Decades of Tax Cuts for the Rich Reduced Their Rates by Half, Republicans Want More
Tax rates including imputed corporate taxes. (Thomas Piketty and Emmanuel Saez)
Republicans and a few Democrats don't like President Obama's one-year proposal to keep only "middle-class" income tax rates where they have been since George W. Bush introduced cuts reducing the marginal rate for nearly all taxpayers. Not only do they want the tax cuts for millionaires and billionaires to stay in place permanently, they want, as we have heard endlessly in the past three years, to cut them even further.
As has been the case for a long time, including the Bush-era tax cuts, the greatest benefit of new cuts would go to the wealthiest. Not by accident. By design. One third of the benefits of the Bush-era tax cuts went to the top one percent, 65 percent went to the top 20 percent, and the other third was shared by the rest of the population. This skewing is not a new phenomenon, and it is a major factor in the income inequality that plagues our society.
These cuts and this skewing of benefits have been, of course, accompanied by a steady right-wing effort to weaken our social infrastructure, the programs of the New Deal and Great Society and others dedicated to assisting the most economically vulnerable among us.
When John F. Kennedy announced his tax cut plan 50 years ago this December, the top marginal rate for the highest income households was 91 percent. That plan, which wasn't enacted until after his assassination, took that top marginal rate down to 70 percent. Changes since then have reduced it even further, now to 35 percent. Average federal taxes and the effective overall rate, that is, what people actually pay in taxes, is and was always considerably lower than might appear to be the case from looking at the marginal rate in isolation.
Mitt Romney epitomizes the problem with the way income tax cuts have been arranged, with an effective rate just below 14 percent, less than many Americans whose primary income comes from salaries or wages. Paul Krugman points out that Romney's defenders claim the taxes paid by the corporations Romney invests in should be counted as part of his tax burden.
But my guess is that conservatives really shouldn’t want to go there. Because if we do, we realize that tax cuts are a much bigger story in rising inequality than the right wants to hear.
Tax rates for the super-elite, the top .01%, have fallen in half since Mitt Romney’s father ran for president; or to put it differently, after tax income for this group has doubled due to policy alone. And bear in mind that the US economy flourished just fine under those [1960-70] tax rates …
The last thing we need right now is further skewing of the tax code to benefit the top 10 percent, much less the top one-tenth of one percent. Yet that is exactly what the right-wing foes of President Obama's one-year extension of cuts for those households making $250,000 or less want to do. What they will do given the chance.