What’s your “fair share” of taxes to pay?
What is the “fair share” for the rich?
Your answer should be a clue about who you’ll vote for in November 2016.
Why? Because there is a nationwide Grand Canyon between what Republicans and Democrats say and think when it comes to taxing the rich – the rich, who by the way, are providing almost all of the cash to fund the presidential candidates’ political campaigns.
All the Republican tax proposals cut taxes for the wealthiest Americans. Democrats call for raising taxes at the highest income levels, though they they have been short on specifics.
Consumer Watch Money Paying BusinessBut here’s the landscape: Three decades ago, the nation’s highest-earning 1 percent of families received almost 11 percent of all pretax income, while the bottom 90 percent as a whole received nearly 65 percent of pretax income, according to research by UC-Berkeley professor Emmanuel Saez. Now, the top 1 percent receive almost a quarter of pretax income, while the share for the bottom 90 percent has fallen to less than 50 percent.
We call this income inequality, and it’s the highest it’s been since 1928.
Given the gains at the tip of our income pyramid, several economists recently made a case to The New York Times that the government could raise large amounts of revenue exclusively from this small group of high rollers, while still allowing them to take home a majority of their income.
It is “absurd” to argue that most wealth at the top is already highly taxed or that there isn’t much more revenue to be had by raising taxes on the 1 percent, says economist Joseph E. Stiglitz, winner of the Nobel in economic science. “The only upside of the concentration of the wealth at the top is that they have more money to pay in taxes,” he added.
These folks in the top 1 percent pay about a third of their incomes to the federal government – including income tax, payroll taxes that fund Medicare and Social Security, estate and gift taxes, excise and custom duties as well as investors’ share of corporate taxes. The nearly richest – those in 95th to 99th percentile, pay about $1 out of every $4. People in the bottom half of the nation’s income bracket pay less than $1 out of every $10.
The Tax Policy Center, a project of the Urban Institute and the Brookings Institution, says that the 1 percenters – about 1.13 million U.S. households – earn an average income of $2.1 million, and raising their tax rate to 40 percent would generate about $157 billion in revenue. In just one year. Raising their tax burden to 45 percent would generate $276 billion and still leave them taking home at least $1 million a year, on average.
The new tax money could pay for undergraduate tuition at all the country’s four-year public colleges and universities, a proposal by Sen. Bernie Sanders, a Democratic presidential candidate. It could also pay for Hillary’s Clinton’s debt-free college degree proposal and most of her universal pre-kindergraten program.
If we were to raise taxes from 25 percent to 35 percent on the next rung down – those making on average $405,000 a year – we would put another $176 billion in U.S. coffers – enough to fund our federal highways program again.
Or, if we forego the spending on those programs, we could almost erase this year’s estimated federal deficit of $426 billion.
The Tax Policy Center says most economists agree that raising taxes modestly won’t do serious damage to the economy.
A dollar here, a dollar there – but that’s with Democrats.
With Republicans, we are looking at a whole different ballgame.
All of the Republican candidates argue against raising taxes on the wealthy. It would kill jobs, they say. (Given that, we should have seen many more jobs over the past 30 years as wealthy tax rates dropped, so what happened?) Meanwhile, their plans for growing our national revenue and making spending cuts leave us with only an option for more borrowing, most mainstream economists say.
Donald Trump’s so-called “amazing, simple, easy, fair” plan is anything but, according to a recent NPR story. The Donald’s plan takes other GOP ideas – primarily Jeb Bush’s, which is a large tax cut aimed a high-income people – much further. So much so that it could cost the federal government trillions of dollars while helping out the rich with little things like eliminating the estate tax. (For most of us, the estate tax is already eliminated unless one inherits more than $5.43 million. Estate taxes now are overwhelmingly paid by the very richest Americans. The top 10 percent of earners paid 98 percent of estate taxes as of 2011. And in 2013, only 20 small businesses or small farm estates nationwide owed any estate tax, according to the Center on Budget and Policy Priorities.)
Bush’s plan would set the highest tax rate at 28 percent. Trump’s proposed highest rate is 25 percent. Ben Carson is proposing a 10 percent flat tax.
Talk about making the rich richer and promoting income inequality.
Former U.S. Sen. John Sununu once wrote: “The precise point at which a tax deduction becomes a ‘loophole’ or a tax incentive becomes a ‘subsidy for special interests’ is one of the great mysteries of politics.”
This year, it’s not too mysterious.
It’s just the difference in Democratic and Republican platforms.