Our friends of at 538.com (and by friends, I mean people who I have never met) have been keeping us busy here at Puggling. They have in depth statistical analysis of a wide variety of topics, which are both very entertaining and informative. One of the most enlightening posts recently posed an interesting question on the $1,000,000 tax bracket. Basically, Nate Silver of 538.com posits that over time, the highest income tax bracket has been steadily trending lower over time in real dollars. This is also in combination with the top marginal tax rate trending lower. It is a very interesting read and I recommend people check out his blog.
One very interesting facet that this does not take into consideration is the rate at which some other types of income are taxed. Currently the maximum tax bracket on dividends is 15%. Today, an individual making $50,000 and someone making $500,000 a year both have the dividends on their investments taxed at the same rate. Adding another step in the dividend tax schedule, taxing dividends at 20-25% for those in the top tax bracket, would still encourage investments by the wealthy because dividends would still be an advantageous way of generating cash and also give the government a boost in income. While those who would fall into these top brackets most likely would not be pleased, the extra income to the government could go a long way on staving off potential ill effects of massive deficits (provided it is used in conjunction with current spending levels and not as an excuse to spend more).
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