We’ve long maintained that having progressive and reasonable tax rates helps pay the bills, but are of secondary importance when it comes to the dynamics of robust economies.
That said, not paying the bills can have disastrous consequences. We’ve been cutting tax rates for eleven years now and look at the results: Poor job growth, wide trade deficits, a severe recession and mounting debt. Contrast that with the 8 years of the Clinton Presidency. Clinton raised the tax rates, which obviously didn’t hinder a robust economy and which obviously resulted in surpluses. At the end of those eight years the debt clock everyone gawks at today was turned off because we had surpluses not deficits.
So a reasonable question is what would our debt picture today be like if we had tax tables from previous eras. As it turns out someone figured that out using the tax rates of 1961. From an article at the Ourfuture blog, written by Sam Pizzigati, a journalist who has written extensively on the problems of income inequality.
Some numbers — from an Institute for Policy Studies report released this past spring — can help us better visualize just how monumental this political failure has been.
If corporations and households taking in $1 million or more in income each year were now paying taxes at the same annual rates as they did back in 1961, the IPS researchers found, the federal treasury would be collecting an additional $716 billion a year.
In other words, if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally vanish over the next decade.
Similarly stunning numbers have come, earlier this month, from MIT economist Peter Diamond and the University of California’s Emmanuel Saez, the world’s top authority on the incomes of the ultra-rich. These two scholars have shared some fascinating “what ifs” that dramatize how spectacularly the incomes of our wealthiest have soared over recent decades.
In 2007, Diamond and Saez point out, taxpayers in the nation’s top 1 percent actually paid, on average, 22.4 percent of their incomes in federal taxes. If that actual tax burden were to about double to 43.5 percent, the top 1 percenter share of our national after-tax income would still be twice as high as the top 1 percent’s after-tax income share in 1970.
So why aren’t we taxing the rich? Why are we now suffering such fearsome “debt crisis” angst? Why are our politicos so intent on shoving the “fiscal discipline” of layoffs and cutbacks — austerity — down the throats of average Americans?
No mystery here. Our political system is failing to tax the rich because the rich have fortunes large enough to buy off the political system. Again, some numbers can help us better visualize that plutocratic big picture.
In 2008, the IRS revealed this past May, 400 Americans reported at least $110 million in income on their federal tax returns. These 400 averaged $270.5 million each, the second-highest U.S. top 400 average income on record.
In 1955, by contrast, America’s top 400 averaged — in 2008 dollars — a mere $13.3 million. In other words, the top 400 in 2008 reported incomes that, after taking inflation into account, amounted to more than 20 times the incomes of America’s top 400 a half-century ago.
But 1955’s top 400 didn’t just make far less than 2008’s top 400. The rich in 1955 paid far more of their income in taxes than today’s rich. In 2008, the new IRS data show, the top 400 paid only 18.1 percent of their total incomes in federal income tax. The top 400 in 1955 paid 51.2 percent of their total incomes in tax.
The bottom line: After taxes, and after adjusting for inflation, 2008’s top 400 had a staggering $38.5 billion more left in their pockets than 1955’s most awesomely affluent.
Multiply that near $40 billion by the annual tax savings the rest of America’s richest 1 percent have enjoyed over recent years and you have an enormous war chest for waging class war, billions upon billions of dollars available for bankrolling think tanks and candidates and right-wing media.
In the face of these billions, should the rest of us, America’s vast non-rich majority, just toss in the towel? Our counterparts a century ago certainly didn’t. They challenged their rich, on every battlefront imaginable. They eventually prevailed. They sheared their rich down to democratic size.
We can do the same.
Beezer here. The numbers speak for themselves. But the major media ignores them. Why is that? Could it be that there really are organized Oligopolies, including an important media one that censors this information? It’s hard not to believe this is what’s happening because there is a robust discussion on the internet, of which the article re-printed here is only one of literally thousands. If some media mogul seizes this opportunity and picks up these conversations in a big way, the balance could shift back to informed debate once again.