Could raising the tax on the wealthy, without cutting spending, balance the federal budget in the US?
Some of the stalemate over the Fiscal Cliff has been over whether to raise the tax rate on the wealthy in order to raise additional revenue.
One argument that is frequently made is that the main problem is not revenue, it is the level of spending. More specifically, that no amount of tax revue from the wealthy would be enough to cover the current spending levels.
Is that argument in favor of bigger spending cuts sound? Can it be substantiated with actual numbers?
If you would consider the "wealthy" to be everyone who earns more than one million per year in income or capital gains (which was a cutoff for many proposals over the last two years), could taxing their income at any level fund the current federal government spending? If yes, what would the effective tax rate have to be? If no, what is the most you can fund at 100% effective rate? (assume 2012 revenues and spending).
(Note: No one is asking the rich to pay 100% of their income over a certain level, but this question is about whether the budget deficit is theoretically addressable without major spending cuts.)
NOTE: I'm not looking for discussions over whether such taxes are fair or not. Merely how the two numbers compare. The answer should consist of the following numbers:
Current federal spending deficit for 2012 (revenues - spending)
Total income of those earning $1mil + for a year
If #1 < #2, what % of #2 is #1?
If #1 > #2, what amount and % of deficit is not covered?
To be clear, the "deficit" discussed here is the annual deficit, not the total federal debt.