A pair of economists are making the case that the top federal income tax rate has been far too low for far too long.
The current top tax rate is nearly 40 percent, a figure that University of Bonn professor Fabian Kindermann and Dirk Krueger, of the University of Pennsylvania, are claiming should be more than doubled.
Krueger told The Huffington Post that all Americans are better off if the top 1 percent of income earners pay a tax rate of “somewhere between 85 and 90 percent.”
The Huffington Post breaks down the tax implications of such a drastic move:
A 90 percent top marginal tax rate doesn’t mean that if you make $450,000, you are going to pay $405,000 in federal income taxes. Americans have a well-documented trouble understanding the notion of marginal tax rates. The marginal tax rate is the amount you pay on your income above a certain amount. Right now, you pay the top marginal tax rate on every dollar you earn over $406,750. So if you make $450,000, you only pay the top rate on your final $43,250 in income.
Kindermann and Krueger believe that increasing the top tax rate to roughly 90 percent would decrease “wealth inequality” and bring in more revenue for the federal government.
“High marginal tax rates provide social insurance against not making it into the 1 percent,” Krueger added.
Read the entire report here.