Should the rich pay more?
The biggest issue on which the presidential candidates have given us the clearest choice is whether the rich should pay more in taxes, Reich writes.
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Meanwhile, the tax rates paid by the wealthy have dropped precipitously. Before 1981 the top marginal tax rate was never lower than 70 percent. Under President Dwight Eisenhower it was 93 percent. Even after taking all the deductions and tax credits available to them, the rich paid around 54 percent.Skip to next paragraph
Robert is chancellor’s professor of public policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Clinton. Time Magazine named him one of the 10 most effective cabinet secretaries of the last century. He has written 13 books, including “The Work of Nations,” his latest best-seller “Aftershock: The Next Economy and America’s Future," and a new e-book, “Beyond Outrage.” He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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The top tax rate is now only 35 percent and the tax on capital gains (increases in the value of investments) is only 15 percent. Since so much of what they earn is from capital gains, many of the super-rich, like Mitt Romney himself, pay 14 percent or less. That’s a lower tax rate than many middle-class Americans pay.
In fact, if you add up all the taxes paid — not just on income and capital gains but also payroll taxes (which don’t apply to income above incomes of $110,100), and sales taxes — most of us are paying a higher percent of our income in taxes than are those at the top.
So how can anyone argue against raising taxes on the rich? Easy. They say it will slow the economy because the rich are “job creators.”
In the immortal words of Joe Biden, that’s malarky.
The economy did just fine during the three decades after World War II, when the top tax rate never fell below 70 percent. Average yearly economic growth was higher in those years than it’s been since, when taxes on the rich have been far lower.
The real job creators are America’s vast middle class, whose spending encourages businesses to expand and hire — and whose lack of spending has the opposite effect.
That’s why the recovery has been painfully slow. So much income and wealth have gone to the top that the vast majority of Americans in the middle don’t have the purchasing power to get the economy moving again. The rich save most of what they earn, and their savings go anywhere around the world where they can get the highest return.
It would be insane to compound the damage by raising taxes on the middle class and not on the rich.
Logic, fairness, and common sense dictate that the rich pay more in taxes. It’s the key to avoiding January’s fiscal cliff and coming up with a “grand bargain” on taming the budget deficit. And it’s central to getting the economy back on track.
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