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.
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