" . . . So the 1993 bill increased the top rate from 31 percent to 41.05 percent. . . . "
Only on wage & salary. FICA does not apply to non-labor income, and of course the capital gains rate (particularly after 1997) is lower still. On the other hand, since we're being picky, the phase-outs of the child credit, exemption, and standard deduction create 'bubbles' that mean higher marginal rates in the 41-42% range for high-income taxpayers.
" . . . 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. . . . "
People have been talking about this for a while now. here are some specific figures from the Congressional Budget Office (Annual Review, Jan 2000). Question is how one explains the growth in tax revenue, how big capital gains are, and conversely what happens to revenue and the surplus if the market tanks.
First of all, total personal income grew faster than GDP, so this component of revenue growth we discount as something specific to capital gains. (same holds for faster GDP growth) Share from this factor is 18 percent.
Second, Adjusted Gross Income grew faster than personal income. This accounts for 40 percent of the growth in revenue. Of this, it is true that capital gains was 31 percent, versus 9 for other components of AGI.
Third, tax rates went up, accounting for 42% of the revenue growth.
How much money are we talking about? Damn little, it turns out. For 1997-98, the growth of revenues in excess of GDP growth was $33 billion. So the shares above would apply to this total. So cap gains might be $10-15 billion. Meanwhile, next year's surplus is projected at $240 billion.
Nathan is right to discount the capital gains effect, but wrong to elevate the effect of rate increases is not much larger than CG (42 versus 31% of the growth).
" . . . 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. . . .
As the figs show, tax hikes were not a huge factor -- less than half of the revenue acceleration (relative to GDP growth). There were also spending cuts and lower than expected spending in health care. I've mentioned before that all discretionary factors -- tax increases or spending cuts -- were outweighed by growth in GDP and income tax base as a whole.
I have no problem giving the Admin great credit for the surpluses. Only problem is that creating surpluses of this magnitude, and proposing frameworks for perpetuating them, is in my view the greatest crime against social democracy since Reagan's fiscal sabotage in 1981. And gore gives every indication of being worse than Clinton in this regard. So I'm lookin' at Ralph.
mbs