How Much Money Would Taxing the Rich Raise?
House Speaker John Boehner's latest tax proposal may mark a big step for Republicans. But it's a very small step in terms of actual tax revenues.
Boehner on Friday floated a plan to raise income-tax rates on tax filers making $1 million or more. The offer was a major concession to President Barack Obama's demand to raise tax rates on the wealthy – and signaled what might be a breakthrough in the talks to avoid the "fiscal cliff."
But for all its symbolic value, the Boehner plan would raise only modest revenues, especially compared to Obama's plan. The main reason: the "Boehner Rich" (those making $1 million or more) are a much smaller population than the "Obama Rich" (those making $250,000 or more).
First, let's look at the Obama Rich. The non-partisan Tax Policy Center figures that there are about 2.8 million Americans making $250,000 or more. They account for a little more than two percent of American tax filers. (Read more: Super Rich: 'Tax Us When We're Dead')
Raising taxes to 39.6 percent on the Obama Rich would yield around $40 billion to $45 billion in added tax revenue in the first year of the president's plan.
The Boehner Rich make up a much more elite club. There are only about 368,000 tax filers making $1 million – that's about 0.2 percent of American tax filers. Granted, their average income is more than $3.6 million, and they do account for a disproportionately large share of income and taxes. But hiking taxes on the Boehner Rich would yield about $20 billion in their first year, or less than half of the revenues from the Obama rich.
If the tax rate goes from 35 percent to 37 percent (another potential compromise) the revenues would be less than half those amounts.
Of course, $20 billion is a good chunk of change. And just because a tax doesn't raise much revenue or solve the entire budget problem doesn't mean it should be rejected. (Read more:Estate Tax Also on a 'Cliff')
The Boehner proposal is also a starting point, so maybe the final solution lies in the middle.
But whether it's $10 billion or $20 billion, the plan to tax the Boehner Rich is more valuable for its symbolism than its revenues.