My proposal to raise the marginal tax to 70 percent on incomes over $15 million, to 60 percent on incomes between $5 million and $15 million, and to 50 percent on incomes between $500,000 and $5 million, has generated considerable debate. Some progressives think it's pie-in-the-sky. Here, for example, is Andrew Leonard, a staff writer for Salon:The rest of the argument is at TPM Cafe.
A 70 percent tax bracket for the richest Americans is pure fantasy - even suggesting it represents such a fundamental disconnect with the world as it exists today that it is hard to see why it should be taken seriously. I would be deeply worried about the sanity of a Democratic president who proposed such a thing.Fantasy? I don't know Mr. Leonard's age but perhaps he could be forgiven for not recalling that between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent...
Will the rich avoid it? Other critics of my proposal say there's no way to have a truly progressive tax because the rich will always find ways to avoid it by means of clever accountants and tax attorneys. But this argument proves too much. Regardless of where the highest marginal tax rate is set, the rich will always manage to reduce what they owe. During the 1950s, when it was 91 percent, they exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent. Yet that's still substantial by today's standards. The lesson is government should aim high, expecting that well-paid accountants will reduce whatever the rich owe.
Besides, the argument that the nation shouldn't impose an obligation on the rich because they can wiggle out of it is an odd one. Taken to its logical extreme it would suggest we allow them to do whatever antisocial act they wish - grand larceny, homicide, or plunder - because they can always manage to avoid responsibility for it.
16 February 2011
A proposal to increase taxes on the super-rich
A proposal by economist Robert Reich:
I say we tax 'em 100%. That'll fix the rich bastards! They won't want to make any more money at all after a while. Put 'em on the street, that's my motto.
ReplyDeleteI agree with Mr Reich to some extent, but rather than pick an arbitrary hight rate, we need to raise taxes to cover the average deficit. The super rich are most able to pay more taxes, so their share should go up. But all of ours should too. We balanced the budget under Clinton, so let's start with a return to those rate, and maybe add a top rate that is 5% higher than the next highest rate for incomes over some super rich threshold (10 million is an easy number).
ReplyDeleteIf taxes are required to rise in lock step with expenditures then we will pretty quickly find that unrestrained spending results in higher taxes which results in politicians losing reelection. To keep people from just taxing the rich to death we need to move all rates in lock step, so if we need 10% more tax revenue, all taxes go up by 10%.
Though it'll never happen, my hope is that taxes be readjusted for everyone such that the more that you make, the more you pay, BUT at the same time, tax deductions get reduced so that you actually pay closer to the actual percentage of what you make. I'd also like to see the percentage paid by those making the most be increased to 20% from their current 16%.
ReplyDeleteI'm pretty sure that any political proposal that is formulated as "The Federal Government should undertake X to punish subclass Y" would be , but somehow when it's "excessive taxation" and "rich people" everything becomes OK. It blows my mind that the fact that this particular subclass can "afford it" makes it OK to go ahead with. Would we similarly impose excessive punishment on other subclasses because they "can handle it"? The only substantive discussion that ever takes place regarding taxation is about whether or not they'll pay. Why isn't the discussion about whether or not it's ethical?
ReplyDeleteA little premature submission there. The comment should say:
ReplyDeleteI'm pretty sure that any political proposal that is formulated as "The Federal Government should undertake X to punish subclass Y" would be received with outrage.
Bret, would you consider it ethical to have them pay the SAME percentage as others? Warren Buffett has said his tax bracket is lower than that of his secretary.
ReplyDeleteAlthough I oppose income-based taxation completely I would consider a flat tax with no deductions an improvement over the current system.
ReplyDeleteHaving everyone pay the same percentage regardless of income, occupation, political status, or otherwise is fair, ethical, harder to corrupt, and cheaper to implement.
I believe Warren Buffett to be right, but I don't take his comments to mean that he is paying too little. Afterall, if he viewed it as such he could always donate more money to the treasury. The self-imposed taxation limit is infinite. To the extent that his secretary is in higher tax bracket, it is due to a cornucopia of deductions, credits, and loopholes Buffett has available to him and an army of tax accountants to take advantage of them. A properly defined flat tax would greatly reduce the effectiveness of such methods.
I like the view that taxation is a punishment. But then, isn't that how we all tend to view it? The government is punishing us in some way for some sin. Was it making too much money? Or perhaps for not being more giving towards those in need. Maybe they just punish us because we are so eager to make war.
ReplyDeleteOr perhaps it isn't intended to be punishment at all?...
Sorry, just going off on a tangent there :)
Mike,
ReplyDeleteMy use of the word "punishment" doesn't necessarily imply intent (although I think in this case the intent exists). Rather, it's meant to explicitly describe the action. Taxation is punishment, the same way hitting a dog with a newspaper is punishment. That's why it's used by politicians to discourage bad behavior (smoking cigarettes?) and encourage good behavior (home ownership).
Sorry Bret, if it seemed I was picking on your choice of words. I just got to thinking that's how we usually view taxes deep down, me included.
ReplyDeleteI wish taxes were used less as behavior modifiers and punishments, and more as they aught to be. (Hey, maybe I;m turning Libertarian?)
Wouldn't it be more fair if every person paid the same dollar amount? Why should Warren Buffet pay millions in taxes when he barely uses any public services? He doesn't ride the bus, he doesn't use the public schools, he likely has his own private security force.
ReplyDeleteI think that if you want to be fair, you should push for the same dollar value paid in tax per person because everyone being treated the same is the very definition of "fair".
Of course, this isn't fair in another sense of the word, because if everyone has to pay $20,000 in taxes - whether they make $20,000 or $20 million - the impact of those payments is clearly unfair.
That's why progressive taxation is more than "fair" - because although the dollar amount isn't the same, and although the percentage isn't the same, the impact of the taxes on the individual still greatly favor the wealthy. Even at 70% on incomes over $15 million, Warren Buffet will not feel any impact of those taxes. Not one bit.
Plus, it actually is fair, because Buffet would still be paying 15% tax on his first $32,550 in income, just like everyone else.
Let's start this off incrementally; how about a war tax to support our escapades in Afghanistan and Iraq (and Pakistan while we're at it)?
ReplyDeleteSurely, Americans would rally around our troops who are supporting democracy. Why, I imagine a 10% increase would cheerfully be accepted as a small cost for us to be policeman of the world.
Why should Warren Buffet pay millions in taxes when he barely uses any public services? He doesn't ride the bus, he doesn't use the public schools, he likely has his own private security force.
ReplyDeleteActually it would be quite the opposite. The wealthy rely on infrastructure and the public good a million times more than any poor person.
"He doesn't ride the bus"
He may have in the past, certainly many of the people employed by his companies do.
"He doesn't use the public schools"
He never went to school? What about the public schools that educated employees enough so that they could work for his companies?
"He likely has his own security force"
So he never relies on police or the law? What about courts?
This is such a misguided argument I don't even know where to begin. I could literally spend hours typing out all the various public resources and ways that Buffet benefits from infrastructure, and the public good.
As much as people like to forget, we are part of a society, and we benefit from that. Don't like it? Go to rural Montana and go Galt.
I say we tax 'em 100%. That'll fix the rich bastards! They won't want to make any more money at all after a while. Put 'em on the street, that's my motto.
ReplyDeleteAs everyone knows, traditionally the wealthy were taxed much higher, particularly during the Eisenhower boom years. They didn't 'stop wanting to make money" then or ever. So basically there's nothing fact based in your comment.
Let's start this off incrementally; how about a war tax to support our escapades in Afghanistan and Iraq (and Pakistan while we're at it)?
ReplyDeleteJack, I've been saying this for a couple years now. Wouldn't it be patriotic to pay for the wars like we did before in our history? Let's get real, please!
Steve, you missed my point (I posted above as anonymous). I was trying to illustrate that taxing someone "fairly" can mean many different things.
ReplyDeleteIsn't it considered "fair" if everyone pays the same amount?
I use that as an example to break people's fixation with the idea that the same *rate* across all levels of income is the only "fair" way to tax. Why is the same rate fair but the same dollar amount not more fair?
Once someone can appreciate that it isn't fair to tax each person $20,000 regardless of their income, because the impact of a flat fee isn't the same on each person, then those people can shift their thinking from "same amount/same percent" to "same impact", and then hopefully they will realize that even taking 100% of Warren Buffet's last million in income will have no impact on his life.