Sorry, Middle Class: In a Few Years, Your Taxes Will Have to Go Up, Too

More

Here are two facts about taxes under the fiscal cliff deal.

Fact One: This year, the 1 percent will pay more in taxes than in any year since 1979.
Average_Federal_Tax_Rates_Top_1_Percent-thumb-615x480-109671.png

Fact Two: We're still not raising enough revenue for the next ten years. Total tax revenue for the next decade will be 18 percent or 18.5 percent of the overall economy. Okay, so that's not far from our historical average. But the next decade's spending demands are nothing like our historical average. We're entering a historically unique moment where we've promised to pay health care and retirement insurance to tens of millions of Boomers, and that will require more money than we're currently collecting for the government -- even if we means-test or change benefits.

fiscalcliff_fig1.png

Fact One suggests we might be through raising taxes on the rich. Fact Two suggests we're not through raising taxes in total. And both facts together suggest that the next tax increase will have to come from families further down the ladder. Maybe we'll start by raising rates or limiting deductions for the 98th and 97th percentiles, who are hardly middle class, but also hardly millionaires. Or maybe under Republican leadership we'll start by clearing out deductions that force lower-income families, many of whom don't owe positive federal income tax, to take fewer benefits.

Right now, Washington doesn't need more money and most families can scarcely afford to pay more in taxes without threatening the shallow recovery. Still, it's impractical to think that revenue as a share of GDP will stay this low after the economy improves and interest rates rise and Medicare and Medicaid costs swell for the retiring Boomer generation. Taxes will have to keep rising and we might be running out of space at the top. 

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

What's the Number One Thing We Could Do to Improve City Life?

A group of journalists, professors, and non-profit leaders predict the future of livable, walkable cities


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In