Tax the Rich! In Fact, Let's Double Their Taxes
Conservatives say they want to "bring back" the old USA, the one that existed during those decades of the twentieth century they only seem to see through a gauzy golden haze. Whatever its problems, that country was a place where Republicans and Democrats agreed on two simple principles: That the most fortunate among us should pay their fair share, and that our government must invest in the nation and its future.
When Rick Perry says he wants to bring back "the America I where I grew up," he's talking about the era when Dwight D. Eisenhower, a Republican President, built the Federal highway system. One of the reasons Eisenhower was able to do that is that the top tax rate was much higher than it is today. While today's highest marginal today is 35 percent and capital gains are taxed at only 15 percent, the highest tax bracket was 91 percent the year Rick Perry was born.
Whenever I talk about tax brackets I'm attacked by right-wingers who say I don't understand, that high taxes discourage job creators. They'll say things like "You hippies just don't get it! If taxes are too high rich people will stop working and investing. The Job Creators will go away!"
Well, I do get it. When I was spent a student year in Great Britain the top marginal tax rate was 102%. Once a person reached a certain level of income, they had to pay more in taxes than they earned. And a few years before that, George Harrison made a compelling case against the 95 percent tax bracket on the Revolver album by singing "Taxman." (The line is "that's one for you, nineteen for me." I make that a 95 percent marginal tax rate, but you can check my math if you like.)
So I'll come right out and admit it: Taxes can be too high. But that doesn't answer the biggest question of all: What's the ideal top tax bracket? Where can we set the percentage so that it provides the most revenue for the Federal government without discouraging high earners from making more money?
Thanks to a new and very thoughtful paper by economists Peter Diamond and Emmanuel Saez, we have the answer: 76 percent. That's right. The most effective top tax bracket in this country, the one that will provide the most revenue for the Federal government, is 76 percent. Know what that means, ladies and gentleman of Washington DC ? That's the rate that will cut the deficit the fastest.

