OpEd News: Why the Rich Should Pay Higher Taxes
media mentionAugust 22, 2011
by PAUL BUCHHEIT
Most wealthy Americans will recoil at the suggestion that they should pay higher taxes, likely responding with the tired mantra that the top earners already pay most of the income tax. But, two points can be made in response to this: (1) Federal income tax is only a small part of the burden on the middle class. Based on data from the Institute on Taxation and Economic Policy, the total of all state and local taxes, social security taxes, and excise taxes (gasoline, alcohol, tobacco) consumes 21% of the annual incomes of the poorest half of America. For the richest 1% of Americans, the same taxes consume 7% of their incomes. (2) The richest people pay most of the federal income taxes because they’ve made almost all of their new income over the past 30 years. Based on Tax Foundation figures, the richest 1% has tripled its share of America’s income since 1980, after taxes.
But, there are better reasons why the rich should pay higher taxes.
The very rich benefit most from national security, government-funded research, infrastructure, and property laws. Defending the country benefits the rich more, because they have more to defend. Taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health (pharmaceuticals), and the National Science Foundation (the Digital Library Initiative) has laid a half-century foundation for their idea-building. The interstates and airports and FAA and TSA benefit people who have the money to travel.
Here’s another good reason for the rich to pay more taxes: With the drop in tax revenue, funding for the preservation of American culture is disappearing. Do we want our national treasures deprived of maintenance because of budget cuts, as is currently happening in Italy? Do we want our national parks sold to billionaires? Do we want programs for music and the arts eliminated from schools, so that only children of the wealthy can
participate in them?
The 1912 book, “Promised Land,” by Mary Antin revealed the wonder of a Russian immigrant coming to the U.S.: “In America, then, everything was free…light was free…music was free.”
Not that capitalist markets don’t have their place. But, the current view of democracy has gone to the other extreme. An extreme that allows individualism and personal gain to trump societal responsibility. The growing inequality makes community support and safeguards unnecessary for the privileged elite.
Finally, back to the tax statistics. Why should financial earnings (i.e., capital gains) be taxed less than wage earnings from actual work? The richest 10% of Americans owns over 80% of stocks, the gains from which are taxed (long-term) at a 15% rate, while most wage earners pay more than that on their income.
Furthermore, over the past 15 years millionaires have seen their income tax rates drop from 30% to 22%. During approximately the same time period, American economic growth declined from an annual 3.2 percent rate to 1.7 percent. Lower taxes for the rich do not lead to productivity.
Will the rich stop investing or move to another country if their taxes are increased? Not likely. They have it too good here. As Warren Buffett recently stated, “I have worked with investors for 60 years and I have yet to see anyone – not even when capital gains rates were 39.9 percent in 1976-77 – shy away from a sensible investment because of the tax rate on the potential gain.”
Mr. Buffett is admitting what everyone else is beginning to realize. The rich take much more than they pay for.