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Question: In 1989, Senator Bob Packwood asked Congress's Joint Committee on Taxation how much extra revenue the government would raise if it just started taxing 100% of all income over $200,000 per year. The Joint Committee crunched some numbers and reported an answer: $204 billion per year.
a. What is wrong with this answer?
b. Under Packwood's proposal, what would the marginal tax rate be at $250,000 per year? At $500,000 per year? Packwood asked the Joint Committee this question not because he wanted to raise taxes that high, but to make a point. The tale of his efforts-and the efforts of Ronald Reagan, Dan Rostenkowski, Bill Bradley, and many others-to improve the U.S. tax code in the 1980s is compellingly told in Birnbaum and Murray's book Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform.
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