On taxing the rich

Greg Mankiw links to this recent column by Larry Lindsey on what Obama's tax proposals would imply for taxes on the highest earners.

Larry points out: "A high-income entrepreneur would see his or her federal marginal tax rate rise to 53% from 37.7% under Sen. Obama's tax plan."I believe this would be the highest tax rate on earned income since 1971.

As I mentioned in this recent piece, that is putting it mildly--since many states also levy an income tax of their own. Top marginal income-tax rates in the country would rise not to 53%, but to more than 60%.This is assuming that Obama applied the full payroll-tax rate to very high incomes. (In Britain, when then-finance-minister Gordon Brown abolished the earnings cap on "national insurance contributions", the UK equivalent of the payroll tax, he extended the tax above the old ceiling at a rate of just 1%.) Obama has not yet been explicit about the rate at which his extended payroll tax would apply, leaving people to think that it would be at the full rate, once it kicks in at $250,000-plus. His campaign says that nothing has been decided. I'm surprised he is not being pressed harder on this.