HAYES: It`s a sort of third, fourth best solution. But you raise a point that I think I want to talk about next which is the distribution of all of this, right?
I mean, because the campaign was about tax fairness, I mean, the presidential campaign, very explicitly about tax fairness, there`s a head line in "The New York Times" today, good piece by Annie Lowrey, who`s been a guest on the show reported there saying we now have the most progressive rate structure we`ve had probably since the Carter years.
So, I want to take a deep dive if this sort of what is the distributional effect of all this. This is really about fairness. How fair -- have we stepped in the right direction in fairness right after this break.
HAYES: All right. If it`s Saturday morning, it`s tax policy here on UP, and we are talking about the deal that was struck this past week to avert the so-called fiscal cliff. I want to give people a sense of the size of the tax increase that we`re talking about. It`s about 0.2 percent of GDP. Now, 0.2 percent, take a look at this for some historical comparison.
The big tax rate that Ronald Reagan did in 1982 was one percent of GDP. If you look at the first Clinton budget which was we remember as a kind of iconic moment of raising taxes, that was 0.6 percent of GDP. So, this is in the historical sense quite a relatively low amount of tax hiking in a historical perspective of other tax raises in recent history.
And then, I want to look at the distribution, because this to me, as I said, before we went to break, is a big question, right? I, you know, I`m an egalitarian leftist. I want to see a more equitable society. And one of the big items on the agenda in this campaign was the fact that we needed more tax fairness. We have rising inequality.
We have a set of tax cuts passed under George W. Bush that were massively upwards re-distributional in their effect. So, here is the percentage of tax cut by income level. This is computed by Citizens for Tax Justice. Now, the sort of hilarious thing about this is, those people making $129,000 a year got a three percent tax cut.
Those making $279,000 got a three percent tax cut. Those making 1.5 million got a 1.2 percent. So, there`s this weird distributional wrinkle that happened in the negotiation which is that, basically, John Boehner and the Republicans fought for people making $300,000 and $400,000 a year, and they ended up with the big -- the best deal out of this, where the folks at that point.
But this is just the income stuff. There are also the effects of the estate tax and the fact that carried interest state (ph). I mean, that`s the things to me that so crazy. Will you break down what happened in the estate tax, David?
JOHNSTON: Well, we raise the estate tax limits which were in the high 600,000 range in the late 1990s to $5 million per person under Bush, but it`s important to understand that that`s just a nominal number. Taxpayers up there will show you how to push $100 million, $200, 500 million through without paying any tax because of all these other rules out there.
Mitt Romney and his wife at a time you could only put $1.2 million to your children created a trust that was $100 million. You put in something you know has little value. And then as a private equity manager, in view it with value after the deal, and suddenly, 1.2 becomes a billion.
I do think that we need to recognize that because we expect people to save for their retirement now that is owned their retirement assets instead of getting a pension, but you have to adjust the system for that. But the system is so porous and meaningless (ph). And most of the gains have never been taxed. Fundamental issue, most for the gains in the states have never been taxed.
HAYES: The headline takeaway, I had the estate taxes. There is -- the White House wanted the estate tax to go back to the 2009 levels and the Republicans fought for 2012 levels. And the difference between those amounted to a million bucks per heir. That was the difference. So, in this compromise, every heir out there who has the tragic and sad loss of their parents, their very wealthy parent, is going to see a million bucks more -- a million --