President Barack Obama and the Congressional Democrats have proposed allowing the expiration of the tax cuts created during the presidency of George W. Bush for all annual income above $250,000. With no action by Congress or the President, all Bush era tax cuts, for all income levels, will expire at midnight on December 31st of this year. The Democrats propose to extend the tax cuts for all income beneath the $250,000 threshold and their Republican counterparts desire to extend them for all income levels.
Returning to the fictional Churchill words of wisdom – the “so few” are the 3% of Americans that make greater than $250,000 per year and the “so many” is everyone else.
“Yes we can, tax the rich.” A few days ago, that statement was displayed prominently on the official website of the Rush Limbaugh show. The statement was displayed across a picture of President Obama and a pile of $100 bills. The mocking reference to the famous “Yes we can” Obama campaign slogan, is included on the same page as a transcript of a recent Limbaugh radio show. Within the transcript, the cantankerous voice of the far right angrily predicts that Congressional Republicans will “cave” on the issue of tax increases for the rich as part of the much discussed ‘grand bargain’ that is sought by the two political parties to solve our national budget and debt crisis.
Without that bargain, our economy may fall over the notorious ‘fiscal cliff’ as the new year begins, the tax cuts expire and a wide range of automatic spending cuts become effective. Figuratively falling over that cliff might cause the beginning of another economic recession period and increased unemployment.
The cantankerous Rush Limbaugh earns roughly $40 million annually (or an estimated $167,000 per workday, $21,000 per work hour, and $350 per work minute). Limbaugh is most certainly among the wealthy that have “so much,” as the fictional Churchill words profess. Despite his wealth far beyond what he might reasonably use, Limbaugh speaks nothing but vitriol for any serious proposal that would require wealthy Americans to carry any of the burden in a ‘grand bargain.’
Clearly, Rush Limbaugh is not representative of all taxpayers earning over $250,000 annually. However, even a $250,000 income will place its earner within the top 3% of American earners.
Something else should be noted that doesn’t get stated often. We repeatedly hear statements about how “taxes will be raised for those making greater than $250,000.” The statement is misleading, and often intentionally so. It is more accurate and complete to note that “taxes will be raised for those making greater than $250,000 on only their income over $250,000.” Under the Democratic budget proposal, a person making $300,000 annually would incur no increase whatsoever for 83% of their income (i.e., their income under $250,000).
Congressional Republicans have claimed that the cure to our country’s soaring national debt is a drastic reduction in the nation’s expenses. They primarily target spending cuts in three of the four largest expenditure areas: in the federal ‘entitlement programs’ of Social Security, Medicare and Medicaid. They generally consider the bloated military spending budget off limits for any cuts.
The ‘entitlement programs’ on the chopping block are important and necessary aids relied upon by poor and middle class Americans. They are generally not needed by the wealthy top 3% and any ‘grand bargain’ that cuts those programs’ benefits, without any increased taxes for the highest earners, would place all of the resulting ‘pain’ squarely upon the poor and middle class.
Congressional Republicans also object to any increase in revenue through even the modest tax increases that would occur if the Bush era cuts expired on the top 3% of earners and their top rates returned to the rates that applied during the prosperous presidential years of Bill Clinton.
The principal obstacle in the ‘grand bargain’ effort has been the Republican refusal to agree to any roll-back of the rate cuts for that top 3%. In response, President Obama has said that the House Republicans “shouldn’t hold the middle class hostage.”
Those Republican Congressman, and their wealthy supporters that supply their motivation, should benefit from a little historical perspective. The top income tax rate was 94% in 1944 and 1945. During the 24 years between 1940 and 1964, the top rate never fell below 80%. It should be noted that the period includes some of the most economically prosperous years in our country’s history.
The average top federal tax rate was 61.4% over the 96-year period from 1916 through today.
Today’s highest U.S. rate of income tax is 35%, which is a full 59% below our highest historical rate and 26.4% below our historical average. A return to the 39% top tax rate of the Clinton presidency would require a mere 4% increase. Given the history of higher rates, even during times of much less need for revenue, the proposed 4% increase is deservingly the “so little” in the fictional Churchill wisdom.
Never have so few wealthy Americans with so much income held hostage legislation, through their control of House Republicans, that is needed by so many other Americans because of such a historically small potential tax increase. Or more eloquently, “never have so few with so much held hostage so many for so little.”