Can You Make a Dent in the Fiscal Gap by Taxing the Top 1%?
Republican candidate Ben Carson claimed during the debate, "You can take everything from the top 1% and you apply it to our fiscal gap, and you won't even make a dent in it.”
We’ve previously dispelled the myth that “We Can Fix the Debt Solely by Taxing the Top 1%.” According to a 2012 Tax Policy Center analysis, reducing the debt to 60 percent of GDP by 2035 by raising the top tax rates would require obviously-impossible rates of over 100 percent.
While the debt problem cannot be solved exclusively by taxing the top 1%, increased tax revenue from the wealthy can certainly make a dent. The Congressional Budget Office previously estimated that raising the top tax rate by 1 percent on taxpayers making over about $400,000 would raise $91 billion over 10 years – and likely the rate could be raised much more than 1 point before reaching the top of the Laffer curve (the rate that maximizes revenue).
Additional revenue could be raised by repealing many tax breaks that benefit the top 1%. As one example, 30 percent of the state and local tax deduction goes to the top 1%, and repealing it would raise $1.1 trillion. We’ve previously estimated the impact of capping the value of tax breaks for higher earners, and found that doing so aggressively could raise $100 billion or more per year.
While taxing the top 1 percent will not fix our debt, it could certainly make a large dent.