Dean Baker: The need to tax the wealthy

[marmar]

from the Economist:



Featured guest
Mr Dean Baker

The need to tax the wealthy


The quest to increase taxes on the wealthy is not a gratuitous attack on upper income households; it is driven by the need to raise more revenue to run the government. While many deficit hawks been irresponsible in raising fears of an impending collapse of the American government, the projected deficits for years following the recovery are in fact larger than is desirable.

There are areas of American spending at the federal government level that could be reasonably cut, but even after we have zeroed out the "waste, fraud, and abuse" category of federal spending we will still likely need additional revenue of between 1-2%t of GDP to keep budget deficits in an acceptable range. That leaves a choice between increasing taxes on the wealthy or imposing more taxes on the middle class.

The vast majority of the income gains in the United States over the last three decades have gone to the richest 5% of the population, largely as a result of policies that were explicitly designed to redistribute income upwards. Therefore it is far more appropriate to tax the richest 5%t of families who have prospered than the broad middle class who have suffered.

Of course taxes can be designed in a better or worse manner. The best way to increase taxes on the wealthy, in addition to allowing the Bush tax cuts to expire, would be to apply a modest financial transactions tax (FTT).

There is a long history in both the United States and the rest of the world with FTT. Until 1964, the United States imposed a tax of 0.12% on new stock issues and 0.04% on stock trades. Britain still has a tax of 0.25% on each stock sale or purchase, raising five billion pounds a year. This would be equivalent to roughly $30 billion a year in the American economy. ..........(more)

The complete piece is at: http://www.economist.com/debate/days/view/299

[closeupready]

1. Obama is full of talk about doing this, but ultimately, he won't, IMO.

In the interests of 'bipartisanship'. :eyes: As if it's bipartisan to run the US government into bankruptcy and/or default and/or hyperinflation.

[natrat]

2. exactly from nafta to surveilance to torture to bank reform and on and on-al complete bs

[closeupready]

3. Yep.

n/t

[katty]

4. obama has a good talk on this - but that is as far as it goes

[macebowman]

5. The Bush taxcuts made the taxcode more progressive

What happened?

Yes, after the Bush taxcuts the rich paid more of the total tax burden.

What happened?

The rich got richer and the poor goot poorer.

If a poor person pays a dollar in taxes, he gets back six. If a rich person pays a dollar in taxes, he gets back like twenty cents. I don't know, but if you ask me--the poor ought to pay as much in taxes as they can, they get six tims as much back. But, if they don't give the money to Uncle Sam, where does it go? Why, in the pocket of the rich person. And how much does the poor person get of that money? Zip. Nada--absolutely nothing. Instead, the rich person uses that money to do everything he can to keep taking money from the poor person.

Yep, today--the rich pay a greater portion of the total federal budget than anytime in history. But, the best part--that "portion" cost them less as a total percentage of their income than anytime before. The trick is not to make the rich pay more, the trick is to make them pay LESS--not because they paying a lower RATE, but because they are making less of the total inoome. The way that happens is to adjust the taxcode to encourage those at the lower incomes to SAVE instead of SPEND. The easiest way to do that--increase the taxes on em. They pay more to Uncle Sam and less to Richie Rich. Uncle Sam spends the money on THEM, not AGAINST them.