The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
Just to make sure I understand, raise the highest marginal rate to 90% on the top 10% of earners, which I think is ~120-130k a year (having trouble finding a graph that shows it clearly)? So every dollar over 120-130k is taxed at 90%?
If taxes were that high, there would be strong incentive to stop working right before hitting that top rate. The value of one's time vs dollars being made would completely skewed to the former. At current rates, while painful, the incentive to stop working doesn't really enter (at least my calculations) but at 90%, I think most would agree the value of the time becomes much more important.
So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
I'm not assuming a 90% marginal tax rate at ~$120k-$130k/year. It'd be at ~$200k/year in my example. What you're positing would be accurate if people made an hourly wage and grossed ~$200k+/year, but most people/couples that earn ~$200k+/year aren't hourly. The only thing a high marginal rate would do is reduce their net income.
Most, if not all, would still choose to take a higher salary, even if they're only keeping 1/10 dollars above $200k/year instead of 6(or less depending on state income taxes)/10 dollars with current taxes. The amount they'll work will remain the same, but their net income after taxes will decrease.
In terms of making the deficit worse, lets say no CEO/lawyer/etc... would even think of working for more than $200k/year, even there's no reason not to, after this new tax rate is enacted. The current marginal rates above ~$200k account for ~$.3 trillion/year in receipts, so in this situation none of that would be taxed.
Having said that, federal tax receipts wouldn't drop by that amount because companies would have a ton of money left over from not paying anyone more than $200k/year, and they would be able to increase existing salaries and/or hire more people. All of those people would pay income tax, so there federal government would still get a lot in tax, but it wouldn't get quite as much because the marginal rate for those people making less than $200k isn't as high as the rate for those making above $200k.
Having said that, just because federal tax receipts decline in this situation, doesn't mean the deficit would increase. With more money going towards lower income people, more of that money will be spent (The lower your income, the more you spend) which will likely do two things. The first off is that it will stimulate the economy, which might provide some benefits. But more importantly, there will be more local spending and local tax revenue would increase.
Since local (state, county, and city) governments would have more money from tax revenues to spend on services/infrastructure, they wouldn't need as much money from the federal government. This would be a situation where the deficit wouldn't get worse even as tax receipts dropped because federal spending would also drop.
Having said that, if the local governments did a crappy job with spending, then the federal government would still need to provide funds, and the deficit would increase, but in that case it would be because of poor spending of taxes at the local level, not because the increase in taxes resulted in the wealthiest Americans working less.
