Friday, April 3, 2015

What is the OPTIMAL Marginal Tax Rate on the Top 1%?

Thomas Piketty and 250 of his French colleagues endorsed Francois Hollande for President of France in 2012 when Hollande promised to raise the top marginal tax rate (MTR) on the top 1% to 75%. Holland did just that in 2013.  But then he let the 75% rate expire at the end of 2014, restoring the previous 45% TMR (plus a 4% surcharge for those with taxable income over one million euros).

The 75% optimal TMR worked in theory, but not in practice.

For some economists, 75% is not high enough.  Dirk Krueger and Fabian Kindermann suggest that the optimal TMR on the 1% can be as high as 90%, with no deleterious effect on the economy. They contend that a TMR of 90% would enhance social insurance in the U.S. economy.  (They are not alone.)

The TMR hit 98% in postwar Britain and 91% in postwar U.S.  Wonder why those rates were not sustainable?


Leslie Lim said...

Thank you for posting some kind of information. It was really helpful since I am doing some research now.


Silvia Jacinto said...

Hi, just passing by your site to see something that will interest me and luckily you impressed me with your great article and
I have a great time reading everything that is written. I'm looking forward to see more of your write-ups.
If you have time you can also visit my site which indicated below.