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Robert Reich writes: "Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)



Why We Must Raise Taxes on the Rich

By Robert Reich, Robert Reich's Blog

05 April 11

 

t's tax time. It's also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma - even if we cut back on our bloated defense budget - it wouldn't be nearly enough.

The vast majority of Americans can't afford to pay more. Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.)

Yet even as their share of the nation's total income has withered, the tax burden on the middle has grown. Today's working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It's just the opposite for super rich.

The top 1 percent's share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent's share has tripled. And they're doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 - $135 billion. That's up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. >From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it's 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it's 35 percent and kicks in at $5 million. Capital gains - comprising most of the income of the super-rich - were taxed at 35 percent in the late 1980s. They're now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they'd be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That's enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don't need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system - Medicare for all - instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That's why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent - still substantial by today's standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don't the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here's the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House - indeed, the reason we have a Democratic Party at all - is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots - the explosion of income and wealth among America's super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn't be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.

The President has the bully pulpit. But will he use it?


Robert Reich 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 Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.

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Comments  

 
+36 # Realist 2011-04-05 11:56
As long as the superrich ate allowed to buy our congresspeople, they will control the government. As long as candidates need money to run for public office, they can be bought. We must eliminate the need for money to run for congress, either by giving them all equal free time for campaigning, or not allowing anyone to use TV for campaigns.
 
 
+11 # soularddave 2011-04-05 22:26
I people understood that we're paying the military to protect and acquire raw materials mainly for the benefit of corporations that pay few taxes, they'd understand that "we the people" could have a vastly smaller military presence around the world.
Hence, a vastly smaller military budget.

It's not really about physically "protecting" ourselves from some sort of "invasion"; but rather, its a cash cow, for corporations.
 
 
+2 # lkach 2011-04-06 02:36
Taking the time to vote is an expression of faith in democracy. But we have no democracy until the comprehensive set of issues that allow money to dominate democracy are addressed.
For a detailed political plan for focusing on getting money out of politics see http://moneyouttapolitics.org/
 
 
+22 # Tony in Chicago 2011-04-05 12:20
Professor Reich has a talent for saying what needs to be said with great clarity. This should be shared with as many people as possible.

This country will go down the tubes if we keep going in this antediluvian direction.
 
 
-3 # Historian-amateur 2011-04-06 23:12
Yes and No. Prof. Reich is certainly a level-headed fellow- which is something of an accomplishment for a public figure these days. But that does not necessarily mean that what he is prescribing for us is best.

It is not "the truth" that "the only way" out of the Washingtoon's financial straight jacket is to simply increase the current system to soak the rich. This is but only one possible solution.

Auditing and ending the so-called 'Federal' Reserve (which created the mess in the first place) is another possible solution (independent of how one feels about soaking the rich, which is a smaller issue). Prof. Reich, as far as I know, is not in D.C. these days. He should not be talking like a politician- threatening the people with 'dire' this unless we support 'only' that.
Professors should see multiple possible alternative solutions to a puzzle.
 
 
+33 # rm 2011-04-05 12:39
Robert Reich cites the legacy of Reaganomics which was based on the belief that the richest people in a society should not be taxed because they are the investors and the engines of economic growth. It has been obvious for many years that this is a fraudulent economic theory. The infamous "Laffer Curve" was always false.

But right wing think tanks still publish false analyses which claim that the top 10% of income earners pay 70% of federal taxes.

Very few people in the US understand what Reich is saying. All the propaganda is on the side of the very rich. There is no chance at all that Congress would vote to raise taxes on the rich. To the contrary, we can expect more tax cuts for the rich -- even while the US fights a global war.

America cannot fix the dilemma it is in. It simply does not have the intelligence or the will to do it. Reich is exactly right, but no one dares to understand him.
 
 
-3 # George de Luna 2011-04-06 09:37
Where is the evidence that the Laffer curve is false? Or that the top 10% pay 70% of tazes. (actually closer to 50%)I understand what he is saying and I think he is dead wrong. Human nature needs to be taken into account and if you take incentive away from those who know how to make money, they won't do it.
 
 
0 # Ralph Averill 2011-04-05 13:11
Another reason to raise taxes on the rich; It would make me sooooo much better.
 
 
+13 # Kayjay 2011-04-05 14:41
Clearly higher taxes on the rich would help us deal with some of our problems. The richest amongst should indeed pay at least a reasonable tax rate. But enough twittering and tittering on this in front of a progressive choir. What we really need is to organize a national caucus day to lay out a blueprint on how to get this idea in motion. It won't be easy... undoubtedly it will be a years long fight. But what we need is people power and the legal advice and passion to make at least incremental steps in this direction. Up to now, America feels like the cartoon in the "Wizard of Id" in which the richest are holed up in their ivory tower, while the masses below doing nothing more than murmur....and TWITTER.
 
 
+13 # Doug Rogers 2011-04-05 14:42
We have to curtail our "entitlements" (read retirement, Social Security, Medicare,etc) to benefit the"entitled" who don't need retirement, Social Security, Medicare, etc.
How long will it take the citizens of this country to stop believing the continual lies of Fox News, Rush Limbaugh, Glen Beck and all the other paid propagandists. How many more people will be made homeless and jobless before we stop listening to these traitors.
We are in the process of trading our schools, our libraries, our medical care for 11 aircraft carrier groups, 65 nuclear subs, untold numbers of multi-million dollar aircraft all used to fight 15th century religious fanatics.
 
 
0 # giraffee2012 2011-04-05 14:44
Rich should replace the CEO of GE who is in charge of "jobs" in Prsident Obaama's cabinet (while keeping is GE job).

Sure- we must raise the taxes on the rich, Rich -- but first we must remove the LOOP holes -- And not raise the taxx on those making $250.00 / year but start higher. That was President Obama's error. The BAR WAS SET TOO LOW.
 
 
+9 # liberalman 2011-04-05 14:49
The Gop, funded by the super-wealthy have duped the poor huddled masses into shouting: government takeover & all the other misleading slogans whenever raising the tax base on the super wealthy is considered. The democrats must change this false narrative now!
 
 
+1 # Activista 2011-04-05 16:02
"Republican Ryan proposes cutting $5.8 trillion from the federal budget over the next 10 years. The plan includes major overhauls of Medicare and Medicaid, a broad reform of the tax code, and reductions in domestic spending (including a modest $78 billion trim to defense spending over 10 years)...
we must CUT military 50% - not 0.5% over the next ten years (likely it will matter much anyhow - looking for job in Chinese bank ..)
 
 
+6 # Fraenkel.1 2011-04-05 16:55
Dear Dr. Reich.

Yes it's true there are moral reasons the rich should pay more taxes and besides we need the money to maintain the economy, to keep the country functioning. What the rich don't understand is that they stand to make more money by paying much higher taxes because they get more benefits from government expenditures that the rest of us. In a properly functioning economy supported by taxes the rich will more than make make for their increased taxes by the increase in the value of their assets. Taxes pay for services that everyone needs for the country to function. The rich need more than the rest of us and they stand to gain more. During the Eisenhower administrations when marginal tax rates were still around 95% we built the freeways using tax money. The improvement to the economy was incalculable. Nowadays we can't collect enough tax revenue to maintain them.
The right wing think all they have to do is mouth the magic words "socialism", "taxes", "bureaucracy" and the proposed "reasonable" issue will just go away. Sooner or later people will get wise. It amazes me that the majority of voters last election were persuaded to vote against their own interests.
 
 
+2 # JNWesner 2011-04-05 17:09
Is there anything here we haven't all known for months if not years? It's plain common sense and fairness. Therefor it has zero chance of passage.
 
 
+4 # rm 2011-04-05 18:39
According to the IRS 1040EZ, the breakdown of who pays how much into the Fed government is as follows –

Personal income tax 26%
Social Security tax 25%
Corporate Income tax 4%
Excise, custom, misc 5%
Borrowed money 40%

Social Security tax is limited to the first $100,000 of income, so rich people pay very little of the SS tax bill. There are too few of them and they pay as if they were not rich. I don’t know if the Corp. tax is net actually paid (i.e., after rebates) or if it is before rebates. But it is still almost nothing considering corporations make more than half of all the income in the US.

Clearly the poor and the working class are paying the bulk of the US tax bill. And what do they get for it? They get social security and Medicare and those are good programs. When the republicans and Obamites take that away, then they will get nothing. Not a damn thing.

That is how our Plutocrats have designed it and they like it this way. Don't expect it to change -- ever.
 
 
+10 # fredboy 2011-04-05 19:30
My grandson will be born next week and it is obvious his future has already been sold to the rich. They think they own him. And all of us.

But he and his sister will be remarkably strong. And independent. And determined. They will also be brilliant and wise, and direct their lives to the purposes of freedom and goodness for all.

Call that ridiculous, call it un-American, call it un-Christian in the modern view of those terms. But know this--corruptio n always consumes itself, and lights the fire of resolve and determination.

So many of us are fed up. And becoming very angry.

Read history, my rich barons. And brace yourself for all that is to come.
 
 
+6 # stormkite 2011-04-05 22:25
The lifespan of a democracy, historically, is about 200 years. We're at 235.

Been fun, but you can't run a free market if 1% of the populace can afford to buy anything and the rest are penniless.

Feudalism works, though.
 
 
+4 # Patricia Chang 2011-04-05 22:46
Obama will not use his Bully Pulpit. He is among the wealthy elite; and wants to cater to them and please them. He is joined at the hip with Wall Street and enthralled with the Military-Indust rial Complex. He is not going to change diddly-squat. All he has done thus far is slap on a few bandaids, put up some window dressing, bring in the smoke and mirrors and pat himself on the back for it. Meanwhile, he goes into a rage, when criticized and asked to keep his campaign promises. He says he has!!! If he believes that, we are in more trouble than we think. He has as many True Believers as the Republicans and their Teanut fanatics. The ability to think critically and analytically is lost in this country. Those like Dr. Reich are voices crying in the wilderness. Those of us who can look at the signs, are not in denial, and can see the results of government stupidity, are not feeling very happy about the future. I am not sure there is much we can do at the moment. We will have no intelligent, honest, ethical choice in 2012. We will be offered up "politics as usual" by corrupt politicians, who will not honor any campaign promises. Maybe it all has to collapse. Not enough people see reality yet. One would think they would, but they do not. Only when the vast majority suffers, will real change come.
 
 
-6 # rf 2011-04-06 06:57
The reason nothing will happen is that Obama is too busy kissing butt of his Harvard classmates. He wants to be one of the gang...he'll never sign anything smelling of taxes on his friends. Otherwise he would consult Krugman and Reich occasionally.
 
 
0 # rf 2011-04-06 06:59
"The ability to think critically and analytically is lost in this country."

It was lost in 1930's Germany also. When people errupt, it can go two ways...it looks like it is going right...Heil!
 
 
0 # sharag 2011-04-06 02:01
No, the President will not use the bully pulpit. I wish he would. But, he won't.

That's why we the people, center, left and right, must unite.

Now that would be poetry.
 
 
+1 # edna 2011-04-06 07:52
Nice spin job Mr. Reich, but your radical left propaganda on taxing the rich is no longer selling in America. First, raising tax rates does not and has never materially increased tax revenues. On the other hand, reducing tax rates, as Reagan did in the 80's by 50%, increases tax revenues and Reagan's reduction generated 100% increase in tax revenues by the time he left office. Second, raising tax rates on the wealthy will result in those same persons moving assets and capital to a more favorable tax jurisdiction (i.e., the gov't will not get a material increase in tax revenue and most likely a reduction). Lastly, paying tax is not an obligation for U.S. citizenship. Prior to 1913, no such obligation existed and you should explain to the American people the legalized robbery both the FED and U.S. government have perpetrated on them since 1913. Why did the Income Tax act get implemented in 1913? Why was the FED act implemented in 1913? Yes, they both go together and the private owners of the FED required the TAX act so that the US taxpayers would bail out the US gov't with their own money via taxation which was not required for over 137 years. The real problem is the Gov't is wasting the US taxpayers money and the system is full of corruption. Don't blame the people for the fraud that has been committed on the American taxpayer since 1913.
 
 
+1 # Oh Rlly... 2011-05-24 01:00
Pretty sure you're a troll, but there are people who will read this and think you're for real. Reagan did not lower taxes. He didn't. He *raised* them. Not just once, either. Four times. As for "1913"... It was the year direct income taxes became Constitutional, not the year they began. They started as the means for recouping the cost of the Civil War. And I know you're just spitting up the bile you've been lapping from Glenn Beck's mouth, but taxes are a necessary evil. The commodities and infrastructure we enjoy as Americans will be paid for by Americans. It's cheaper for the individual for society to fund these things as a whole(and we all get to use them, too!)
 
 
+1 # mtnview 2011-04-06 08:11
Organize and vote for anyone but a major party candidate, but do not expect your vote to change anything, rather let it be a signal of our anger, a warning to the elite. Then use your organization skills to resist. The power has always belonged to the people. Stop paying your insurance, your health care premiums, your credit cards, your mortgage. If we all do this, they can not come for us. The system will collapse, finally, and then we can rebuild without the Fed.
 
 
+1 # wfalco 2011-04-06 10:23
"The President has the bully pulpit. But will he use it?"
If re-elected I believe he will. Then he will know that enough of the American public trusts him to do the right thing.
FDR needed the disenfranchised public to "make him do it." So does Obama.
If we, the public, lead-the rest will follow. The money trail to politicians must be counter-balance d by the popular vote.
Like it or not- Obama is the only Democratic candidate who can get out the youth and minority vote. That is how he won. To dream of a third party candidate or a radical alternative, like Kucinich, is utter foolishness.
 
 
-1 # FalseDichotomyAnyone 2011-04-06 23:17
You guys, like Reich, seem to have caught the rhetorical 'O-word syndrome'- where all problems have "ONLY" one solution, only one savior, and only one crayon.
Open your minds. Think freely. Remember, you're not the policians. THEY are (and that's their problem).
 
 
0 # judith langer 2011-04-14 17:11
We need to tax the rich!! Not take away from seniors, education and disabled. We need to tax the rich!!!
 

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