Daily Chart: Tax the Rich to Pay For Health Care?

By Conor Clarke

The daily chart is a feature I started playing around with over at my blog. (It's pretty self explanatory: I make -- or steal, if I've been procrastinating -- one chart each day.) And since today's the day that Charlie Rangel is supposed to be announcing his plans to pay for health care reform by levying a surtax on the wealthy, I thought I'd make a chart of what the federal effective tax rate paid by the wealthiest 1% has looked like since the Clinton administration:

Effective federal tax rates top 1 percent

So what does this mean? Here are a few thoughts:


1. The details haven't been released yet, but most (if not all) of the families that fall under Rangel's tax plan will also be in this 1% range.

2. These are families that paid a lower rate in 2006 (the last date of available data) than they did 15 years ago. That's not an argument for upping the taxes, of course. But it puts it in perspective. (Confession: If you go back to the Reagan years, the top effective rate is lower. But the current rate is still below the historical average.)

3. News reports have anticipated Rangel proposing a 1-3% surtax. Even a 3% increase across the board will leave an effective rate lower than it was in 1995.

I should add that I don't love the idea of paying for healthcare with a big surtax on the wealthy. There are at least three alternative options that I like more, like (a) Reducing the charitable deduction rate; (b) reducing the tax exclusion for employer-sponsored health care; or (c) taxing harmful consumer products with negative externalities, like soda and cigarettes. But as Matt Yglesias says, this gets the job done just fine.

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