Tax Rates on Wealthy Decline

There has been a lot of discussion on this page recently about tax policies and how they impact behavior. A great example of this is provided by the relatively low rate dividends and long-term capital gains are taxed at. From the Wall St. Journal:

 

"Effective tax rates fell for high-income households in 2010, continuing a long-term trend that is fueling momentum for rewriting tax rules.

The Internal Revenue Service said in a report released Wednesday afternoon that average effective tax rates — the percentage a taxpayer actually pays after deductions and other breaks — fell for every income group above $500,000. The decreases were largest for the top category, households with income exceeding $10 million. The average rate fell for that group to 20.7% from 22.4% in 2009.

The reason for the drop in average tax rates is no secret: It’s the special 15% top rates for capital gains and dividends that President George W. Bush pushed through. In 2009, taxpayers with incomes exceeding $10 million reported 35.8% of their income as capital gains and dividends. That rose to 48.5% for 2010."

 

While it can certainly be argued that these low rates stimulate investment, and thus, the broader economy, it is also becomingly increasingly difficult for the rich to claim that they are over-taxed with information like the above taking up column space...