The Tea Party says we are Taxed Enough Already. But who exactly is "We." Are upper income individuals and families taxed enough already or is it just lower income individuals and families? Here's the tax brackets for 2010:
Federal Income Tax Brackets For 2010 - Based On Taxable Income Ranges
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How many middle class families would object to adding a few higher brackets like say a Tax Rate of 40% for Married Couples and Individuals with Incomes over $500,000. Why not 50% for incomes over $1 million, 60% for incomes over $5 million, 70% for incomes over $10 million, 80% for incomes over $100 million and 90% for incomes over $1 billion? Even at the 90% tax rate, a billionaire filing would still have 10% of $1 billion left over in disposable income which is $100 million. Pity the poor person who can't live on that! And then why are the real high earners whose income is mostly capital gains only taxed 15% when everyone who makes at least $16,750. or higher by the sweat of their brow is taxed at least 15%. A married couple making $16, 570 is poverty level. Why is some single billionaire taxed at the same rate as a poverty level family? Note there is no reduction in tax rate when there are children in the family. CEOs take most of their income in stock options. When they cash them in, their profit is all capital gains taxed at 15%. And please note that adding higher tax brackets for millionaires and billionaires while keeping the lower brackets exactly the way they are will not add one iota of taxation to the poor and middle class.
On January 28, 2011, it was reported in various news media on television and online that John Paulson earned at least $5,000,000,000 (five billion USD) in 2010. Since Paulson is a hedge fund manager he paid taxes at the 15% rate due to the tax loophole of "carried interest." If capital gains were taxed the same as regular income, he would have paid at the 35% rate, the same as someone making $373,650. If my tax table given above was in effect he would have paid at a 90% rate. The reason why the Federal government has such large deficits is that tax rates for the rich under Republican Presidents have been systematically lowered. Tax breaks have been given to the rich with the result that now there is a debt crisis and Republicans are attemtping at this late date to balance the budget on the backs of the poor and middle class while continuing to give even greater tax breaks to the rich. From 1946 to 1954 the top tax rate was either 89% or 90%. From 1956 to 1960 the top rate was 75%. Does it make sense that millionaires and billionaires, if they are not paying most of their tax at the 15% capital gains rate, are paying at the same rate as those making $373,650? Shouldn't there be a few higher brackets in the tax code say for income over $1 million and income over $1 billion at least?
The focus becomes even clearer when we look at top marginal tax rates. A marginal tax rate is tax on income over a certain amount. When we look at marginal rates, we see that millionaires and billionaires are treated the same as lower income individuals and families on lower amounts say the first $50,000. They would pay the same rate as everyone else on their first $50,000. of income. Then, for instance the marginal tax rate on income between $50K and $100K would be greater. For only that income over $100K would there be an even higher rate and so on. Higher marginal rates would only apply to that portion of income over a certain amount not to the entire income. Marginal tax rates collapse down to one effective overall rate on the entire amount of income, but it is instructive to think of the tax code in terms of marginal rates. The notion that, once a person makes over a certain amount, their need for that additional income diminishes supports the idea of progressive marginal tax rates. The top marginal rate from 1936 to 1963 was at least 79%. From 1948 to 1964 this applied to incomes above $400,000. From 1964 to 1980 it was at least 70% on incomes above approximately $200,000. Then Ronald Reagan was elected. Reagan lowered the top marginal rate to 50% in 1982 and then George H W Bush lowered it again to 28% in 1988. So this was definitely tax breaks for the rich. Any time the higher marginal tax rates are lowered or eliminated altogether, this constitutes, ipso facto, TAX BREAKS FOR THE RICH.
Clinton raised marginal tax rates and ran a surplus rather than the deficits accumulated under Reagan and George H W Bush who together quadrupled the national debt from $1 trillion to $4 trillion. Under George W Bush the top marginal tax rate was lowered from 39.6% to 35%. Bush's policies of tax lowering and increased spending (aka "growing" the size of government) were disastrous for the national debt. When conservatives talk about "small government," they ignore the fact that Bush presided over the largest increase in the size of government in history especially in the size of that portion of government attributed to defense. In 2000 when Bush became President the defense budget was $300 billion. When he left in 2009 the defense budget was around $700 billion. So Bush "grew" the size of government by at least a factor of two just for the defense budget alone. In addition Bush cut taxes for the wealthy several times which added to the national debt as revenues decreased and added an unpaid for prescription drug benefit for Medicare recipients which again added to the deficit and the debt. In short Bush doubled the size of the national debt from $5 billion to $10 billion. From Wikipedia:
Effect of policies on federal budget deficit and national debt
Recent additions to U.S. public debt Fiscal year (begins
10/01 of prev. year)Value % of GDP 2001 $144.5 billion 1.4% 2002 $409.5 billion 3.9% 2003 $589.0 billion 5.5% 2004 $605.0 billion 5.3% 2005 $523.0 billion 4.3% 2006 $536.5 billion 4.1% 2007 $459.5 billion 3.4% 2008 $962.0 billion (proj.) 6.8% The cumulative debt of the United States in the past seven completed fiscal years was approximately $4.08 trillion, or about 40.8% of the total national debt at the time of that completion of approximately $10.0 trillion.
The total surplus in FY 2001 was $128 billion. A combination of tax cuts and spending initiatives has added almost $1.7 trillion—through budget deficits—to the national debt since then (October 1, 2001 through September 30, 2007). It should be noted that yearly debt accumulation often exceeds the yearly budget deficit, because, for example, paying the interest on the debt is not planned in the budget to be paid off or because Social Security receipts run a surplus (see Fiscal policy of the United States). The total budget deficit for FY 2007 was $162 billion.
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Most debt was accumulated as a result of tax cuts and increased national security spending. According to Richard Kogan and Matt Fiedler, "the largest costs — $1.2 trillion over six years — resulted from the tax cuts enacted since the start of 2001. Increased spending for defense, international affairs, and homeland security – primarily for prosecuting the wars in Iraq and Afghanistan – also was quite costly, amounting to almost $800 billion to date. Together, tax cuts and the spending increases for these security programs account for 84 percent of the increases in debt racked up by Congress and the President over this period." Lawrence Kudlow, however, noted "The U.S. has spent roughly $750 billion for the five-year war. Sure, that’s a lot of money. But the total cost works out to 1 percent of the $63 trillion GDP over that time period. It's miniscule [sic]." He also reported that "during the five years of the Iraq war,. . .household net worth has increased by $20 trillion." Nobel laureate Joseph Stiglitz has estimated the total cost of the Iraq War at closer to $3 trillion.
Interest on the debt (including both public and intragovernmental amounts) increased from $322 billion to $454 billion annually. The share of public debt owned by foreigners increased significantly from 31% in June 2001 to 50% in June 2008, with the dollar balance owed to foreigners increasing from $1.0 trillion to $2.6 trillion. This also significantly increased the interest payments sent overseas, from approximately $50 billion in 2001 to $121 billion during 2008.
President Bush also signed into law Medicare Part D, which provides additional prescription drug benefits to seniors. The program was not funded by any changes to the tax code. According to the GAO, this program alone created $8.4 trillion in unfunded obligations in present value terms, a larger fiscal challenge than Social Security.
So contrary to what the Republicans would have you believe, the US does not have a spending problem, it has a revenue problem brought about by insane policies of lowering taxes on the rich, increased defense spending and an unfunded prescription drug benefit. Now Obama, having inherited these built-in deficit producing Bush policies is being blamed for running the country into debt, and Republicans are attempting to balance the budget on the backs of the poor while giving even more tax breaks to the wealthy on the grounds that they are the "job creators." If they were truly job creators, don't you think that Bush tax lowering policies would have produced one job for the eight years Bush was in power? They didn't. Obama tried to get Medicare spending under control with his Affordable Care Act. Unfortunately, Republicans fought him every step of the way particularly on the elements which would have reduced spending on health care. If a public option had gone into effect, it would have reduced health care expense. If Medicare was allowed to negotiate prescription drug charges, that would have brought down the cost of Medicare. Now Republicans want to privatize even Medicare which will mean that poor senior citizens will just die from lack of health care because they won't be able to afford private health insurance.
Taxes on corporations used to constitute a substantial part of US government revenues. No longer. The share that corporate tax revenues comprise of total federal tax revenues has collapsed, falling from an average of 28 percent of federal revenues in the 1950s and 21 percent in the 1960s to 9% in 2010. The Republican game plan has been to lower taxes on corporations and the wealthy while claiming that that will create jobs, a fact that has been historically proven to be untrue, and then to raise taxes on the poor and middle class while cutting social programs because they claim we can no longer afford them. When they talk about cutting government spending they never talk about cutting the bloated Defense Department budget which is larger than the rest of the world's military budgets combined. That is MIA from their conversations. They never talk about increasing government revenues in order to balance the budget.
If the US wants to get serious about decreasing deficits, it needs to roll back the Bush tax cuts, cut military spending and reform the Medicare prescription drug benefit. Just going back to pre-Bush policies would likely bring the budget under control. Ending the tax loopholes for corporations would bring in additional revenues. Corporations like GE and Exxon Mobil which make tens of billions of dollars in profits should not be getting billions of dollars from the US government in tax refunds. Subsidies to agriculture and Big Oil should be eliminated saving billions more. Adding higher income marginal tax brackets would broaden the notion of shared sacrifice. Democrats need to extend the scope of the debate to include these items. Instead they let the Republicans narrow the debate to just eliminating or decreasing programs which benefit the poor and middle class.
