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Raise taxes on the rich

Robert Reich

Bob Moon: We keep hearing about how much we can't afford and what programs we need to cut to rein in the federal deficit. But there could be two edges to the budget knife.

Commentator Robert Reich wonders why one agenda item seems to be missing from the conversation.


Robert Reich: As Americans get ready to file their taxes, politicians are battling over how much to cut government spending in order to reduce huge deficits. Curiously though, one option for deficit reduction seems to be off the table. That's to raise taxes on the very rich.

For decades now, America's top earners have been pulling in a larger and larger share of the nation's total income. Over the same period though, their tax rates have steadily declined. In the 1950s, the top marginal income tax rate was 91 percent. Now it's 35 percent. Even when you include deductions and credits, the super-rich are now paying a far lower portion of their incomes in taxes than at any time since World War II.

Meanwhile, capital gains and dividends -- a big chunk of their income -- were taxed at 35 percent as recently as the late 1980s. Now, they're taxed at 15 percent. And the estate tax has now vanished for estates under $5 million or $10 million a couple.

If the rich were taxed at the same rates they were taxed a half century ago, they'd be paying some $350 billion more this year in federal taxes. That would be trillions of dollars over the next decade -- a major contribution to eliminating the deficit.

Now yes, of course, clever accountants and tax lawyers would find ways around any tax increases, but this was always the case.

The real difference between now and then is the political power of the super-rich is much greater. After all, that's why their tax rates are so much lower.

But it's just possible that the devastating budget squeezes in Washington and in state capitals, and the slashing of public services vital to the middle class and the poor, may prompt Americans to look back 50 years -- and ask why the super-rich shouldn't pay the same tax rates now as they did then.


Moon: Robert Reich was Labor Secretary for President Clinton. His most recent book is called "Aftershock: The Next Economy and America's Future." Next week, David Frum. And in the meantime, you can always throw your two cents into the budget debate -- click on this contact link to let us know what you think.

About the author

Robert Reich is chancellor's professor of public policy at the University of California, Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.
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Taxes most definitely should be part of the discussion. Allegations that the rich pay the lionshare of taxes are grossly overstated. When all taxes are factored into the equation icluding property taxes, sales taxes, excise taxes etc. the middle class is carrying the burden of paying for our society. The wealthy benefit the most from government services in our country but don't recognize it. They need to pay for those services. Take GE for instance. It's inexcusable that a company that makes so much from government contracts and subsidies, paid no income tax last year.

So glad I could get my dose of socialism from Robert Reich. He needs to stop doing a few things:
1. counting other people's money--why do liberals always cite the percentage of wealth held by the "top 1%" but never the percentage of taxes paid by them. How about 40%, which was more than paid by the bottom 95%?
2. criticizing success--did it ever occur to Reich that a large reason people are financially successful is because of some combination of hard work, intelligence, responsiblity, creativity? No, he seems to think that the only way one person enjoys success is by cheating someone/everyone else.
3. believing that socialism is the answer--why should someone work hard and make responsible choices (like saving wisely)if they are not going to be rewarded for it, and worse, have the fruits of their labor stolen for the benefit of those who chose not to be responsible or work hard?

If Reich thinks taxes are too low, then he has my permission to send more to the IRS since he obviously believes that the government can spend his money better than he can. Until it can be shown that Washington knows my needs and priorities better than I do, I am not ready to cede my decision-making authority and freedom.

While you may disagree about whom to tax, the reality is that the current tax rates are the LOWEST they have been in generations. Spending may be too high, but revenue is too low as well. Where is the balance?

If Mr. Reich were interested in presenting a balanced picture, he would address the spending side of the equation. Or does he think it's possible to sustain the unsustainable -- namely, the excessive costs imposed by public employee unions?

What seems to be missing from the tax debate is the acknowledgment of the dependency of the rich (here, I mean people making over $1 million a year)on the working class. Without the working class buying up the services and products offered by the companies owned by the rich, the rich, well, wouldn't be rich. Further, without a stable society in which the working class may flourish and contribute to the economy, the rich cannot continue to be rich.

Marketplace and Cartalk were the last shows I listened to on NPR. With constant drivel from Mr. Reich and socialist tendencies thinly veiled in a business format, I no longer listen but occasionally visit the website. No longer!

Dr. Reich trots disingenously compares tax rates 50 years ago with current rates. 50 years ago America was mopping up debt from WWII and the disaster of the Great Depression. Current events - no matter what pie-eyed Lefties claim - bear little comparison.

This is a question in response to Dr. Reich's implied assumption of absolute surrender to federal power: what is the relation of the citizen to the government? Is our role to subsidize an ever-increasing and unaccountable bureaucracy?

The more practical and traditional American solution is to make best use of resources according to community standards with local knowledge & resources.

Perhaps Dr. Reich has been away at Berkeley's furry tower too long and lost touch with American ideals.

Dr. Reich did not consider the effect high tax rates have on taxable incomes: the higher the tax rate, the more incentive there is to conceal income from the taxing authority. In the 1950s those who qualified for the 91% tax rate employed the best brains in the world to reduce their taxable income. As tax rates were reduced it has made sense not to waste money doing this, so it's no wonder the reported taxable income of the rich has increased. Who knows whether their actual income has increased? If a major company pays 6% tax on its income when the tax rate is 35%, can anyone rationally argue that a billionaire actually paid 91% tax when the tax rate was 91%? Billionaires do not become billionaires because they're stupid. They might have paid a marginal rate of 91% on the last dollar of their reported income, but most of them (I'm sure) had a large unreported income. Don't forget that in those days Swiss bank accounts really were secret.

Interesting to see that there is no 'counter' point on this article. If you look at the real data you will see that the top 5 percent of income earners pay 40-50% of all tha nations taxes -- and where the corporate tax is concerned the US has the highest rate in the world; If we lowered the corp tax rate jobs would return to the US and the federal revenue income would grow accordinly. If we continue to tax the rich excessively and at continued increasing levels, eventually we will kill 'the golden goose'.

Robert Riech, Warren Buffet, and myself all agree that additional taxing of the very rich is what should be done to "help" counteract the ballooning debt. However, the analogy of returning to the 1950 tax base opens the opportunity to look at the other half of the coin such as no funding of Planned Parenthood, No free lunches at school, No "earned income" on the poorest - who by the way a close friend of mine spent their thousands of dollars in hand-outs on electronic gear all made in China. Nice stimulas as China eats our lunch from "earned income". Yes, lets go review the balance sheets of the 1950's tax and spending. I'm with you all the way Robert!

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