Tax the rich: Should millionaires really pay more?
The fight over raising levies on the wealthy, a theme of the 'Occupy Wall Street' protests, is about more than money. It's a clash over fundamental American values.
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The gulf between rich and poor is at its widest since the 1920s, and the wealthiest 1 percent of American households now take in more than 20 percent of total US income, a figure that's doubled in the past three decades. Over the same time period, marginal income tax rates on top earners dropped from 70 percent to 35 percent.
"It's become a moral issue rather than just an economic one," Robert Reich, the former Labor secretary and liberal political economist, says of taxation. "Most people in this country are flat on their backs economically. It's the worst economy since the Great Depression. We have a huge budget deficit that's getting worse."
"If the rich don't pay their fair share, then everyone else has to either pay more taxes or go without the public services they need," he adds.
IN PICTURES: Wall Street protests
Mr. Reich isn't alone in that belief. More than three-quarters of Americans support progressively increasing federal income taxes for households that earn at least $1 million annually, according to a Christian Science Monitor/TIPP poll taken last month. And 64 percent favor increases for households earning at least $250,000 a year.
Wealthy people, not surprisingly, are more divided over the idea. Only 23 percent of well-to-do Americans (those making more than $100,000) support tax increases for households making $250,000 a year, according to a September poll conducted by the Harrison Group and American Express Publishing Corp. But the support goes way up when the threshold rises: fully 65 percent of respondents said they would support tax increases on people making $1 million or more.
Don't count conservatives among them.
"Can a people tax themselves into prosperity? Can a man stand in a bucket and lift himself up by the handle?" Winston Churchill demanded in 1904, during his first term in the British Parliament. Never mind that the late British prime minister was talking about free trade, rather than income taxes; that quote has attracted a popular following in contemporary Republican circles, where an arsenal of antitax arguments are being honed for use in the current debate.
Conservative political economists cite how much of the federal tax burden is already shouldered by America's richest citizens. The wealthiest quintile of households paid 68.9 percent of federal taxes in 2007, according to data from the Congressional Budget Office. They also argue that not even a soak-the-rich strategy would make much of a dent in America's staggering debt. Robbing the Fortune 400 of everything they've got would yield about $1.53 trillion – nearly the gross domestic product of Canada but a fraction of the $14.8 trillion US debt.