Our tax system is unfair. The share of taxes paid by working families has increased while the wealthy and the large corporations have pocketed more and more tax breaks. Today, hedge-fund billionaires pay taxes at lower rates than their receptionists do. Corporations get tax breaks for moving jobs abroad. Oil companies pocket billions in tax breaks while racking up the largest profits in corporate history. Only the very wealthiest pay any federal estate tax, yet conservatives continue to wail that it is somehow unfair. This doesn’t make sense.
The current tax system is unfair. Middle-class families pay too much while the very richest individuals and corporations pay too little. Now, conservatives want further cuts in corporate and top-end tax rates, leaving middle-income families to pick up the tab. We need to reform the tax system so everyone pays their fair share.
Trickle-down economics is a proven failure. The Bush program of tax cuts for the rich at the expense of the middle-class caused our economy to be more sluggish than during any comparable period over the past 60 years. [Center for Budget and Policy Priorities] Unemployment increased, basic costs skyrocketed, incomes stagnated, poverty rose, the number of uninsured increased, and mortgage foreclosures are at record levels. Conservative economics has been a spectacular failure, so why would anyone want more of the same?
Conservatives don’t have an intellectually honest argument. No matter what the situation, they say tax cuts are the solution. The economy’s doing well, cut taxes. The economy’s doing poorly, cut taxes. It’s not an economic prescription, it’s just thinly disguised greed.
The Right is Wrong
Opponents argue that all progressives want to do is “tax and spend.” But in fact, it is the conservatives who have been the champions of wasteful spending. Conservatives wasted hundreds of billions of dollars on tax breaks for the rich; they wasted more than $600 billion on an unnecessary war in Iraq; they gave billions away to wealthy corporations that outsourced American jobs; they left us with a $1 trillion budget deficit. Conservatives got their chance to demonstrate fiscal restraint and instead proved they were the most profligate spenders in American history.
Opponents argue that tax cuts—primarily for the rich—will help us climb out of the recession. But in fact, tax cuts for the rich helped get us into the recession. Even conservative economists acknowledge that tax cuts provide the least economic stimulus—they create the fewest jobs per dollar spent.
We need to build a tax system that is fundamentally fair to all. It should discourage tax-avoidance schemes that do nothing for our national interest, and reward innovation, diligence, and an honest day’s work. That means we should:
- Cut taxes on the middle class and increase tax credits for child care and college.
- Increase taxes on individuals who make more than $250,000 per year.
- Increase the tax rate on capital gains.
- Close corporate loopholes and tax breaks that reward companies for sending jobs overseas.
- Crack down on tax avoidance by shell corporations set up offshore in places like the Cayman Islands.
- Freeze the federal estate tax rate and exemptions at current levels—don’t weaken the estate tax any further.
- Strengthen enforcement of the tax code on the largest corporations and wealthiest individuals.
The tax system has been tilted to enrich the rich. In 1980, the top 1 percent of taxpayers received 8 percent of our entire nation’s income and paid an effective rate of more than 22 percent. By 2006, the top 1 percent received 16 percent of national income and paid a rate of 19 percent. [Congressional Budget Office] As a result of the 2001 and 2003 Bush tax cuts, millionaires got an average $118,000 annual break while middle-income households received only $740. [Center on Budget and Policy Priorities] Today, the 400 U.S. taxpayers with the highest incomes pay income taxes worth, on average, only 18 percent of their income, compared with 25 percent for the typical American. [Center on Budget and Policy Priorities]
Corporations are under-taxed. In the 1950s, corporate income taxes accounted for about one-quarter of federal tax revenues; now they account for just one-tenth, leaving workers to pay the difference. [Economic Policy Institute] Two-thirds of corporations doing business in the U.S. pay absolutely no federal income taxes, despite taking in $2.5 trillion in sales. [Government Accountability Office] Compared with other countries, our total corporate tax level is not high—the amount corporations actually pay after credits, deductions, and exemptions ranks 92nd among 181 nations. [World Bank]
Capital gains are under-taxed.The capital gains tax rate of 15 percent is the lowest it’s been in years (it was 28 percent in 1986). The top federal income tax rate for ordinary income is 35 percent—which means that earned income is taxed at more than twice the rate of income from capital gains. [Citizens for Tax Justice]
Conservatives promised that the Bush tax cuts would create jobs, but they didn't. Conservatives claimed that the Bush tax cuts would create 5.5 million jobs from July 2003 through 2004. Instead, only 2.4 million jobs were added—1.7 million fewer than the economy was expected to produce without any tax cuts. [Center for American Progress]
Conservatives promised that the Bush tax cuts would pay for themselves, but they didn’t. Conservatives persistently repeat the myth that, as Bush put it, “You cut taxes, and the tax revenues increase.” But as Time magazine reported, “Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves—and were never intended to.” [Time] In fact, Bush took office with a $236 billion surplus and left with a 2008 deficit of more than $1 trillion.
The campaign against the federal estate tax is based on distortion and motivated by greed. In 2009, any estate worth less than $3.5 million is passed on to heirs estate-tax free. [Center on Budget and Policy Priorities] Only one of every 400 estates is subject to the tax.[Center for Economic and Policy Research] The federal estate tax simply does not threaten small businesses. [Congressional Budget Office] The American Farm Bureau Federation has never named a single farm that had to be sold to pay estate taxes. [New York Times ] The campaign to repeal the estate tax was financed by 18 of the richest families in America—including 23 billionaires—who spent nearly $500 million on this special interest legislation. That’s because these families, including the heirs of fortunes from Wal-Mart and Mars candy, stand to reap over $70 billion from the repeal of the estate tax. [Public Citizen]
Americans strongly favor the Obama tax package. Seventy-four percent of Americans think it’s a “good idea” to increase “federal income taxes for households making more than $250,000 a year.” Only 23 percent think it’s a bad idea, according to a CBS News/New York Times poll. [CBS News/New York Times Poll]
Americans think that middle and lower income people should pay less and upper income people should pay more in taxes.
“Do you think the tax code should be changed so that middle and lower income people pay less in taxes than they do now and upper income people pay more in taxes than they do now, or don't you think the tax code should be changed?”
.....65% Should be changed
.....29% Should not be changed
CBS News/New York Times Poll. April 1-5, 2009
Americans strongly favor the Obama tax package.
“The Obama Administration has proposed increasing federal income taxes for households making more than $250,000 a year. Some of the money raised by these new taxes would be used to help improve access to healthcare and provide tax cuts for households making less money. Do you think this proposal is a good idea or a bad idea?”
.....74% Good idea
.....23% Bad idea
CBS News/New York Times Poll. April 1-5, 2009
Americans are more positive about income taxes than they have been in 50 years.
“Do you regard the income tax which you will have to pay this year as fair?”
.....61% Yes, fair
.....35% No, not fair
“Do you consider the amount of federal income tax you have to pay as too high, about right, or too low?”
.....46% Too high
.....48% About right
.....3% Too low
Gallup’s analysis of this data says this is “one of the most positive assessments Gallup has measured since 1956.” Over the past half-century, about 60 percent have usually said that taxes are “too high.” The study concludes: “Gallup finds Americans’ views of their federal income taxes about as positive as at any point in the last 60 years.”
Gallup Poll, April 13, 2009
“Tax Cuts: Myths and Realities,” Center on Budget and Policy Priorities, 16 November 2007
Aviva Aron-Dine, “The Skewed Benefits of the Tax Cuts,” Center on Budget and Policy Priorities, 4 February 2008
“Citizens for Tax Justice Factsheet,” Citizens for Tax Justice, 30 January 2008
“Trickle-Down Economics: Four Reasons Why It Just Doesn't Work”
When Sherrod Brown took Mike DeWine’s Ohio U.S. Senate seat in 2006, he ran television ads that asked: “Did you get that big tax break Mike DeWine’s been bragging about?”
Hedge fund manager billionaire Warren Buffet presently pays taxes at a lower rate than his receptionist (18% v. 30%) without offshore tax shelters or other devices he declines to use. Buffet has called the rates “welfare” that “tilt the tax scales toward the rich.”
[Washington Post, May 2003]