Who Gave the Winners Another Pass on Taxes?
Just the other day President Obama denounced $18 billion in Wall Street bonuses as "shameful" and "the height of irresponsibility." Wednesday Treasury proposed a $500,000 pay cap for a select few executives of bailout-enriched companies. But these are essentially symbolic responses. Why not instead follow through on a theme heard during the campaign -- when the country is in need, it is time for all to pay their fair share?
During the run up to the mortgage crash, hundreds of billions of dollars in record bonuses and other compensation were paid out to the architects and builders of the financial house that has since collapsed. Mortgage brokers, investment bankers, and investors who collectively flooded the market with subprime loans profited handsomely. Average Wall Street bonuses tripled from 2002 to 2007, driven significantly by the explosion in these new pools of largely unregulated loans.
Better still for those on the receiving end, record compensation flowed with the benefit of reduced taxes - the 2001 Bush Administration tax cuts dropped marginal rates at the high end from 39.6% down to the current 36%. What's more, often astronomical bonuses were structured to take advantage of still lower 15% capital gains rates, or even to defer any taxes until well into the future.
Think of it this way - if all those who were the winners from several years of very lucrative peddling of the junk loans had merely continued paying taxes at the pre-Bush rates, our national Treasury would now at least be holding billions more, a good downpayment towards rebuilding our fiscal house.
The market, not temporary salary caps, ultimately sets compensation levels. Alongside the rise and fall of incomes, higher marginal tax rates would be a tangible way to embody a return to shared responsibility and fair allocation of the burdens of responding to national challenges.
This insight was articulated the day before the election, when former Treasury Secretary Robert Rubin and progressive economist (now Vice Presidential adviser) Jared Bernstein teamed up to declare common ground: "We both agree that individual income tax rates and other taxes for those at the very top could be moved back to the rates of the Clinton era. It's worth remembering that rates at this level helped finance deficit reduction and public investment that contributed to the longest economic expansion in our history."
Yet now we are on the verge of needing to borrow massively to try to turn around the faltering economy, what has happened to the tax fairness part of the agenda? The winners are about to get a pass again.
Not raising taxes in a recession on the vast majority of Americans is sensible, as tax increases would cut into shrinking incomes and stifle buying power. Instead, a temporary payroll tax cut for most Americans should be one part of a multi-pronged stimulus effort.
But this argument crumbles when we look to the highest few percent of earners. Will that CEO, top tier lawyer, investment banker, Washington lobbyist, entertainer or other high roller really put off buying a tv or eating dinner out because an additional $3,000 tax is due on the next $100,000 earned?
During the election campaign, I imagined what John McCain could have said had he chosen to emphasize the good of the nation over the "me first" views attributed to that now famous plumber. Of course, he never delivered that version of the speech.
In light of today's situation, perhaps President Obama should consider delivering a similar appeal to those Americans who are still doing well in these difficult times, something like:
"Fellow citizens, every generation of Americans faces a challenge. When that challenge arrives, some serve, and some look out for themselves. Service comes in many forms -- not just joining the military, or working in a factory, but also offering America whatever is needed, whatever serves the common cause.
In World War II, high income earners paid high tax rates. Everyone saved and recycled essential materials, had ration cards, and pitched in. Families rich and poor sent their sons and daughters off to war. From Korea through Vietnam, America's elites not only paid high taxes, their children again served their country. In the all-male Princeton University class of 1956, 450 out of 750 graduating seniors (60%) joined or were drafted into military service. At Princeton today, only 9 students out of 1,108 graduating seniors in 2006 (under 1%) joined the military.
In 2009, America is still militarily committed in Iraq and Afghanistan, where our challenges grow daily. Foreclosures are rampant, unemployment has soared. Those with jobs are afraid that next week will bring a pink slip. Consumer confidence is down, we have run up enormous debt, and we are facing the worst national economic situation since the Great Depression. To respond and restore our fortunes, we have committed billions, and are on the verge of releasing additional billions to create a massive stimulus to our economy.
Where will we find the money for this plan? Millions of American families are totally strapped, not able to pay all the bills. They need a tax break just to make it through. We can and will have to borrow to jumpstart the economy, but it is also our responsibility to minimize the debt burden we leave to our children.
Our history has shown that when we all take to heart the words of the Declaration of Independence and "mutually pledge to each other our lives, our fortunes and our sacred honor", we prosper. And when we each retreat to a narrow view of self interest, of "mine" before "ours", our nation suffers.
So I am just asking those of you earning the highest incomes to pay the same tax rate that every other American earning $250,000 and up paid on January 20, 2001 -- the day my predecessor took office. Will you help us?"
Vice President Biden while a candidate called a willingness to pay higher taxes in a time of need "patriotic." Such a similar call to service by President Obama is not merely an appeal to patriotism, however. It is a necessary first step towards changing a culture of entitlement and dependency at the high end.
For too long we have been irresponsibly led to believe that individually, and as a country, we can have more for less. Many have come to hold as an article of faith that the winners in boom times can enjoy a bigger share without sharing the winnings. And now that we are in a bust, many still don't see any extra responsibility to help out.
Now is exactly the time, however, to reverse that thinking. If we don't, the next time around we go through boom and bust, we will again be lamenting that all those big winners took their chips home from the party and left everyone else to clean up the mess.
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VP Biden had it right when he said paying taxes is patriotic.
President Obama’s plan to cap executive salaries at 500,000 in bailed out companies is a step in the right direction. It is now time to think about our second step.
In the Great Depression, the nation moved to a high tax on the rich. In 1932 there was a maximum tax rate of 62%. That rate went to 95% income tax for the wealthiest Americans. That rate was in effect until the early 1950s. I remember those days.
From thinkers like Aleksandr Solzhenitsyn to thinkers like George Carlin, a clear thought emerges about human beings: Most people want stuff. Some people must have more stuff than anyone else. They can’t be satisfied until they are at the top. So make a top.
Shareholders are poorly protected from inflation in executive pay , especially when ownership is in mutual funds and in highly diluted stocks. One way to protect shareholders from excessive executive salaries is the maximum wage.
The song “Maximum Wage” on YouTube and MySpace calls specifically for series of new tax rates that increase rates on incomes in excess of 60 times the minimum wage. It will cut unbridled competition for executive salaries at large public corporations. It will raise the minimum wage -as the wealthy lobby the Congress to raise the minimum wage in order to increase the maximum wage.
It will also raise a lot of tax income to pay for the excesses of past administrations and the help fund the needs for economic recovery programs.
Here is the Maximum Wage link:
http://www
This is NOT the right one:
http://www
two things....
showing the stats that people from Princeton went to military in those days and these days they dont.
DUH !!
Students are getting SMARTER not more stupid. Frankly, the military doesnt play even close enough that you could not earn in medicine/l
Only people who have no where else to go and cant make it anywhere would join the military. truth hurts, but thats it.
So only the cannon fodder belong or should feel obligated to serve in the military? I beg your pardon. May I remind you that Pat Tillman gave up a huge career and his life to serve his country during the last decade, and many more. Other people go because the feel an obligation to repay the country for what they have and will receive in the blessings of this land during their lifetime.
We know about those who chose to use their money and position to not serve and then make more money off of it. Dick Cheney and his gang of theives, for example.
There was a time when the privileged felt their privileges came with responsibilities to the country and culture that made them successful. This was called 'patriotism' and 'duty' and the sons of privilege fulfilled their duties as they saw them, even the conservatives.
Today, privilege is supposed to mean freedom from consequence or responsibility while the ordinary working American is supposed to foot the bill in the good times and suffer in the bad times.
This is called 'feudalism
Yet liberals are 'elitists' for wanting to impose some justice on the system.
Those who "earned" so many billions throughout the Bush years by looting America need to be taxed accordingly. Bring back the 90% top marginal tax rate and recover some of what the scoundrels have ripped off.
There used to be a motto that said, "Crime doesn't pay." What a concept!
i agree...th
And take away the corporate benefits for the wealthy, I see NO REASON whatsoever that a 400 million dollar pension package should be tax deductible, nor the private jet and all the expenses that go with it....We have blackberries and video conferenci
It's right where it's always been ... Republicans are "Tax Cheats", and Democrats make "honest mistakes" over and over and over again.
Republicans LOST 8 billion dollars in IRAQ with no accountability,, no responsibility, etc and Katrina...
WHERE DO YOU THINK THAT 8 BILLION WENT.. WHY DID HALLIBURTON MOVE TO DUBAI and ENRON TO SWITZERLAND
First of all, we are nowhere close to the "great depression". Please stop using that scare tactic, it's getting old. Second, the wealthy (which I am not one of) pay more in taxes then anybody else. Pretty soon you're not going to have enough people that actually pay taxes. Then what? Capital gains taxes should be 5%. Let people invest. I'm not rich, but I do have investments that I pay capital gains on. Not everybody who invests is rich. Some people are just smarter with money than others. Stop with the "spread the wealth" stuff.
Then institute the fair tax, nothing is fairer than that but I do resent the fact that I am having to pay
28% when the rich only pay 17% or 1/5 of the total taxes collected. Off-shore banking and
tax cheats in Liechtenstein is a problem and needs to be addressed ASAP.
What do we pay taxes for? Security. Justice. The common welfare (public works.) A successful State (Governmen
Money derived from Capital Gains depends on all of that, just as individuals do - if not more than individuals do. So taxing them as much as individuals - or more - is just and fair.
Capital Gains depend on contracts being honored, laws being enforced, peace in the streets. People can get by - horribly - without them. Capital Gains are dependent on them. Think "Somolia".
"First of all, we are nowhere close to the "great depression
THAT'S WHAT YOU THINK. Hey jubalander
State and local property taxes
Sales taxes
Excise taxes
Utility taxes
Automobile registration fees
Tolls (bridge and highway)
Mass transit fares (commuter rail, bus, light rail, subway, etc.)
Social security taxes are not really taxes at all (at least that was not the way they were set up). They are supposed to be a retirement fund that people pay into their whole lives, and then receive the funds THEY put in. The reason for the cap is because those people who earn a lot would never receive even close to THEIR OWN money back if they paid SS taxes on all income (ie-fairness).
As for the other taxes you cite as not being paid by the rich:
State and local property taxes - the rich pay more
Sales taxes - the rich pay more
Excise taxes - the rich pay more
Utility taxes - the rich pay more
Automobile registration fees - not a tax
Tolls - not a tax
Mass transit fares - not a tax
As you can see, the rich pay way more taxes than the middle class and the poor. The top half of all wage earners pay 97% of all the taxes. We are almost at a point in this country where there will be more people who are net tax-receivers (they get back more than what they pay), than taxpayers. A similar thing happened to ancient Rome, and it was the major cause of their fall.
Lastly, we are nowhere near the great depression, things are not even as bad as they were in the late 70's and early 80's. All this fear-mongering has got to stop, and Obama is the biggest
This is exactly the attitude that has contributed to our current economic crisis. Thank you for demonstrating it so clearly and well.
The reason you got the 1.6 trillion dollar tax cut from the Bush is that he ROBBED SOCIAL SECURITY FUNDS...
my grandfather told me a long time ago to help take care of the poor because they are people who will make you wealthy.
the feudal roots of the usa show themselves occasionally and have so far been beaten back into the ground but not before the entire country pays dearly. there were the robber barons of the industrial revolution vanquished by ted roosevelt, the wall street barons of the 20s vanquished by the great depression and the money changers of today reeling from losses that appear to be leading us into an economic abyss. the wealthy should pay the portion of taxes commensurate with their wealth. if 2% of the wealthiest americans own 80% of the wealth of the country then they should foot 80% of the bill.
the original income tax was paid only by the wealthy. today, as warren buffet has pointed out repeatedly, the working class pays more taxes then the wealthy as a percentage of income.
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