Corporations are roaring. Wall Street is rolling in cash. C.E.O. bonuses are going gangbusters. It’s a really good time to be rich!
So begins a NY Times op ed by Charles Blow,
The Pirates of Capitol Hill. He points out things are not so good for the poor, with the Census bureau reporting the poverty rate in 2009 reached 14.3%, higher than since 1994, with Agriculture reporting increasing food security and unemployment remaining unacceptably high, then Blow asks
So in a civil society, which of these groups should be expected to sacrifice a bit for the benefit of the other and the overall health and prosperity of the nation at a time of great uncertainty? The poor, of course. At least that seems to be the Republican answer.
Except it is not just the poor, it is also the middle class that is the heart of this nation, upon whose well being the economic health of this country depends.
I want to talk about taxes. I will look at Blow, I will look at a Washington Post op ed by Walter Mondale titled As in 1984, we need the courage to raise taxes. Mondale reminds us of the truth of the famous lines from his 1984 acceptance speech:
Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.
But I want to start with reality of the middle class, using myself and my wife as an example.
I am only going to talk about our taxes on income - not real estate, not sales.
My wife and I are middle class. She is a federal government civil servant in the middle of the GS-13 scale. I am a school teacher still fairly highly paid (as teachers go) even after the loss of my National Board Stipend and four furlough days and being frozen in step without a Cost of Living Increase for several years. Still, we are well below the $250,000 that would be the point at which the President is prepared to raise tax rates back to what they were before the previous administration.
Almost of our income is from salaries. Yes, there is the occasional stipend or honorarium. Those are relatively small. And I did cash in a small 403B to pay for unexpected household repairs and replacements. For those items there was no payroll taxes.
For everything else, even with deductions for taxes paid, charity given, mortgage interest, and miscellaneous deductions (not enough to qualify for medical), our taxable income puts us in a 28% Federal bracket, to which we add 6.5% state income tax, and 7.65% payroll taxes. Do the math. That's an incremental tax rate of 42.15% on each additional dollar of earned income.
My Agnes Meyer teaching award was $3,000. I did not pay payroll taxes, so there the total was only 34.5%.
Yes, our effective overall tax rate is of course lower, because of deductions to adjusted gross income, but all one need to consider is how many Americans have all or most of their income from wages subject to payroll taxes and to ordinary tax rates as compared to the wealthy who may get substantial amounts from capital gains, on which the maximum Federal rate of 15% is just over half our incremental federal rate, and which is not subject to payroll taxes.
In fact, if we consider just those combined federal taxes, a wealthy person whose income is primarily from Capital gains has an incremental federal rate of 15% and a person with income just from salary has one more than twice that, of 35.65%.
Yes, I know, this year we got a 2% break on the employee portion of social security taxes. Still, having an incremental Federal rate more than twice that of many of the wealthy is more than annoying.
Let's return first to Mondale. Immediately after he reminds us of those famous words from his speech, he writes
I lost the election, but I won the debate. Reagan ended up increasing taxes in 1984, 1985, 1986 and 1987 to mend the budget and tax systems.
We could add to this that Reagan's vice-president and successor, George H. W. Bush, after saying 3 times in his own acceptance speech "Read my lips: No New Taxes!" had a massive tax increase (which helped cost him reelection) because he was fiscally responsible. His OMB director Dick Darman negotiated the increases with Congress so as not to put the nation's finances in serious jeopardy.
Blow chooses to paint this as rich against poor:
But the spurious argument that cutting taxes for the wealthy will somehow stimulate economic growth is not borne out by the data. A look at the year-over-year change in G.D.P. and changes in the historical top marginal tax rates show no such correlation. This isn’t about balancing budgets or fiscal discipline or prosperity-for-posterity stewardship. This is open piracy for plutocrats. This is about reshaping the government and economy to benefit the wealthy and powerful at the expense of the poor and powerless.
It is more than that. The increasing power of the rich has made an ever larger proportion of the American people relatively powerless, with even our assembled political power through voting being outweighed by the expenditures unleashed under Citizens United.
Blow quotes from an analysis released Thursday by the Economic Policy Institute which shows that from 1979 (pre-Reagan) to 2007 (near the end of GW Bush's tenure and before the economic collapse) the tax rate for the top 1% dropped 20% while that for all Americans dropped just 8%, and that for the top 400 families dropped more than 1/3. Meanwhile
“between 1992 and 2007, a time in which income for the average household and top 1 percent grew 13% and 123%, respectively, the income for the top 400 households grew fully 399%.”
As others have pointed out, the wealthiest still pay a very large proportion of the taxes. That's because they have an ever increasing proportion of both the income and the wealth. The changes to our tax structures have exacerbated the differential. Blow refers to words by his colleague Catherine Rampell that "the top 1 percent of Americans earn a fifth of the income and control a third of the wealth."
Let me return to Mondale, who offers these words:
Elections since 1984 have demonstrated that favoring higher taxes to pay for specific priorities can be a winning political formula. Bill Clinton and Barack Obama both prevailed with well-executed and honest proposals to raise taxes for concrete purposes that Americans favored.
It makes sense to seize today’s bipartisan support for cutting tax exemptions as a way to increase revenue. I also believe that we must eliminate Bush’s tax cuts for the rich. Where is the decency in cutting taxes for those making tens of millions while middle America struggles? This is a fight over fairness that Americans can understand.
Certainly current polling data supports that argument by Mondale. A strong majority of Americans prefer raising taxes on the wealthy to cutting programs that benefit them. Mondalre argues that we need a mix of approaches, that we must
include tax increases in the mix. President Carter and I, as well as George H.W. Bush and Clinton, all used some version of that recipe. Today, efforts to restore tax revenue will need to be spread out over several years, as Obama proposes, to avoid cutting short the recovery.
He suggests not only restoring the higher taxes for the wealthy, but also such as
such as reducing the deductability of mortgage interest for wealthy homeowners, cutting subsidies for large, corporate absentee-owned farm operations, reducing tax preferences for oil companies and closing loopholes that prevent huge corporations from paying taxes.
Here I remember reading recently that in 1942 more than 40% of total federal taxes were paid by corporations, while the proportion now has sunk to well less than half that.
Why do we need the revenue, beside avoiding exploding the deficit? Mondale writes
I am troubled by cuts in infrastructure investments, which enjoy support from business and labor as a source of jobs and future economic prosperity. I am ashamed that America leads affluent democracies in the number of people (including children) who live in poverty.I am perplexed by the shortsightedness of reducing support for smart, hard-working college students. And where is our decency when we cut back on medical care for the ill?
These are neither humane nor necessary choices. We are better than that. We can and must restore fiscal discipline while showing mercy and justice for the most vulnerable.
Blow closes his piece by being even more blunt:
More tax cuts would be gluttony in a time of starvation. That is not America. That is a nation about to be plundered, and a people laid to waste.
I think Blow is largely correct. It is the nation as a whole that will be plundered, and the people,laid to waste will include most of the Middle Class.
Taxes.
We pay them for services that we receive, all of us.
We pay them to be secure - militarily, economically, medically, when we are too old to be able to work any longer (and remember, too many of those suggesting things like further raising the retirement age do not do physical labor that it is impossible for most to do into their late 60s).
Taxes are the price for civilized society.
Taxes are our recognition for our shared responsibilities to society as a whole, to each other, to those who are less able to fully care for themselves.
Some would divide the poor up into the worthy poor and those less worthy. Once we start down that path of rationalizing greed and insensitivity, it become far too easy to rationalize further greed and insensitivity, and to lose sight of what Franklin offered as a political statement that surely applies as well in other ways, that we need to hang together lest we surely hang separately.
Or if you prefer, perhaps the words of Mondale's mentor Hubert Humphrey are yet again appropriate:
It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.
Further cutting the taxes of the already wealthy while cutting the programs that serve those in the dawn, twilight, and shadows of life is immoral. If we the people allow that to happen our government will thus represent us as an immoral society.
I wish I had more money after paying my taxes. But I am unwilling to give up the benefits that flow from those taxes - education, health, roads, scientific research, controls on the rapaciousness of corporations, food safety, food assurance, law enforcement, real military security, economic security in times of unemployment and when no longer able to work, and so much more. I am unwilling to turn my back on those less fortunate than I am. I remember my common humanity.
I read several things. I had a few thoughts of my own. And now? I am going to finish filing my own taxes.
But I will not ignore what is threatened by the greedy, selfish, insensitive people who propose further depredations. Charles Blow is right. They are the Pirates of Capitol Hill. And remember, piracy of any kind is a crime against all, punishable by all.
So how's your Saturday?