, 25 Jul 2000, Doug Henwood wrote:
> About the only good thing Clinton ever did was to raise taxes on the
> top 1-2% of the distribution, from a marginal rate of 36% to 39.6%.
> This boosted revenues somewhat, but extremely high capital gains and
> a generally strong economy have probably had a greater effect than
> that rate boost.
If that was all he did, you might have a case, but the 1993 tax bill actually raised the top rate from 31% to 39.6%, plus for the first time applied Medicare FICA taxes to wealthy taxpayers. This added another 1.45 percent of tax.
So the 1993 bill increased the top rate from 31 percent to 41.05 percent. The share of income taxes paid by the top one-fifth of earners has risen since the depths of Reaganomics - a big part of cutting the deficit. The top 5 percent of earners now provide more than half of federal income tax revenues. The share of the income tax take from the top 1 percent, the truly wealthy, has gone from 20 percent in 1983 to 29 percent now.
Individual income taxes amount to an estimated $982 billion for 2000 (and growing every day). Federal revenue from capital gains taxes was $42.7 billion in 1995. It was risen since then, but it is still far less than the rest of normally taxed income. I haven't been able to find direct revenue figures, but from estimates on "tax expenditures", the yearly total looks to still be under $100 billion per year.
So despite all the media hype, the surplus is not due to people cashing out their stock and paying capital gains (although that has contributed) but is due to increases in normal income tax receipts - fueled directly by the 1993 increase of nearly 33% on the tax rates of wealthy.
Why progressives want to deny the fact that tax hikes on the wealthy worked to cut the deficit and create a surplus is beyond me. The GOP said it would crash the economy and instead we've had both expanding revenues and a growing economy.
The role of capital gains in the surplus is much overhyped and overrated, all part of the media obsession with the stock market.
-- Nathan Newman