Cover of Paris Hilton
In the last fiscal deal between Republicans and Democrats, the top 1% of income-receivers (I hesitate to say income-receivers rather than earners because it's hard to believe that Paris Hilton earns what she reports on her taxes), who make in excess of $400,000, suffered...if that's the right word for a person making that much money who has to give up $16,000 of his income to the taxman...a 4% tax increase. President Obama had wanted the top 2% of income-receivers to be exposed to that tax increase, but he gave up half of what he wanted to get the other half. However, that didn't do much to reduce the deficit and the national debt--$80 billion out of $1 trillion next year. So now we face the advent of the "sequester," the across the board 10% budget reduction for all federal spending, and the Republicans are demanding spending cuts, saying that they will brook no more tax increases because the president already got his tax increase. But the argument is fallacious...not just misleading but fallacious...because the Republicans purport to be protecting the middle class with that position when no such thing is the case. What they fail to mention is that we all got a 2% tax break for two years when they agreed with the Democrats to reduce the Social Security tax withholding, which most affects those making under $106,000, the group that 97% of us are in. But part of the deal that limited The President's intended tax increase on the rich actually increased the taxes...or discontinued the tax reduction...on the income of the vast majority of Americans, and did so disproportionately on us in the lower middle class. So, the Republicans managed to penalize the 97% by protecting the 99th percentile plus a few from the 98th ...those making between $100,000 and $400,000 who were spared the income tax increase The President wanted...from the 4% tax increase now being paid by only the richest 1% of us. In other words, we on the bottom paid for some of the wealthiest people in our society to be exempted from tax increases.
It is true that the 2% tax increase that we 97%ers suffered goes somewhere other than the general fund, which is where the 4% more now being paid by the top 1% goes. But despite the fact that such is the case, if the Republicans had really wanted to reduce everyone's taxes, they would have demanded that the Democrats replace the two percent Social Security tax hike we all suffered with a two percent reduction in the income taxes of the bottom 97% by also imposing the 4% increase on those in the ninety ninth percentile making between $250,000 and $400,000. That's what they want isn't it...lower taxes for all Americans...or is it just the rich they want to protect? (That's a rhetorical question; of course it's just the rich they want to protect. I mean, just look at their record lately.) So, why are they so confident that the American public will side with them on this latest fit of recalcitrance? Because they are publicly touting their position as standing up for all of us, and they assume that we are all too stupid to think about it and see the ruse for what it is, that's why.
The fact is that President Obama, while he didn't cause the sequester in the first place as the Republican claim he did, did ask for more in tax increases on the rich before more spending cuts could be imposed. Thus, the half loaf he got in the last deal with the Republicans wasn't near enough to justify more than the $2.5 trillion in spending cuts already made during the last two budget negotiations between The White House and the Republicans in congress, who still may not be able to do just whatever they want, but they can, and do, stop the Democrats and The President from accomplishing anything progressive. In the vernacular of the day, the Republican position is bogus, dudes. The current status of the spending cuts versus revenue increases effort is that spending cuts have outnumbered tax increases by about three to one: $800 billion in tax increases over the next ten years compared to $2.5 trillion in spending cuts over the same decade. That's what started out as being fair...at least in the minds of Democrats: one quarter revenue for three quarters reduced spending. So now, we are back to square one when it comes to making further progress in eliminating the remaining $7 trillion or so in deficits that we are looking at during that period. That means that if anyone else is to get hurt by spending cuts, the rich have to pay commensurately more. So tax reform is not too much to ask, and it certainly wouldn't be a concession to the Democrats. It is, at a minimum, the quid pro quo for deeper cuts to federal programs, including defense incidentally, which is the Republicans' sacred cow, not to mention their patrons' cash cow.
In the end, the point of this convoluted exegesis is that contrary to the Republicans' bellowing about their ox being gored, so far the program of revenue enhancement and spending reductions is just about where it ought to be if we are going to compromise on all this. Personally, I would rather see taxes go up for the rich even further, not necessarily to the 90% level they were at in the post-WWII era, but considerably higher than they are today. Studies show that people do not alter their investment strategies until the tax on their gains approaches 50% or more, and common sense says that is so. After all, would you refuse to invest your dollar if you could earn only fifty cents with it instead of sixty five? So slowing down the economy by raising taxes on those with the most money to invest would take a lot more in tax increases than anyone has proposed...anyone except me of course. The corollary is that the virtually universal opinion of economists is that reducing government spending too much at a time like this will slow down the economy and cost jobs...not just new ones, but old ones too. In this case, a penny saved is not a penny earned. Three quarters of a penny is.
Your friend,
Mike
Leave a comment