Saturday, December 1, 2012

The Republican Fight Against Higher Taxes for the Rich

President Barack Obama’s demand that taxes of the rich be raised has become a key issue in the battle which, if not settled, could send the United States over a “fiscal cliff” at year’s end.

A series of extreme government spending cuts—including in defense and social programs among them Medicare—mandated by the Budget Control Act of 2011 would then kick in if no compromise is achieved, and, it is widely forecast, send the U.S. into recession.

Democrat Obama is arguing that higher taxes for the wealthy must be part of any package, and Republicans are fighting this.

Important in understanding the issue is how the tax rates for the richest Americans have fallen precipitously over the last several decades.

The “tax rates on the richest Americans fell from 91 percent in the 1950s and 1960s, and 70 percent in the 1970s, to the current low rate of 35 percent,” notes Dr. Richard D. Wolff, professor emeritus of economics at the University of Massachusetts, Amherst, currently visiting professor at New School University in New York.

The “richest Americans won that spectacular tax cut,” says Dr. Wolff. “Middle- and low-income Americans won no such cuts.”

This has been paralleled by how “big business and conservatives have worked to undo the regulations and taxes imposed on them in the wake of the Great Depression of the 1930s.”

“Since the end of the Great Depression—and especially since the 1970s—the class warfare waged by business and its allies, most conservatives in both parties, was successful,” he says. He notes how, at the end of World War II, “for every $1 Washington raised in taxes on individuals, it raised $1.50 in taxes on business profits. In contrast, today, for every dollar Washington gets in taxes on individuals, it gets 25 cents in taxes on business. Business and its allies successfully shifted most of its federal tax burden onto individuals.”

“In plain English,” says Dr. Wolff, a Harvard graduate with a Ph.D. in economics from Yale, “the last 50 years saw a massive shift of the burden of federal taxation from business to individuals and from rich individuals to everyone else.”

Involved has been “class war policies” in a “war that victimized the vast majority of working Americans.” And “today, business and the rich are waging class war yet again to avoid even a small, modest reverse in the huge tax cuts they won in that war over the last half-century.”

Now, there are some that argue that even with steeply reduced tax rates, the rich pay more in taxes. Robert Frank of CNBC said earlier this year: “Despite the oft-repeated fact that tax rates for the wealthy are at an all-time low, which is true, it’s also true that the actual amount paid in taxes by the wealthy is higher than before the recession.”

He also stressed: “The One Percent paid an average effective tax rate of 28.9 percent on their income—far more than any other group, and more than twice the average effective rate of the middle class, who paid 11 percent on average.”

Then there are those who say the rich are being unjustly attacked. “I believe the president has vilified this so-called 2 percent,” Representative Darrell Issa, a Republican from California, said last week. “Vilifying people and then punitively taxing them is un-American,” he declared.

The bottom line is that there has been a successful effort in the U.S. to alter the progressive income tax system that is based on individuals who earn more, paying higher taxes. The tax rates for the wealthy have been reduced drastically.

And Obama isn’t seeking a return to a 91 percent rate, or 70 percent or even close. During the campaign, he proposed raising the top rates for high-income people to 36 and 39.6 percent.  That would be a return to the top tax rates during the Clinton presidency.

Part of the battle between Obama and Congressional Republicans involves who should be considered high-income. The Obama administration has talked about a threshold of $200,000 in annual income for an individual, $250,000 for a family. The GOP complaint is this is too low.

This is a valid area of debate. But to reject a hike in tax rates, period, for the millionaires and billionaires who make up the top economic strata of this nation is not right.

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