How much could a tax on millionaires raise?

On Monday, the Obama administration will call for a new tax on income over $1,000,000. The details aren’t available yet, but various versions of of a millionaire’s tax have been floating around for some time now, so it’s possible to get a rough sense of what the tax could raise.

(Andrew Harrer - BLOOMBERG) Back in early-2009, House Democrats proposed offsetting health-care reform by imposing a 5.4 percent surtax on income over $1,000,000 for joint filers, and $500,000 for single filers. The Joint Committee on Taxation estimated that the proposal would raise $460 billion between 2010 and 2019. Adjust for economic growth and a similar proposal scored from 2012 to 2021 would likely raise more than $500 billion. That would more than pay for the president’s jobs bill.

Another option would be to create a series of tax brackets for millionaires. After all, someone making $1,500,000 annually is in a very different position than someone making $10 million annually. Rep. Jan Schakowsky has advanced a proposal along these lines that would tax income between $1 million and $10 million at 45 percent, income between $10 million and $20 million at 46 percent, income between $20 million and $100 million at 47 percent, income between $100 million and $1 billion at 48 percent, and income over $1 billion at 49 percent. Her office estimates this proposal would generate $78 billion in revenue in 2011, which implies that it would raise close to, or perhaps more than, $1 trillion over the next 10 years, depending on how fast incomes rise.

Something of a compromise proposal can be found in the Center for American Progress’s deficit-reduction plan (pdf), which proposed four version of a graduated surtax on incomes over $1,000,000. The lightest of these proposals raised $10 billion over three years with a surtax of one percent on all income over $1 million. The heaviest raised $75 billion over three years through a surtax of five percent on income between $500,000 and $5,000,000 and seven percent on income above $5 million.

A final possibility would be to simply sunset the Bush tax cuts for income over $1 million. This is a proposal advanced by, among others, Sen. Chuck Schumer. The Center on Budget and Policy Priorities looked at this option and concluded it would raise about $400 billion when compared to a world in which all of the Bush tax cuts were extended. But compared to a world in which all of the tax cuts for income over $250,000 expire — which is, remember, the administration’s current position -- the proposal is actually a tax cut of about $400 billion.

The bottom line is that a proposal to tax income over $1 million could raise anything from very little money, as in the Center for American Progress’s plan for a one percent surtax, to around a trillion dollars, as in Schakowsky’s plan. There’s also the possibility for it to be, in reality, a large tax cut, if the administration trades their option to let some portion of the the Bush tax cuts expire in return for a small and politically popular tax increase on income over $1 million. We’ll know more tomorrow.