Taxes, Wealth Inequality and the Obama Budget

Here is further evidence that the world is rapidly changing –or at least the national conversation about taxation. Released this morning, along with the Obama Administration’s first budget, is an extraordinary preamble called “Inheriting A Legacy of Misplaced Priorities”

In a section entitled “Growing Imbalance: Accumulating Wealth and Closing Doors to the Middle Class,” the administration recounts dizzying statistics about wage and wealth inequality, observing “instead of using the tax code to lessen these increasing wage disparities, changes in the tax code over the past eight years exacerbated them.”

Sam Pizzigati and I argue this point in Tuesday’s Christian Science Monitor (see: www.ips-dc.org/articles/1107 [1]), that several decades of shifting tax obligations off the wealthy requires the Obama Administration to tap new progressive taxes.

We have some ideas where the money should come from! Our Institute for Policy Studies Extreme Inequality team identified $500 billion in potential revenue from targeted tax hikes on the wealthy, closing overseas tax havens and levies on speculative investment. Our Policy Brief “Paying for a Strong Economy: Seven New Revenue Sources to Revitalize America and Reduce Financial Speculation,” (see: www.ips-dc.org/reports/#1112 [2]) argues that taxes on the wealthy don’t hurt consumption and discourage the type of speculation that fueled the high-tech and housing bubbles.

How do we tell the story of what has happened over these decades? Over coffee, my friend David Gleason said the rhetoric around dampening speculation doesn’t connect broadly. His version of the story:

“We were told that money would trickle down from those who had the most, but actually many of the richest people speculated with it in risky investments like “hedge funds”, “derivatives” and …. They did not share their wealth. Instead, they used it just to try and make more. Enough was never enough. In the end, the little guy got…” You get the idea.

It’s a whole new conversation.