Since Rangel's tax hikes are focused on the rich, and the AMT is scheduled to draw ever more revenue from the middle class in federal budget estimates, the rate increases necessary to maintain current revenue levels are enormous. Rangel adds a 4.6 percent "surtax" on adjusted gross incomes above $500,000 in the first year of the law. This gives voters the impression that we are simply lifting the current top rate of 35 percent to the good old Clinton rate of 39.6 percent. But in 2011, when the Bush tax cuts expire, the surtax sticks, lifting the federal rate to 44.2 percent. Rangel also grabs revenue from the rich by phasing out exemptions and deductions. Add in the Medicare tax, and average state and local taxes, and the combined marginal income tax rate goes to 52 percent. As the accompanying chart illustrates, that would make our top marginal rate the second highest among the ten largest OECD economies, right below France.
This tax "reform" is revenue-neutral, which means that there is no money left over to fund, say, the universal health-care coverage so many of the Democratic candidates favor. If we lift the top rates to fund that too, then our rate would be far higher than that of any other major country, and begin to approach the 70 percent top rate of the 1970s.
I don't know about you but I have no desire to emulate the economic "success" of France.