Who Is Rich?
December 08, 2010, 01:40 PM
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For 2010, federal income marginal tax rates begin at 10% and lurchingly rise to 35% on every dollar of taxable income above $373,650 for married filing jointly.

And then the marginal tax rates stop rising. Couples who make $374,000 per year, well, they`re about as rich as it`s worth thinking about, right.

A generation ago, it made sense not to worry much about squeezing a little extra tax revenue out of people making extremely gigantic amounts of income because there weren`t very many of them and it didn`t add up to all that much.

Today, though, the term "orders of magnitude" just comes up a lot more when thinking about income.

Consider baseball contracts as a well-known example. Free agency started around 1975, but by the 1980 season, only one player, Nolan Ryan, was averaging a million bucks per year over the life of his contract. During the 1989 season, Eddie Murray was averaging the most at $2.7 million. By 1996, Ken Griffey Jr. was getting $8.5 million, and then pay really exploded, all the way up to Alex Rodriguez getting $25 million in 2001. Today, Rodriguez remains the highest paid at $27.5 million.

So, today, the marginal tax rate on Alex Rodriguez is the same as on a utility infielder making the minimum major league salary of $400,000. How much would it really hurt the economy in the long run if Alex Rodriguez faced a marginal tax rate that was 5 or 10 points higher than that of the lowest paid major leaguer?