Warren Buffett is a tough negotiator, which is one reason why he's the second-wealthiest person in America.
So when the president refers to his new initiative to raise taxes on millionaires as the "Buffett rule" we might expect he'd start the bargaining from a tough position.
But this is Barack Obama, whose idea of negotiating is to give away half the house before he's even asked the other side for the bathroom sink.
Apparently Obama will propose that people earning more than $1 million a year pay at least the same tax rate as middle-class earners. That's aiming mighty low.
America's median income is about $50,000. The typical taxpayer at that level pays approximately 20 percent in taxes.
Granted, that's a higher rate than most of today's super rich pay because of countless deductions, credits, and loopholes -- including, especially, their ability to take their incomes in the form of capital gains, taxed at 15 percent. That's a big reason Buffett's hundreds of millions a year are taxed at just over 17 percent -- a lower rate than his secretary faces, as Buffett often says.
But a 20 percent rate is still ridiculously low compared to what millionaires and billionaires ought to be paying. Officially, income over $379,150 is supposed to be taxed at 35%.
And even 35 percent is a pittance compared to the first three decades after World War II. Before Ronald Reagan slashed taxes on the rich in 1981, the highest marginal tax rate was over 70 percent. Under Dwight Eisenhower it was 91 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.
Meanwhile, 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. The last time the top 1 percent got that much was in the roaring 1920s.
So much money is now concentrated at the top that what we really need are more tax brackets at the high end, higher marginal rates in each bracket, and a tax code that treats all sources of income -- whether ordinary or capital gains -- the same.
The marginal tax rate ought to be raised to 50 percent on income between $500,000 and $5 million, 60 percent on income between $5 million and $15 million, and 70 percent on income over $15 million.
In light of our history, and in the face of future budget deficits that will otherwise cause taxes to be raised on the middle class and government services to be sliced, this is the least we should expect from the richest among us.
Why shouldn't the president be calling for this, instead of asking that millionaires and billionaires pay at a rate average earners pay?
At least begin from a tough negotiating position, Mr. President. You might as well. Congressional Republicans will oppose any tax increases on the wealthy, whom they call "job creators" -- even though big companies are sitting on more than $2 trillion in cash and aren't creating any jobs at all, while 99 percent small-business owners, who account for most new jobs, make under a million dollars a year. (GOP Budget chief Paul Ryan has already accused the president of waging "class warfare" with his millionaire tax plan.)
And you can also bet Republicans, as well as their allies on the editorial page of the Wall Street Journal, will continue to harp about the large portion of low-wage earners who pay no income taxes -- without mentioning that they pay a higher portion of their incomes than anyone else in payroll and sales taxes.
Besides, the public supports raising taxes on the rich. (In an August CBS News/New York Times survey, 63 percent of respondents favored increasing taxes on households earning more than $250,000 a year to help close the budget deficit.)
We don't yet know the details of the president's proposal. The White House hasn't said what the minimum rate on millionaires will be, or how they'll define a "middle class" income. Maybe he'll surprise us by starting out much higher and tougher.
I hope so. But as he's proven time and time again, when it comes to negotiating Barack Obama is no Warren Buffett.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Robert Kuttner: Muddled Class Warfare
Mark Penn: Strategy Corner: Obama -- Don't Bring Back Class Warfare
The article linked below appeared in the NYT recently. The attention grabber was the first line, "THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics."
I searched high and low for the Moody's study but couldn't find it so I went to the Bureau of Labor Statistics Consumer Expenditure Survey and found these figures. (see picture link below) Note that, in fact, the top 20 percent consume 38 percent.
It appears that somehow Mr Reich and the NYT have twisted the facts a bit.
The Limping Middle Class
By ROBERT B. REICH
https://www.nytimes.com/2011/09/04/opinion/sunday/jobs-will-follow-a-strengthening-of-the-middle-class.html
Bureau of Labor Statistics
Consumer Expenditure Survey, 2009
ftp://ftp.bls.gov/pub/special.requests/ce/standard/2009/quintile.txt
Consumption Data Spreadsheet
http://i55.tinypic.com/33bq1w5.png
http://www.huffingtonpost.com/2011/09/20/obama-buffett-rich-taxes_n_971388.html
In any case, the 200k number is not mentioned in this article.
We could easily consider lower marginal tax rates on income from 200k to 1 million by substituting a 1% wealth tax on all net wealth over 10 million. And taxing estates like other income.
And a 1.0 % tax on all financial transactions, like the computerized nonsense where "investors" hold a share for maybe half a millisecond.
Change is coming, one way or another, and slogans like 'class warfare" can't stop it.
No, if you were thinking, you wouldn’t have ‘thunk’ that. If I earned 200K for “any length of time”, I have been paying taxes at a much higher rate in wages (income) than the 15% the current div tax rate. According to the IRS in 2009, the households with more than 1 million in income paid an AVERAGE of 24% of their income, households with 100-125K paid on average 9.9%, 50-60K paid average of 6.3%.
So if it takes money to make money (at the 15% cap gain/div rate) , then it should take anyone making 200K per year (assuming 20% of that is paid in fed taxes alone[40K] and they save 100% of after tax income (i.e. they spent no other money on expenses or things such as property taxes) then it would theoretically take 6.25 years and 250K of federal taxes paid to earn the luxury of “only” paying 15% [150K] more in taxes each year on top of the 40K per year already being collected against their wages.
Fyi - The cap gains / div tax rate is 0% for households up to 68K (after deductions).
Is “change coming”?? Well if you think getting rid of rich people who pay the bills will bring you prosperity you are sorely mistaken.
Lebron James earns $40 million a year, do you think he pays $14,400,000.00 a year to the IRS?
The speed limit says 45, but everyone knows they can drive 52 without being stopped. There is nothing wrong with the law, it is the exceptions that cause the problems.
I don't agree with taxing earnings, but for this topic, I offer reform. I think a flat sales tax would be better, enforce it through the DOJ and eliminate the wasteful IRS.
If we must tax income, it should be equally, all income taxed at the same rate for everyone. The more income I make, the more I end up paying taxes. No exclusions, no deductions, period.
Man you guys are a riot! Next time you hear the government spends something .. trace what happens to that money, transaction after transaction..The economic flow. Follow the money at least 5 deep from business to person to business with government taking a peice back at each step in income and sales taxes and property taxes and etc.
The government is the largest customer or its employees of most business... if you work its in your paycheck coming back to you unless of course it goes for 900 foreign bases or is used by people losing the flow to buy foreign goods, then its lost (or at least the economic/job multipler effect is greatly reduced and MFG has the highest Multipler effect, military very low, infrastucture very high and extension of business productive assets...
No economic model or business accounts for government spending dollars differently than anyone's private sector spending..
A soldiers pay spent in my business is the same as a non government workers on my books...
And that non goivernment worker may be paid by a Government subcontractor.
Government is MACRO economics and government accounting, not business accounting or home accounting or Micro economics. Anyone who says to run government like a business, does not know what he is talking about!
Regards
Regards
Is that coming from a socialist that thinks the wealthy lock up their money in a vault and only use it for an occasional swim?
“No economic model or business accounts for government spending dollars differently than anyone's private sector spending..”
Wrong - Government spends money for POLITICAL GAIN - not a financial return (aka profit)
If it was up to government, we would still have typewriter factories instead companies like Apple with their Ipads – just ask Jess Jackson Jr. (D-IL)
“[T]his new device… is now probably responsible for eliminating thousands of American jobs. Now Borders is closing stores because, why do you need to go to Borders anymore? Why do you need to go to Barnes & Noble? Buy an iPad and download your newspaper, download your book, download your magazine.”
Do you SERIOUSLY still want to argue that guys like Congressman Jackson should have control of the purse strings (i.e. the capital resources of our nation)???
oh, and this is the guy who always orders caviar, gobbles it all up himself, then tries to "split the bill," right? yeah, i've had lunch with him, but only the once.
Yep, so lets take another 400 billion out of the pockets of the likes of Warren Buffet and turn it over to the likes of Joe Biden and Obama…
What a total con… the gig is up liberals.. throwing money (other peoples money) at a problem doesn’t fix anything except for maybe the next election.
Why ought it to be at that level?
I guess I don't feel entitled to 70% of anyone's annual income.
Ha only kidding!.. But seriously though, if you took a 100% something from someone else for the first half, but then gave back 200% of that the 2nd half, I guess you are actually a liberal …
Oh I kid again! But really, yes, 70% of federal income + that 11% state tax that the current Minnesota governor tried to get, in addition to 3.8% for Obama care, payroll taxes, property taxes…etc…
At this rate, we will LITERALLY be at 100% of annual income in 3 years. I think I am just going to quit now, move to section 8 housing in Chicago with mom, then come back to MN the 1st of each month to collect my “fair share” in MN Welfare – on the “backs” of all those ‘poor people’ that somehow pay all the taxes and get no benefits…
But, at least I will be ‘stimulated’! Thanks Pres OB, Gov Dayton! You guys bought my vote! And frankly, I could careless who pays for it, just give me the dam money already.
I think you need a section 8!
In the 1950s, the top tax bracket was 90% ( and the top brackets was just over 100K, of course that would be one million today, inflation adjusted). And between 1950 and 1980 , the top bracket was 70% and yet people survived and thrived, the highest rate of job growth/investment in our history and real wages doubled and were not stagnant or going down like since 1980... when we flatened the taxes, reduced top brackets sharply and went down hill from then on, except after Clinton raised taxes and balanced the budget, repaired the reagan damage where he trippled the debt!
Reagan in 1987 after trickle down was a failure raised capital gains to 28% (actually the tax cut was so bad he did his fiorst year, he raised income taxes every year after), now just 15% and said he thought a top tax bracket of at least 50% was required...
Regards
Regards
Now if you dont know that , you likey belo
It is true that as a person approaches infinite income, the percentage taxed approaches 70%, but by the time you get that much income, you aren't really feeling the pinch of further taxes.
Anyway, I don't know if Reich has an argument for those specific values, but there is a general argument in favor of a progressive tax system: the dollar (like everything else) has decreasing marginal utility. The real value of your next dollar earned is less than the real value of your previous dollar earned. Early dollars get spent on basic necessities, like food and housing. Later dollars get spent on luxuries, like entertainment and vacations. Proponents of a progressive tax think that we should be taxing utility, not raw dollars. That way, everyone feels the pinch of their taxes to the same degree.
Yes the feudal lord said to the serf as he took his crop, just learn to live on less, while I eat your hard work...
What destroyed the middleclass was the outsouring of 30 million jobs and the loss of 80% of our industry, 50% of high tech and declining wages for 30 years, while the top one percent got 100% of all economic/productvity gains as during the days of the english aristocracy, feudal lords and the Robber Barons.. and now again with the new robber barons!
Regards
The answer, RELIGION. Since 1950 religion has become BIG, BIG business. Religion has made many wealthy and powerful people, people who weld great political influence without contributing a penny back to society. To phrase it another way Religion takes, it does not give.
Religion means Church's, tent revivals, radio, T.V, cable, internet, etc. Take away their non-for-profit status, take away the real estate tax's exemptions, and will these greedy people scream like stuck pigs. In fact all religions will scream bloody murder. They'll yell that they will not be able to feed all the poor in Africa, They won't be able to expand and save souls, they won't be able to build their flock to preach the word of god, to continue to exit. God they need that money.
Well Religions, how about contributing back to the country that made you rich and powerful. I guarantee you my children that god will look favorable upon you.
Another person that believes the main problem is revenue . . . so sad, I wish people would actually look at the numbers.
2001 - $1.9 trillion in spending, $2 trillion in Revenue
2011 - $3.8 trillion in spending, $2.2 trillion in Revenue
Revenues are actually higher in a deep recession, spending has DOUBLED.
We have a spending problem.
Why not cut taxes if they're "unfair"?
Do we really need half million dollars to study how to get shrimp on treadmills or a how to blow 535 million on solar energy companies that don't work?
60,000 factories closed under Bush... because we dont have export rebates or Tarrifs like China or national healthcare not in the cost of goods sold.
China's government spent 30 billion last year on solar and wind energy development//MFG.
We spent 4 trillion on the iraq war and 250 billion on F22 fighter unfit for combat.
I would rather see failed attempts at reindustrialization as opposed to NO Attempts to reindustrilaize and lead in a technology as under repubs who outsourced 80% of our private industry and 50% of our high tech with zero job creation here...
Bush lost more than that by 400% on French executive helicopters.
Regards
Bush isn't alone. Obama's Job Czar Immelt (you know GE - 0 taxes paid) are shipping jobs oversees.
Ok, so China spent 30 billion subsidizing a businesses and the USA spent 250 billion subsidizing a business… ??..By that standard, Aren’t we “winning”?
The problem with the minds of folk like yourself is that you arrive at conclusion you like (i.e. government spending = “good” - provided it has the words “education” or “green” in it) then you work backwards from there filling in the facts to arrive at your predetermined conclusion.
So China subsidizes business.. they also run people over with tanks, ban lady gaga, violate copyright/patents, mainly speak Mandarin and also just closed a solar plant after 4 days of protests from local residents over pollution concerns
http://www.latimes.com/news/nationworld/world/la-fg-china-solar-20110920,0,2015603.story
So what??? Why try to pull the “well Mikey likes it..” argument?
Just because “we” subsidized the housing/health care/education/insurance/banking/financial markets BEFORE, does not mean it is a good idea to KEEP doing the same thing. Nor are we China, Europe, India or even Greece (though we are getting closer to the same failure that socialism INEVITABELY always leads to) – so please stop with the apples to the oranges comparisons when it suits your needs.
61% supported the Millionare tax on a station where the viewers are market watchers and investors, mostly conservative.
People making under one million and paying 35% tax rates while those making one billion and paying 15% have even had enough of this BS!
Small businesses in a Gallop poll said they wanted more regulation suprisingly to prevent what happened under Bush and to end the speculation that is driving up their customers cost of living and taking money out of theoir pockets. They said the big problem is no jobs, declining wages and thus no demand.
If you listen to repubs or FOX, these type of results would be a shock...
Only 20% of the population in another Poll believe Democrates are responsible for our economic mess.
The public (80%) in general support such a tax... its about fairness...
Regards
Regards
===
I think Obama has a deep psychological need to be accepted, and that makes him a very timid man. He is very adverse to any conflict. He has never been embroiled in a controversy, and he has never gone against the tide. Even running for president entailed less risk of failure than it did for other candidates because, had he lost, his loss could easily have been attributed to racism.