Yet more than a quarter of these ultrawealthy paid less than 15% of their take in combined federal income and payroll taxes. Half of this crew paid less than 20%. And—brace yourself—a few actually paid nothing. This outrage points to the necessity for more than a simple revision in upper-end tax rates, though that’s the place to start. I support President Obama’s proposal to eliminate the Bush tax cuts for high-income taxpayers. However, I prefer a cutoff point somewhat above $250,000—maybe $500,000 or so.
Additionally, we need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30% of taxable income between $1 million and $10 million, and 35% on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.
Above all, we should not postpone these changes in the name of “reforming” the tax code. True, changes are badly needed. We need to get rid of arrangements like “carried interest” that enable income from labour to be magically converted into capital gains. And it’s sickening that a Cayman Islands mail drop can be central to tax maneuvering by wealthy individuals and corporations. But the reform of such complexities should not promote delay in our correcting simple and expensive inequities. We can’t let those who want to protect the privileged get away with insisting that we do nothing until we can do everything.
Our government’s goal should be to bring in revenues of 18.5% of GDP and spend about 21% of GDP—levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won’t stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.
In the last fiscal year, we were far away from this fiscal balance—bringing in 15.5% of GDP in revenue and spending 22.4%. Correcting our course will require major concessions by both Republicans and Democrats. All of America is waiting for Congress to offer a