Local members of MoveOn.org want our elected representatives to know that we stand firmly against extending the Bush tax cuts on the top income tax brackets. Instead, Congress can extend the tax cuts to lower brackets, allowing everyone in the country to see lower taxes. This includes those earning the most money, since this would lower taxes on their first $250,000 of income. But to further cut the top brackets would add a windfall to the very rich, especially those earning a billion dollars a year or more, while doing nothing to help the economy and shifting the tax burden to those that earn less and have already sacrificed over the past few decades.
The wealthiest households in the U.S. are the ones that own the majority of assets in the country. The top 1%, in fact, own about 35% of all our wealth. But the effective tax rates for the highest earners have actually fallen substantially over the last 15 years. According to a study at U.C. Santa Cruz, “the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era”. While many bemoan even a low top rate of 35%, in fact, the effective tax rate on high incomes is only about 20%. So, the tax rates for the top tiers should, in fact, be increased to a higher rate than they were before the Bush cuts.
Additionally, those that owned large property holdings have been historically called on to do the most to defend the country in times of war. This is as it should be. Wars defend both people and property. So, those with enormous holdings should pay the most to fund the federal government. Households in the top tax brackets own most of the assets and control an even larger share of the financial assets. As of 2003 just the top 1% of households with the highest incomes received more than half of all capital income.
About three-quarters of the real federal budget is used for our protection. This includes defense-related expenditures ($844 billion) and national protection ($458 billion) out of a total of $1.7 trillion. Many people count Social Security and Medicare as part of the federal budget, but this is not really government spending. These programs simply require employers to pay enough for their workers to live through retirement to a natural age. Spending on Social Security and Medicare is part of the private sector and should not be counted as part of the federal budget. When we exclude these programs and look at actual spending, the large majority of this spending is for the country’s defense.
Yet, there is no national property tax that would require those with large property holdings to pay their fair share. We make up the difference with a progressive income tax, so that the wealthiest, which have the greatest share of the wealth, are required to pay at a higher rate. Yet, many in Congress would like to reduce the top tax rates, shifting the burden to lower income levels.
Workers have already sacrificed enough. Since the early 1970s, real wages in the U.S. have declined about 8%, while worker productivity has risen about 90%. This additional labor productivity has not resulted in wage increases. That additional wealth has gone to employers and increased profits. Until workers start to see the fruits of this productivity increase they should not be required to sacrifice further with increased tax burdens.
The irony is that these exact cuts were supposed to stimulate the economy and create jobs during the Bush Administration. But there is no evidence that the current low tax rates for the very rich have contributed to any job creation. Nor is it logical to assume they would. The economy is suffering from a lack of demand. At the same time, businesses have shown no inclination to expand jobs in the United States because they’ve learned they can make a cheap buck off us.
Congress needs to address this structural imbalance before cutting any more taxes. The route to job growth (which is the basis of any solid economic growth) is to ensure that all products sold in the U.S. are made to our workplace and environmental standards. Further bailouts for billionaires will not produce economic growth. That can only come from an effective national industrial policy and an effective international trade policy, the bare minimum necessary to addresses these structural problems.
Sources:
- Wealth, Income, and Power by G. William Domhoff
- The Library of Congress, House bill “H.CON.RES.85” from the 111th Congress
- Bureau of Labor Statistics
- U.S. Census Bureau
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