Next Monday most Americans will be filing their income taxes for tax year 2011. This year, though, tax day has special significance. If there's one clear policy contrast between Democrats and Republicans in the 2012 election, it's whether America's richest citizens should be paying more.
Senate Democrats have scheduled a vote Monday on a minimum 30 percent overall federal tax rate for everyone earning more than $1 million a year. It's nicknamed the "Buffett Rule" in honor of billionaire Warren Buffett who has publicly complained that he pays a lower tax rate than his secretary.
No one in Washington believes the Buffett Rule has any hope of passage this year. It's largely symbolic. The vote will mark a sharp contrast with Republican Paul Ryan's plan (enthusiastically endorsed by Mitt Romney) to cut the tax rate on the super rich from 35 percent to 25 percent -- rewarding millionaires with a tax cut of at least $150,000 a year. The vote will also serve to highlight that Romney himself paid less than 14 percent on a 2010 income of $21.7 million because so much of his income was in capital gains, taxed at 15 percent.
Hopefully in the weeks and months ahead the White House and the Democrats will emphasize three key realities:
1. The richest 1 percent of Americans are now taking in over 20 percent of total national income, and so far have raked in almost all the gains from this recovery. Thirty years ago, the richest 1 percent got 9 percent of total income. Income and wealth are now more concentrated at the top than they've been since the 1920s.
2. The richest 1 percent are paying a lower tax rate than they've paid since 1980. For three decades after World War II, their tax rate never dropped below 70 percent. Even considering all deductions and tax credits, they paid close to 55 percent. Under Eisenhower, the top rate was 91 percent and the effective rate was 58 percent.
3. Right now the nation faces two yawning deficits -- an investment deficit and a federal budget deficit. The investment deficit includes deferred maintenance on America's infrastructure -- roads, bridges, public transit, water and sewer systems that are all crumbling -- and an educational system that's being starved for resources (the federal government pays for 8 percent of K-12 education and about 5 percent of public higher education, but could do much more). The federal budget deficit is projected to mushroom to $6.4 trillion over the next ten years, mostly because of aging boomers and soaring health care costs.
Any serious person looking at these three realities would conclude that the rich should be paying far more. It's not just a matter of fairness; it's also a matter of patriotism.
In fact, given these realities, the Buffett Rule sets the bar too low. For most Americans, wages and benefits are declining (adjusted for inflation), net worth has been plummeting (their only asset is their homes), and the public services they rely on have been disappearing. For the top, it's just the opposite: Their incomes are rising, their stock-market portfolios have been growing, and a growing portion of their earnings has been subject to a capital-gains tax of just 15 percent.
The Buffett Rule would generate only about $47 billion in extra revenues over the next decade, according to Congressional estimates. Why not restore top rates to what they were before 1980, and match the capital-gains rate to the income-tax rate?
ROBERT B. REICH, one of the nation's leading experts on work and the economy, is Chancellor's Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, "Aftershock: The Next Economy and America's Future;" "The Work of Nations," which has been translated into 22 languages; and his newest, an e-book, "Beyond Outrage." His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen's group Common Cause. His widely read blog can be found at www.robertreich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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So? They also pay substantially more than 20% of the total national income taxes. Notice you NEVER hear these liberals mention how much of the taxes the rich pay, only how much of the income they make.
According to the IRS, in 2009 (their most current year with info available at http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133414,00.html ) the top 0.29% of returns (those making more than a million dollars that year) alone paid 18.9% of the total income taxes, they earned 12.9% of the income.
The rich make a lot, but their slice of the tax pie is already greater than their slice of the income pie.
Also, his secretary, making $60,000/year has got to be hiding something. The income tax of a person making between $50k - $75k is 14%. After payroll tax is considered 14.3%. She is not reporting some sort of income, to try and prove a point.
I am totally for the rich being taxed more - if they don't create jobs and don't manufacture products. Lets start with entertainers, especially sports teams. My state tax dollars went to revamp Time Warner Arena, for a team (Bobcats) nobody goes to see play.
Finally, before the Buffet rule is passed, his company should be forced to pay up his back taxes that he has been evading since 2002.
1. The top 10% earns 45% of income and pays 70% of federal income taxes (bottom 50% pays only 2.25%). The considerable amount of progressiveness built in to the tax system, however, doesn't prevent some from incessantly repeating "fair share" rhetoric like a iPods on loop play.
2. Buffett rule advocates say they wish to tax Thurston Howell III. In truth, those hikes would hurt countless small businesses filing individual tax returns. Small businesses account for 2 of every 3 new jobs and in the context of 8.2% unemployment it boggles the mind that some advocate for disincentives for these job creators.
3. Claims income inequality has skyrocketed rely on a flawed study of tax data by Picketty & Saez which ignores structural changes that make inter-year comparisons nearly impossible. For example, the top 1 percent's income share of 9.1% in '86 jumped to 13.2% in '88 due to nothing more than shifts in filing behavior due to a drop in tax rates from 50% to 28%. Increased use of tax-favored 401(k)s, increases in "transfer payment" for low-income families, and increases in the AGI gap further distort the analysis.
With 12.7 million people unemployed and 4.5 million having dropped out of the labor force altogether since 2009, Americans deserve serious solutions. Promoting policies that smother engines of growth and demonize job creators is not responsible.
So let's stick with the status quo, because, as everyone knows, sound bites are the answer.
TOP MARGINAL RATES
1917 - 1921 (to pay for WWI) 67 - 77%
1932 - 1939 (the DepressionÂ) 63 - 79%
1940 - 1945 (to pay for WWII) 81 - 94%
1946 - 1963 (korean war cold war) 86 - 91%
1964 - 1981 (Vietnam/ Cold war) 77 - 70%
1982 - 1986 (Reagan admin) 50%
1987 -1992 (Bush the 1st) 28 - 32%
1993 - 2002 (Clinton / early GW) 38 - 40%
2003 to present (The Bush tax cuts) 35%
to each of your lines, I will add the percent of GDP generated by income taxes. The number will be the average income taxes collected as a % GDP GDP over your year ranges. It shows that regardless of tax bracket structure, the %GDP of the tax is very similar (source: http://www.usgovernmentrevenue.com/revenue_chart_1890_2017USp_13s1li011mcn_10f)
TOP MARGINAL RATES
1917 - 1921 (to pay for WWI) 67 - 77% ; %GDP avg = 4.05%
1932 - 1939 (the DepressionÂ) 63 - 79% ; %GDP avg = 1.93%
1940 - 1945 (to pay for WWII) 81 - 94%' %GDP avg = 8.15%
1946 - 1963 (korean war cold war) 86 - 91%; %GDP avg = 11.55%
1964 - 1981 (Vietnam/ Cold war) 77 - 70%; %GDP avg = 10.73%
1982 - 1986 (Reagan admin) 50%; %GDP avg = 9.51%
1987 -1992 (Bush the 1st) 28 - 32%; %GDP avg = 9.66%
1993 - 2002 (Clinton / early GW) 38 - 40%; %GDP avg = 10.64%
2003 to present (The Bush tax cuts) 35% ; %gdp avg = 9.03%
So...let's tax the top1% for about 1.5% of GDP, leaving the tax break in place for everyone else. That raises 225B in a year. Makes our deficit 1.15T instead of 1.4T. And you sucked about 15% of the top 1% AGI from them.
Now what...we have interest payment that will skyrocket as bonds return to normal yields, structural spending problems, and an ailing infrastructure. what now.