Paper abstract bibtex
As a purely practical matter, raising taxes for the richest Americans is harder than it might seem. Several options that have received considerable attention and some support either would not raise much revenue or are unadministrable (or close to it). Much of the problem comes down to the chal-lenge of taxing capital. In particular, increasing the tax rate on capital gains income is problematic because it would generate little revenue, despite claims based on official tax expenditure tables that doing so would generate tens of billions of dollars per year. 1 Other options suffer from the same prob-lem, including the Obama administration's pro-posed new minimum taxes. 2 Some, like the now-renowned Thomas Piketty, have suggested more radical measures like annual wealth taxation or mark-to-market income tax accounting; 3 however, these options seem troubled, if nothing else, by the considerable challenge of administration. What are viable options for raising revenue from the most-well-off individuals in the country? Per-haps the most promising option is to treat gifts and bequests as realization events, at least partially and at least for substantial transfers of wealth. Other options include significantly expanding transfer taxes, raising the top individual income tax rate, and limiting deductions and exclusions. There is a broader debate about whether the best-off Americans should pay more in taxes, which I do not engage here. Instead, this article focuses on the menu of options for raising revenue from those Americans and emphasizes that how to do so is more difficult than it might seem — especially when it comes to taxing capital. The article also discusses why some of the most-discussed options are thus not as promising as sometimes claimed and why the starting place for raising taxes should probably be realization of gains at death or bequest. I focus this analysis on best-off Americans, often using a threshold of those making more than $1 million per year and sometimes defining in terms of wealth. This is not to suggest that tax burdens should remain the same below these thresholds or that those making less than $1 million are not well-off. Instead, I mean to separately discuss the most well off Americans because they tend to differ from others toward the top of the distribution. In particular, they have more capital gains and benefit less from specific tax expenditures like the home mortgage interest deduction. The challenge of tax-ing them is, thus, different.