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Getting Real on Budgets—and Who Won’t Budge

If you’re like me, the word “budget” brings to mind a nice nap.

Still, it’s those snoozers that invariably have the most profound consequences for all of us. And now, with the federal debt debate raging, is the time to make a strong cup of coffee, rub your eyes, and focus.

Here’s a new report from the Institute for Policy Studies’ Program on Inequality and the Common Good. You’ve probably heard some of these statistics, and some of these ideas. But not all—and this is the moment where it all comes together.

The authors say that the shutdown talk was never necessary, not if we were talking about the right things.

Here’s the “executive summary”:

The United States is a wealthy society. But our wealth has pooled at the top.

• We face mammoth state and federal budget cuts because we have, in large part, failed to sufficiently tax America’s millionaires and prevent aggressive tax avoidance by multinational companies.

• Wealth and income have concentrated in the United States at incredibly rapid levels. The richest 1 percent of households own over 35.6 percent of all private wealth, approximately $20 trillion. The number of households with incomes exceeding $1 million has grown from 15,753 in 1961 to 361,000 today, adjusted for inflation. This is a 968.4 percent increase, while the U.S. population only grew 69.3 percent over this same 50-year period.

• As wealth and income have become increasingly concentrated in the hands of a few, middle class living standards have imploded, due both to wage stagnation and the deterioration of public services and investment. Poverty has remained persistent — and even worsened. As a result of the economic meltdown, the number of Americans living in poverty has spiked to the highest level in 15 years.

Our tax system now raises proportionately less from affluent taxpayers and large corporations than it did 50 years ago in 1961, the year President Barack Obama was born.

• Households with incomes over $1 million in 1961 paid an average 43.1 percent of their incomes in federal income taxes. Today, households with $1 million income or more pay 23.1 percent, almost half as much, adjusting for inflation.

• If households with income over $1 million today paid their federal income taxes at the same rate that comparable households paid taxes in 1961, we would this year raise an additional $231 billion.

• If affluent households, those with incomes in 2011 between $200,000 and $1 million, paid at 1961 rates, the U.S. Treasury would see another $151 billion.

• If U.S. corporations paid at the same effective tax rate that they paid in 1961, the additional tax revenue would total $485 billion.

• In 1961, small business owners and individuals paid twice as much in federal income taxes as large corporations. By 2011, small business owners and individuals will be paying nearly five times in taxes what corporations pay.

These five tax revenue reforms could raise a total of as much as $4 trillion over the next decade:

• Establish several higher income tax brackets for millionaires: $60-$80 billion a year

• Scrap overseas corporate tax havens: $100 billion a year

• Introduce a modest financial transaction tax: $150 billion a year

• Revamp the estate tax to include progressive rates: $25 billion a year

• End preferential treatment for income from dividends and capital gains: $88 billion

The authors of the report know what sort of response to expect, and anticipate it:

Critics of the proposals we present here would, if these ideas gained political momentum, no doubt howl “class warfare” and dub these initiatives “job killers.” Some would argue that government shouldn’t be in the business of “picking winners” in the economy.

But our current tax policy is already picking winners every day. Our government is subsidizing practices that are burning up the earth with climate change — and freezing out the regionalized green businesses of the future. We’re rigging the tax rules to benefit the wealthy and global corporations at the expense of everyone else.

It concludes:

Until we as a nation reverse the Great Tax Shift, we will be debating — and likely imposing — totally unnecessary and avoidable austerity measures at every level of government. We will keep on firing teachers, police officers, and mental health workers instead of ending the games that corporate tax dodgers play and insisting that all Americans, including the most affluent, contribute to our national well-being.

The Center on Budget and Policy Priorities already reports that more than 46 states have imposed severe budget cuts that hurt vulnerable residents and endanger economic recovery. Now we face almost unimaginably deep cuts at the federal level as well. As a nation, we can — and we must — do better.

Whatever you make of this proposal—like it, hate it, or somewhere in between, it’s something worth discussing.  If you are one of the lucky ones who has been blessed, fairly or not, with the benefits this country, its people and its economy can bestow, you might well ask—what have I done in return? And—whether or not I like these measures (and who does like paying more for anything than they have to)—why don’t I step up and do the right thing? After all, I can afford to.

Many Americans beat their breasts and argue that they contribute enough through getting up in the morning and doing what they do. Taxes are bad, period, they say. It’s all a waste and a rip-off and lazy people taking my hard earned money. Government is inherently sinister and oppressive.

That’s really a uniquely American perspective, and doesn’t in any way reflect the reality of the need to pay for things we all use—things that in many ways benefit the wealthy far more than they’d like to admit.  Still, the resistance to taxes has a hugely powerful place in the national psyche, and the emotional tug is profound.

So, no, you don’t need to concede anything at all if you don’t want to.

But you could.

 

Image Credit:  (http://www.flickr.com/photos/29084098@N00/5121932180/)


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  • Planck

    It is a uniquely American perspective because like taxes, the Ruling Elites control cultural institutions here and everything about how most of us see the world. We live in our Stockholm Syndrome here and will defend our Betters to the Death! Even our own childrens’ death.

    The truth is history shows exactly what happens when things get to this point and poverty and misery rise to the levels they will here. Extremists politicians are thrust into power. Paid and made behind the scenes by the money people, they drive the country into extremism, chaos, poverty, “state of nature”, violence, and fire asset sales. Europeans don’t fall for this in the same way as Americans do right now, because their grandparents lived through and make sure they understand the lies that have always emanated from the Palaces and Episcopates were sugar-coated in half-truths to mislead them off cliffs in service to the King and Moneyed Classes.

    Americans will someday learn they’ve been misled too, but only after they’ve been irreparably burned! They will then be very glad to pay their taxes to the State that represents them against all the Rulers’ nefarious invidiousness!

    There is a reason history was taken out of school under Reagan! And a reason we don’t need history to get corporate jobs!

  • Howard Beale

    From the perspective of someone who considers himself low- income/working class I’d say that “class warfare” has been evident in this country’s tax policy for decades. The specious howling of the top 1% whenever tax reform comes up is a defense mechanism meant to mislead those still gullible enough to believe in the “free market” as the be-all and end- all economic sytem.

    There is class warfare in this country – and we’re losing!

    http://www.workinglife.org/blogs/view_post.php?content_id=15036

  • http://profiles.google.com/apsmack a smack

    The voice of reason is drowned out by the mob crying “socialism, no more taxes, death to government!” There has got to be an emotional appeal just as strong from the other direction.

    Yes, our tax code is definitely horribly skewed. We might think about the years after WWII when our government pledged to always provide employment. When the tax code provided advantages for the smaller than small business — income averaging, investment tax credits, and more — before it was all snatched away in the seventies.

  • Rexcumming

    Something not properly explored in your post is flat wages for 12 years. That plus loss of pensions, expanding transportation and health cost (with less benefits from corporations) and the middle class had to borrow to keep up! The taxes raised on just paying our workers more would be substantial..and the money would develop velocity and change hands in the marketplace. Stagnation of cash and credit is also a major problem. Corporations are not sharing wealth, they are accumulating it.

    An additional conundrum that is seldom discussed; When taxes are raised, corporations and wealthy individuals are more likely to spend to offset gains. At this rate, the wealthy need not invest, spend, or take the same risks because it’s best to just pay taxes on the gains and sit on the cash.

  • Oldblevins

    It would be funny if it was not so pathetically sad. The Upper crust has taken everyone else’s marbles, and declared the game over. After 30 years of wealth redistribution upward, they claim any correction of the tax code is, what else, reditribution of wealth. You know, socialism. The only explanation I can see is that as a nation we are hopelessly addicted to ignorance, and have obviously not hit rock bottom. Yet. What we need is a good 12 step program that ends with common sense approaches to problem solving, including healthcare systems, budgets, foreign wars, renewable energy, civil rights, taxes, campaign finance, and much more. The Tea Party is not a path to enlightenment. The national media is not the canary-in-the-mineshaft it used to be. So maybe more widespread pain and suffering will be the catalyst. Not a reassuring thought.

  • EchoBravo

    I am not wealthy but I know better than to spout the garbage this article spouts. Let me make it clear: the wealthy have either earned their wealth or passed it on to those who they feel deserve the wealth. The wealthy owe absolutely nothing to any other class. They should be proud of their wealth because it means they’ve created products and services that consumers want (e.g. Steve Jobs and the iPhone, iPad, MacBook). The path to poverty is paved with taxes which redirect money from financially successful people to financially unsuccessful people. The more money you receive from the government, the less successful you are, and you rightfully deserve the consequences of your looting – poverty.

    • Eric Saunders

      Yeah, like Goldman Sachs, who can make $100,000,000 in a day with computerized trading that produces nothing and steals from the real economy. It is only our advances society that allows the rich to be rich. They should pay their fair share rather than hoarding all the wealth while society crumbles, as it is now.