Why We Must Raise Taxes on the Rich - Reich

Why We Must Raise Taxes on the Rich, ASAP!

America's wealthiest are paying a pittance in taxes, while the country is chipping away at its central foundations to meet budget shortfalls.

 It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich. Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.

The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)

Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.It’s just the opposite for super rich.

The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)

                 Read the entire piece at Robert Reich.com

End Tax Cuts for the rich !

by Tula Connell
A majority of the American public thinks Bush’s tax cuts should continue for families that make less than $250,000 a year but should rise to the previous level for those making more than that amount, according to a new CNN poll. Some 51 percent say the tax cuts, which expire at the end of this year, should end for the rich.

Wise. Because as Dave Dayen points out, George W. Bush’s tax cuts for the wealthiest Americans are thought to cost $830 billion over 10 years, adding massively to the nation’s budget deficit. Overall,

it’s generally considered that extending all the tax cuts would increase the deficit by $3.1 trillion dollars over the next 10 years.

Former Labor Secretary Robert Reich is among those calling for an end to Bush’s tax cut for the rich, noting it has been a “huge windfall for the wealthy. About 40 percent of its benefits went to the tiny sliver of Americans earning over $500,000.”

A final reason for allowing the Bush tax cut to expire for people at the top is the most basic of all. Although Wall Street’s excesses were the proximate cause of the Great Recession, its fundamental cause lay in the nation’s widening inequality. For many years, most of the gains of economic growth in America have been going to the top—leaving the nation’s vast middle class with a shrinking portion of total income. (In the 1970s, the top 1 percent received 8 to 9 percent of total income, but thereafter income concentrated so rapidly that by 2007 the top received 23.5 percent of the total.)

The only way most Americans could continue to buy most of what they produced was by borrowing. But now that the debt bubble has burst—as it inevitably would—the underlying problem has reemerged.

Extending the tax cuts for the rich would exacerbate the already massive income gap between the rich and the rest of us, and so, to end with Reich:

Why make it worse?

From the AFL-CIO blog.

Safety Nets for the Rich

by Bob Herbert Op-Ed Columnist
New York Times - October 20, 2009

The headlines that ran side by side on the front page
of Saturday's New York Times summed up, inadvertently,
the terrible fix that we've allowed our country to fall
into.

The lead headline, in the upper right-hand corner,
said: "U.S. Deficit Rises to $1.4 Trillion; Biggest
Since '45."

The headline next to it said: "Bailout Helps Revive
Banks, And Bonuses."

We've spent the last few decades shoveling money at the
rich like there was no tomorrow. We abandoned the poor,
put an economic stranglehold on the middle class and
all but bankrupted the federal government - while
giving the banks and megacorporations and the rest of
the swells at the top of the economic pyramid just
about everything they've wanted.

Read the entire piece; http://www.nytimes.com/2009/10/20/opinion/20herbert.html

Congress: Help the rich

Housing Policy: Free Market Vs. Help the Rich

By Dean Baker - April 3, 2008, 8:46PM
As we all know there is an ongoing debate in politics between those who favor market solutions and those who believe that the government must intervene to protect the rich.

Okay, the first group may not exactly be market fundamentalists, but the government intervention help-the-rich faction is definitely calling the shots these days, especially when it comes to housing policy.

The economy is in recession and job loss is soaring. The banking system is on life support, with the Fed handing tens of billions of dollars to the country’s biggest banks at below market interest rates. Millions of homeowners are facing foreclosure, and more than ten million are now underwater in their mortgages, owing more than the value of their house.

In such dire circumstances, Congress did the only thing it could; it gave more tax breaks to banks and homebuilders.
Yes, that is really what Congress, or least the Senate, proposes as the answer to the crisis facing the country’s homeowners. The Senate has approved a bill that would give a tax break worth more than $6 billion to homebuilders facing losses due to unsold homes and banks facing losses due to bad mortgages. That should make troubled homeowners sleep more securely.
Read more at Talking Points Memo