Why Are We Afraid to Tax the Super-Rich?
Stay up to date with the latest headlines via email.
Our nation is already deeply in debt. How can we possibly afford to invest in our infrastructure, renewable energy, health care, our schools — and create the millions of jobs that our unemployed desperately need?
We are told that we’re already living well beyond our means — that entitlement programs like Medicare and Social Security will bankrupt us. Forget the solar panels, the smaller classes and the new jobs — we’ve got to cut back on government programs at all levels.
Meanwhile, the super-rich are still having a ball. In his annual shareholder letter, mega-investor Warren Buffett wrote, “We’ve put a lot of money to work during the chaos of the last two years. When it’s raining gold, reach for a bucket, not a thimble.” And Forbes Magazine adds, “Many plutocrats did just that. Indeed, last year’s wealth wasteland has become a billionaire bonanza. Most of the richest people on the planet have seen their fortunes soar in the past year.”
Which brings us back to the federal budget. There are two sides to every ledger: the expenses…and the income. We need to start looking at the income side. With a fairer tax system, we could retrieve some of that money downpour that the elite has been siphoning away from us for decades.
In the 1950s the marginal tax rate on those earning more than $3 million a year (in today’s dollars) was 91 percent. By 1990 it was 28 percent. The IRS says that the top 400 richest tax filers actually paid a rate of just 16 percent in 2007 (the latest numbers we have). Yep, the richest earners — people who took in an average of $343 million each — probably paid a lower rate than you did. Something to consider as you sign your 2009 return.
By the way, those 400 people who do so well on tax day have a combined net worth of nearly $1.37 trillion. (According to Forbes Magazine their wealth has gone up on average by more than 16 percent over the past year — the worst economic year since the Great Depression during which 29 million Americans are without work or forced into part-time jobs. )
How do we even wrap our minds around a number so large? Here’s the example that brings it down to earth for me. If we had progressive taxes that reduced their wealth to a trifling $100 million each, we’d have enough money to set up a trust fund whose interest could provide tuition-free higher education for students at every public college and university in perpetuity. Imagine that. Our kids could actually leave college without carrying tens of thousands of dollars of debt on their backs.
Could those 400 special people be able to get by on just $100 million a year? I think they might.
So why are we so fearful of taxing the super-rich? Here are the arguments I’ve heard.
1. They’ve earned it.
Really? The concept of “earning” is murky when you consider the array of corporate welfare programs we provide. Oil companies have their depletion allowances. Big sugar farmers have their sweet subsidies. The health insurance industry is exempt from anti-trust laws.
One way corporations spend their welfare checks is by providing top management with mind-boggling compensation packages. For instance, in 2009, our financial wizards netted about $150 billion in bonuses – as if in reward for crashing the economy. Were it not for our $10 trillion (not billion) in bailout funds, they would have earned nothing at all. In fact, the financial sector’s reckless gambling has lost us over $6 trillion in wealth. But the execs did quite well, thanks to taxpayer largesse.