One cannot complain about negative cash flow when they ignore the opportunity to increase revenue. (CFP)
“Why I’m Right About Raising Taxes on the Very Rich.
By Robert Reich
February 15, 2011
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:
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 knowing 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 under Ronald Reagan was it slashed
Incidentally, during these years the nation’s pre-tax income
was far less concentrated at the top than it is now. In the
mid-1970s, for example, the top 1 percent got around 9
percent of total income. By 2007, they got 23.5 percent. So
if anything, the argument for a higher marginal tax should be
even more realistic now than it was during the days when it
was taken for granted.
A disconnect with the world as it exists today? That’s
exactly the point of proposing it. For years progressives
have whined that Democratic presidents (Clinton, followed by
Obama) compromise with Republicans while Republican
presidents (Reagan through W) stand their ground – with the
result that the center of political debate has moved steadily
rightward. That’s the reason the world exists the way it does
today. Isn’t it about time progressives had the courage of
our conviction and got behind what we believe in, in the hope
of moving the debate back to where it was?
Would a Democratic president be insane to propose such a
thing? Not at all. In fact, polls show an increasing portion
of the electorate angry with an insider “establishment” – on
Wall Street, in corporate suites, and in Washington – that’s
been feathering its nest at the expense of the public. The
Tea Party is but one manifestation of a widening perception
that the game is rigged in favor of the rich and powerful.
More importantly, it will soon become evident to most
Americans that the only way to reduce the budget deficit,
preserve programs deemed essential by the middle class, and
not raise taxes on the middle, is to tax the top.
In fact, a Democratic president should propose a major
permanent tax reduction on the middle class and working
class. I suspect most of the public would find this
attractive. But here again, the only way to accomplish this
without busting the bank is to raise taxes on the rich.
Republicans have done a masterful job over the last thirty
years convincing the public that any tax increase on the top
is equivalent to a tax increase on everyone – selling the
snake oil of “trickle down economics” and the patent lie that
most middle-class people will eventually become millionaires.
A Democratic president would do well to rebut these
falsehoods by proposing a truly progressive tax.
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.
Some critics worry that if the marginal tax is raised too
high, the very rich will simply take their money to a more
hospitable jurisdiction. That’s surely possible. Some already
do. But paying taxes is a central obligation of citizenship.
Those who take their money abroad in an effort to avoid
paying American taxes should lose their American citizenship.
Finally, there are some who say my proposal doesn’t stand a
chance because the rich have too much political power. It’s
true that as income and wealth have moved to the top,
political clout has risen to the top as well.
But to succumb to cynicism about the possibility of
progressive change because of the power of those at the top
is to give up the battle before it’s even started.”