Thoughts? Also, are we supposed to link the whole article here or just a snippet so the real article gets the traffic? http://www.huffingtonpost.com/robert-reich/why-we-should-raise-taxes_b_823822.html My proposal to raise the marginal tax to 70 percent on incomes over $15 million, to 60 percent on incomes between $5 million and $15 million, and to 50 percent on incomes between $500,000 and $5 million, has generated considerable debate. Some progressives think it's pie-in-the-sky. Here, for example, is Andrew Leonard, a staff writer for Salon: A 70 percent tax bracket for the richest Americans is pure fantasy -- even suggesting it represents such a fundamental disconnect with the world as it exists today that it is hard to see why it should be taken seriously. I would be deeply worried about the sanity of a Democratic president who proposed such a thing. Fantasy? I don't know Mr. Leonard's age but perhaps he could be forgiven for not recalling that between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent. (Many considered Reagan's own proposal a "fantasy" before it was enacted.) Incidentally, during these years the nation's pre-tax income was far less concentrated at the top than it is now. In the mid-1970s, for example, the top 1 percent got around 9 percent of total income. By 2007, they got 23.5 percent. So if anything, the argument for a higher marginal tax should be even more realistic now than it was during the days when it was taken for granted. A disconnect with the world as it exists today? That's exactly the point of proposing it. For years progressives have whined that Democratic presidents (Clinton, followed by Obama) compromise with Republicans while Republican presidents (Reagan through W) stand their ground -- with the result that the center of political debate has moved steadily rightward. That's the reason the world exists the way it does today. Isn't it about time progressives had the courage of our conviction and got behind what we believe in, in the hope of moving the debate back to where it was? Would a Democratic president be insane to propose such a thing? Not at all. In fact, polls show an increasing portion of the electorate angry with an insider "establishment" -- on Wall Street, in corporate suites, and in Washington -- that's been feathering its nest at the public's expense. The Tea Party is but one manifestation of a widening perception that the game is rigged in favor of the rich and powerful. More importantly, it will soon become evident to most Americans that the only way to reduce the budget deficit, preserve programs deemed essential by the middle class, and not raise taxes on the middle, is to tax the top. In fact, a Democratic president should propose a major permanent tax reduction on the middle class and working class. I suspect most of the public would find this attractive. But here again, the only way to accomplish this without busting the bank is to raise taxes on the rich. Republicans have done a masterful job over the last thirty years convincing the public that any tax increase on the top is equivalent to a tax increase on everyone -- selling the snake oil of "trickle down economics" and the patent lie that most middle-class people will eventually become millionaires. A Democratic president would do well to rebut these falsehoods by proposing a truly progressive tax. Will the rich avoid it? Other critics of my proposal say there's no way to have a truly progressive tax because the rich will always find ways to avoid it by means of clever accountants and tax attorneys. But this argument proves too much. Regardless of where the highest marginal tax rate is set, the rich will always manage to reduce what they owe. During the 1950s, when it was 91 percent, they exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent. Yet that's still substantial by today's standards. The lesson is government should aim high, expecting that well-paid accountants will reduce whatever the rich owe. Besides, the argument that the nation shouldn't impose an obligation on the rich because they can wiggle out of it is an odd one. Taken to its logical extreme it would suggest we allow them to do whatever antisocial act they wish -- grand larceny, homicide, or plunder -- because they can always manage to avoid responsibility for it. Some critics worry that if the marginal tax is raised too high, the very rich will simply take their money to a more hospitable jurisdiction. That's surely possible. Some already do. But paying taxes is a central obligation of citizenship. Those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship. Finally, there are some who say my proposal doesn't stand a chance because the rich have too much political power. It's true that as income and wealth have moved to the top, political clout has risen to the top as well. But to succumb to cynicism about the possibility of progressive change because of the power of those at the top is to give up the battle before it's even started. Haven't we had enough of that? Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
My solidly conservative values have me longing for the good old days. Let's tax like the Greatest Generation did.
I don't know. I mean, I like safe food and safe bridges and I guess things like the Coast Guard and NASA are cool and all, but then again, I might win the $101 million Powerball tonight, so put me down as a nah.
Such a proposal would fail. If you bring back the old tax rates, you need to bring back the old tax breaks also. That results in the tax attorneys and tax accountants getting all of the money the Treasury expected to receive. I was disappointed with President Obama's budget proposal because he did not try to use some of the good ideas from the commissions he created. If he proposed lowering the rates, but eliminating deductions, he could have run in 2012 as the President who either lowered taxes or tried to lower taxes. Since people only focus on the marginal tax rates, they think they are paying less. In reality, such a proposal actually increases tax revenue by eliminating deductions. Instead, he will be running in 2012 as the person who wants to raise taxes.
^ Good point. Another benefit to decreasing marginal tax rates coupled with a reduction in deductions is simplifying the tax code that may increase tax collections. For example I don't make a huge amount of money, especially this year yet my tax return is still the size of a small novel. Simpler returns might reduce the impetus to cheat on taxes and also improve accuracy of collections.
If we are going to keep the current tax system (progressive income tax), then we must raise taxes on the rich substantially if we are to have any hope of retiring the debt. It is just that simple.
What!!! and steal all that money from the young libertarians and conservative college grads who believe that they will certainly make at least $500k and most likely $5 million per year very soon!!!!!!!
Only the naive have bought this argument which has just the ring of truth in it needed to fool some folks. It may be a hassle for you to spend a few more hours probing deductions; not so for the really wealthy. It is just a bit more for the acccountant. There is a reason why millionaires and billionaires invest tens of millions in libertarian and conservative politicians who pledge to reduce their tax rates and urge a flat tax or whatever scheme will appeal to folks below their pay scale. Despite their deductions the wealthy pay more when the rates are raised just like the average Joe pays more when you raise his rate, too despite his deductions.
Has Reich run the numbers to see how this would reduce the deficit, ignoring pleasant fantasies such as the supply side fantasy of more revenue with lower taxes? All of a sudden the usual crowd doesn't care about deficits any more.
"The Tea Party is but one manifestation of a widening perception that the game is rigged in favor of the rich and powerful." This is what cracks me up, teabaggers aren't rich and they despise the banksters, but yet support cutting taxes for the rich at the expense of funds for education, healthcare, research, etc.
That seems like faulty logic. If you eliminate all the deductions that wealthy, and many others can take, they won't be able to reduce the amount they pay by exploiting loopholes. In other words hiring accountants to figure out creative ways to save them taxes won't work. Under our current system though the wealthy can use their wealth to exploit the complexity of our tax systems to reduce what they actually pay. At the same time for a tax payer like most of the rest of us consider the amount of time that can be saved from filing taxes in addition to the money spent on things like Turbo tax. Frankly I would be willing to pay the amount that I spend on Turbo Tax to taxes but given the complexity of our tax code I am compelled to use something like Turbo Tax. Are you so sure that they do? You yourself are citing the use of accountants to reduce the amount that they pay and the more complex our tax code gets the more deductions and other loopholes there are to be exploited. Also keep in mind that tax fraud and just plain mistakes are more likely under a complex tax code and ours is huge.
We need to increase revenue at both the state and the federal level. Trickle down is and has always been a fantasy, discredited long ago. It rapes the middle class and places even more wealth in the hands of the rich. You can't cut enough spending, after so many years of slicing tax rates on the wealthiest Americans, to come close to balancing the budget. You have to increase rates on upper class income. You have to increase the gasoline tax. That's a start.
How will this impact their incentive and motivation to continue growing their businesses? What is the downside of your scenario?
No, you don't have to raise taxes substantially. You have to make sure that taxes actually get paid. Eliminate loopholes and simplify the tax code. It makes enforcement and payment a hell of a lot easier.
Based on history, hardly at all. I am not talking about increasing corporate taxes, so this wouldn't impact companies' bottom line. Rich people will have very slightly less money in their bank accounts.
We have a $1.4 trillion deficit, due in large part to massive tax cuts given to wealthy people. We are not going to eliminate the deficit and retire the debt using our current tax code without substantially raising tax rates on the upper income brackets.
You do not have to raise tax rates, you need to raise tax revenue. I think we all know that the American public will get upset about increased rates, so the best way to raise tax revenue is to eliminate deductions. The deductions are so large that the government can actually reduce rates at the same time and still increase revenue.
