With a likely focus to some degree over the next year or two on tax policy, coupled with the proposed tax on many employer provided health care plans, I've been doing thinking on the way tax policy and debate has been driven over the past decade – and how to change the discussion from one that is pretty much completely skewed towards the uber wealthy and against the middle class. Whether it be the increasingly oppressive Alternative Minimum Tax (AMT), tax cuts for the super rich, lower taxes on wealth (i.e., capital gains from selling stock vs. income that you have to work for) vs. wages or the estate tax (which I propose some changes to and a rename as the "rich brat tax"), it is long past time to shift the terms of the tax discussion to those who are really ripping off society.
In his diary earlier today, teacherken talks about "shared sacrifice", and some comments discuss how that is sorely missing from the views of conservatives – where the individual having more is more important than the good of the country. This is a no-brainer to me as the "mine mine mine" theory falls flat when 50% - 60% of people are earning less and can’t keep up with inflation and rising health, heating or food costs.
So it is time to turn the tables against the fat cats who earn more than, say, $5,000,000 per year, the rich brats who live off of trust funds and untaxed wealth passed down from generation to generation and those who "earn" money simply by having money.
Since I am talking about taxes, I’ll try to keep it less "dry" and boring and more in terms of why I think certain things should be pushed out by progressives – if for nothing else than (1) there will be a tax policy debate in the coming year or two, (2) there is already a frame that needs to be shattered and (3) there is a great way to use these ideas as a way to move the discussion to the left.
In looking at some figures with respect to top income tax rates as well as ideas on taxes that can raise a lot of money without hitting any significant portion of the population (i.e., less than 1/2 of 1%), there are a few things which would put those who want to argue against as "fighting for fat cats and rich brats" (notice a theme here?).
Up until the Reagan years, the top income tax rate was never lower than 70% at any time since the early 1930s, and as recent as 2007, only 46,000 tax returns filed had TAXABLE incomes in excess of $5,000,000. There were over 96,000,000 TOTAL tax returns filed, so this is less than ½ of 1% of the total tax returns. Taking this a step further, the total taxable income on these 46,000 returns was just under $670 Billion, and the total income taxes were around $154 billion, for an effective rate of around 23%. In fact, those who filed tax returns with taxable income exceeding $10,000,000 had a LOWER effective tax rate than those who had taxable income between $200,000 - $9,999,999.
I’ll repeat that once more: If you had taxable income exceeding $10 million, you paid at a lower tax rate than anyone with taxable income between $200,000 and $9,999,999.
Just by doubling this (depending on how this is indexed and what rates are used at each level), you'd get an additional $100+ billion per year, no,? Why not call it the "fat cat" tax - who is going to side with those making over $5 or $10 million to give a little back for all they have? Add in something like higher taxes on non-wage income (why should people who work hard be taxed higher than those who are earning income off of accumulated wealth that most people don't have the luxury to have?) and this could go even higher. The argument about those who earn more give more to charity is nice but quite frankly, there are far too many people in far too much need of far too many things to have this be a valid argument in these times. If paying an effective tax rate of 50% (still lower than any time since the 1930s) will stop people from giving to charity, then that is pretty telling.
Also, why not change the makeup of the estate tax? Did you know that for this "hot button issue that MUST be addressed" there were only 17,000 taxable returns filed in 2007 and under 14,000 filed in 2008?. That’s all. That would be hitting less than 1/3 of the filers noted above, or 1/6 of 1% of income tax filers.
The biggest argument I've heard is how people have to sell their parents house or family business to pay this tax, so why not exempt those 2 things, as well as farms, with caveats such as the residence must have been lived in for at least 5 or 10 years prior to death, lower the threshold and make it a tax on untaxed and inherited wealth? Call it the trust fund baby tax, the lazy brat tax, the leech on society tax or something like that? It isn’t like exempting family businesses or homes would have too much of an impact anyway with the right structure, as stock, cash and cash-type assets make up the largest piece of taxable assets anyway so the theory of a trust fund lazy brat is even more applicable here.
There are other ideas, but these are two very easy ones for pretty much everyone to understand, and the following points are as basic as can be:
- Neither of these taxes will likely apply to anyone that nearly everyone in this country knows or will ever know;
- The top income tax rates are at or near 80 year lows at a time when those who will never benefit from these rates are hurting the most;
- The "fat cat" tax hits less than one half of one percent of taxable income returns and only to those who have taxable income - after all deductions - of $5,000,000 (or $10,000,000).
- The "fat cats" already pay at a lower effective tax rate than those families who have taxable income as low as $200,000 (which I know is a lot but in major metropolitan areas, it doesn’t go nearly as far as it does elsewhere – and these are areas with higher state income tax rates as well).
- The "rich brat" tax would allow people to pass down the family business and residence without worry, but it would force the trust fund brats to actually do something with their lives or contribute to society.
- The "rich brat" tax would apply to roughly 5,000 - 10,000 families IN THE ENTIRE COUNTRY.
Progressives need to get out in front and get out in front quickly on this. There will no doubt be talking points and arguments about how the upcoming tax bills will be "huge tax increases" and blah blah blah. Besides being patently false, it is high time that the discussion not only turn back to how the super rich are soaking this country and ripping off the rest of Americans but also how fat cats and lazy brats should step up and pay their fair share.
After all, everyone else is – and they have to work two or three jobs to do so.