The Senate Democratic leaders' proposal to impose a 5 percent surtax on Americans with yearly taxable incomes of more than $1 million to pay for President Obama's proposed Jobs Act is not a legitimate substitute for the comprehensive tax reform the nation needs. But it is close enough to it to make a valid point: Americans at the zenith of household income and national wealth will have to give back some of the gratuitous and grossly disproportional tax breaks they got from George W. Bush and his Republican-controlled Congress in 2001 and 2003 if there is to be any serious progress on cutting the federal deficits that followed that stupendous loss in revenue. Cutting spending alone just won't make it -- wouldn't be fair in any case.
Here are some reasons why taxes on the nation's ultra-wealthy have to return to a sane level from those "temporary" 10-year Bush tax-cuts.
The gains from the Bush tax cuts went largely to the top 1 percent income bracket. Indeed, the top one-tenth of 1 percent of taxpayers, those with average annual incomes of around $27 million, got fully 43 percent of the benefit of the Bush tax cuts, according to IRS figures.
For the entire top 1 percent, those with yearly incomes of just over $1.1 million, their annual income has soared, to an average of about $1.9 million -- or more than 130 percent as a share of national income -- since 1973. In the same period, the share of the nation's income for the bottom 80 percent of Americans declined, due to just a 2.3 percent increase in income since 1973 in inflation-adjusted dollars.
Put another way, the richest 1 percent captured more than half the nation's total income growth since 1993. That's because tax rates have declined significantly the past few decades for the top 1 percent, and especially for the top one-tenth of 1 percent The tax rate for this ultra-wealthy group, which includes the nation's mega-millionaires and billionaires, was 53.7 percent in 1980. By the most recent IRS figure, it had fallen to 33.7 percent.
These figures mark a vast shift in the inequality of wealth in America in recent decades. The richest 400 Americans now have more wealth than the lower half of all Americans combined. The United States now has the greatest disparity of wealth among advanced industrialized nations. The top earning 20 percent of Americans (those with incomes above $100,000) own about 85 percent of the nation's wealth, and received 49.4 percent of all income generated in the country last year.
The growing inequality in share of wealth and income growth in America is striking, and deeply harmful. The top 1 percent's share of wealth is higher than at any time since the Great Depression, and their income growth relative to everybody else is the highest since the Census Bureau began keeping records of household income in 1967.
Republicans keep saying that even marginally rectifying the wage and wealth inequality by restoring slightly higher taxes on the ultra-wealthy would burden "job creators," small businesses and kill new jobs. But job-creation was highest when the wealth gap was lower, and the ultra-wealthy have not been creating new jobs since they got the lion's share of the Bush tax cuts. They could hardly lower their performance.
Very few small business owners -- perhaps less than 2 percent -- have annual taxable incomes of more than $1 million. And big businesses and banks are sitting on their highest levels of profits and earnings ever. They're not investing in new production, businesses and jobs simply because the bottom 90 percent of income-earners are not buying much, or simply cannot afford to buy much because wage inequity has become so skewed in this country.
Legislation to put a surtax on multimillionaires and billionaires, of course, is not likely to overcome a Republican filibuster in the Senate, and it won't get introduced in the Republican-controlled House. But the proposal is marker. Republicans will call it class warfare, but it is the Republicans' tax policies that have shaped the real financial class conflict in America: the great and growing divide of wealth between the richest 1 percent of Americans and everybody else, and the harm that is doing to tax equity, social programs, consumer spending and the economy as a whole.