In their desperate bid to find half a trillion dollars or so to fund a health care expansion, Democrats have no shortage of bad ideas. Indeed, their new idea is even worse than last month’s dastardly plan to hike taxes on beer and wine.
The Democrat’s new idea is to slap a special “surtax” on high earners. A surtax is simply a flat additional charge based on adjusted gross income. The model for the new scheme seems to be a four percent surtax proposed by House tax writer Charlie Rangel in 2007.
Elsewhere I’ve explained why tax hikes on high earners is poor economic policy. But politically, what’s striking is how far American economic policy is moving to the left of policies in other major nations.
The chart shows that the current top U.S. personal income tax rate (including the average state rate) is 42 percent, which is the same as the average in the 30 nations of the Organization for Economic Cooperation and Development (OECD).
President Obama already plans to increase the top federal rate from 35 percent to 40 percent at the end of 2010. That would push the combined federal-state rate to 47 percent, substantially above the average of other major industrial nations. Imposing a 4-percent surtax on top would push the top rate to 51 percent, which would be higher than many nations that were traditionally more socialist than America, including France (46%), Germany (48%), and Italy (45%).
Obama and the Democrats chafe at being labeled “socialists”, and it’s true that Republicans are just as socialist when it comes to spending policies. But tax rates higher than France? Tax rates over 50%? Come on Democrats, you’ve got to be kidding!