Robert Reich: We Can Save the Economy If We Get Serious About Taxing the Rich

[xchrom]

http://www.alternet.org/economy/robert-reich-we-can-save-economy-if-we-get-serious-about-taxing-rich

***SNIP

Top tax rate was once 91 per cent

“I want to test your assumptions,” Reich says in the film, to a class at University of California, Berkeley, where he is a professor of public policy. “If possible I want to shake your assumptions.”

He starts with something a little oblique, and asks the class where they think the $178 cost of making a 3G iPhone was spent. Students naively believe the majority of the money stayed in the United States. But the real surprise is how little went to China, where the phones are assembled. The breakdown? Japan was tops with 34 per cent, followed by Germany (17 per cent) and South Korea (13 per cent). The U.S. came in at six per cent and China at just three.

This is part of Reich’s argument that a highly educated workforce — not cheap manufacturing — is what delivers respectable incomes, and the example is just the beginning of his litany of things we do not know, or are unable to properly discuss.

Reich points to another issue that has escaped rational public debate and bedeviled U.S. legislators over the last year: disparity in taxation.

[winter is coming]

1. Hey! Some people have paid good money for taxation to escape rational debate and

bedevil legislators! Bedeviling doesn't come cheap!

IMO, having a genuinely healthy economy should be seen as a matter of national security. Apparently, lawmakers don't have a problem debasing our Constitutional rights in the face of "national security", so why should increasing the tax rate on the rich be so unthinkable?

[JHB]

2. Even more than the top rate, it was the distribution of the load

Borrowing this from a post I made back in March:

Most discussion of tax history mentions the top marginal rates of the past (91% in the 50s, 70% in the 60s and 70s, 50% through most of Reagan's presidency, etc.)

I like to highlight a different aspect: leaving aside what the rates were, where did they kick in? We live in times where people argue "are couples who make $250K 'rich'?" "Should we raise taxes on people who make over $250K? Over $500K?"

Where did these sorts of things lie in the past?

Using the inflation adjusted historical tax bracket tables from The Tax Foundation for married couples filing jointly, let's break it down a little and find out the equivalents in 2012 dollars:

1945:
Total number of brackets: 24
# of brackets affecting income over $250K: 14
# of brackets affecting income over $500K: 9
Top bracket affects income over: $2,551,044

1955:
Total number of brackets: 24
# of brackets affecting income over $250K: 16
# of brackets affecting income over $500K: 11
Top bracket affects income over: $3,426,776

1965:
Total number of brackets: 25
# of brackets affecting income over $250K: 13
# of brackets affecting income over $500K: 8
Top bracket affects income over: $1,457,740

1975:
Total number of brackets: 25
# of brackets affecting income over $250K: 9
# of brackets affecting income over $500K: 5
Top bracket affects income over: $853,509

1985:
Total number of brackets: 15
# of brackets affecting income over $250K: 1
# of brackets affecting income over $500K: 0
Top bracket affects income over: $360,650

1995:
Total number of brackets: 5
# of brackets affecting income over $250K: 1
# of brackets affecting income over $500K: 0
Top bracket affects income over: $386,423

2005:
Total number of brackets: 6
# of brackets affecting income over $250K: 1
# of brackets affecting income over $500K: 0
Top bracket affects income over: $383,773

2013:
Total number of brackets: 7
# of brackets affecting income over $250K: 2
# of brackets affecting income over $500K: 0
Top bracket affects income over: $440,876

Special Bonus Gipper edition numbers:
1988:
Total number of brackets: 2 (No, not a typo. Two brackets)
# of brackets affecting income over $250K: 0
# of brackets affecting income over $500K: 0
Top bracket affects income over: $57,738
(There was a reason why Poppy Bush had to go back on his 'Read My Lips' line -- this rate was so low it was unsustainable (naturally, they crucified him for it). And every RWNJ wants to go back to this, or lower...)

ALL income tax progressivity for very high incomes was eliminated under Reagan, and has stayed that way ever since.

Let me repeat that last part:
ALL income tax progressivity for very high incomes was eliminated under Reagan, and has stayed that way ever since.

Brackets reached up into the equivalent of millions today. (heck, between 1936 and 1941 the top bracket kicked in at (inflation-adjusted) incomes in the ballpark of $80 million). That had been eroded by inflation, but it was cut off at the ankles under Reagan.

There are plenty of details that can be argued, but that basic "top-heavy" tax structure put a bottleneck on how fast wealth could be sent skyward. It certainly was an impediment to the "if I can grab it, I deserve it" mentality of Wall Street and corporate executive culture.

It worked for people trying to get ahead. Now the structure works for those who already are.

[Live and Learn]

9. +1 nt

[onehandle]

3. Tax? I say seize 50% of their stateside liquid assets, and 100% of their overseas liquidity.

Then we can talk about taxing them.

[KansDem]

4. Perhaps Mr. Reich should have rephrased his remark...

"We Can Tax the Rich If We Get Serious About Saving the Economy."

[JayhawkSD]

6. You make much more sense that Mr. Reich's headline does.

Part of the gist of the article is that the old saw about "cutting taxes on the rich will improve the economy" has been proven beyond any shadow of dount to be wrong, and that we should therefor not be hesitant to raise those taxes now; that doing so will not harm the economy. I'm completely on board with that. Reich's headline goes one step farther and says that doing so will solve the economy, but I'm not on board with that because nothing in the article explains how that mechanism will work. Raise taxes on the rich and then what happens that causes the exonomy to get better? He doesn't say.

There is a discussion about how income inequality is harmful to America and how it discourages the incentive to get ahead, and that taxing the rich will reduce that income inequality. There are a couple of problems with that. Income inequality is real enough, but his talk about its effects, about how it disincentivizes and such, are undocumented non-economic issues. Is America really less productive because the lower classes are not working as hard as they could because they have become demoralized by how much money a few top dogs are making? I doubt that very much. If so this country should certainly quit referring to itselof as "exceptional," since exceptional countries don't give up.

I certainly think income inequality is harmful, but not in the vague and rather disrespectful way that Reich does. I don't think that Americans are that unspirited that they give up that easily. I think it's harmful not because the rich make too much but because the niddle and lower class make too little, and that is what I think needs to be addressed. And it needs to be addressed directly, not by some indirect back door move. "Trickle down" didn't work in cutting taxes, and it isn't going to work in terms of raising them.

Sure, raising taxes on the rich will reduce income inequality to some degree, but that inequality is far more the product of globalization (the offshoring of manufacturing and other high paying jobs), the growth of the financial sector in our economy, a surplus of debt, and to some degree technology than it is taxation. We could have taken steps to respond as these market forces changed the shape of our economy, and we did not. Business was profiting from them and government didn't care.

It would be far more beneficial to our economy and to the people of this nation to reduce income inequality by focusing on increasing the income of the middle and lower classes rather than being so determined to bring the upper class down. Constructive change is almost always better for a nation than destructive change. There are many things that we could be doing to work for better wages and benefits for middle and working class Americans, such as a return of the collective bargaining process and the return of offshored jobs, but all we can think of is tearing down those whom we envy.

[pampango]

5. "When business people take credit for creating jobs, it’s a little like squirrels taking credit for

evolution. It’s actually the other way around.”

"It is astounding how significantly one idea can shape a society and its policies,” he said of the notion that taxing the rich hurts the economy. “This idea is an article of faith for Republicans and is seldom challenged by Democrats.”

“Since 1980, the share of income of the top one per cent has more than tripled while our effective tax rate has gone down by more than 50 per cent. If it was true that lower taxes on the rich and more wealth for the wealthy led to job creation, today we would be drowning in jobs.”

...most Americans — Democrats and Republicans alike — are utterly ignorant of the extent of wealth disparity, and that a surprising 92 per cent of them actually want to see wealth spread more equitably.

Reich and Kornbluth say better understanding the disparity, and the threat it poses to the future wealth of both the rich and the poor, is the reason they made the film. ... Adds Reich, noting that people bridle at being told what to do, “If you describe the problem, the solutions follow from that. The problem is not the lack of policy. The problem is the lack of political will.”

[WillyT]

7. Yep...

&q=90&w=640&zc=1

[BKH70041]

8. Someone Remind Me

Are members of Congress year in and year out typically wealthy, or middle class, or poor? You know, the one's who decide whether or not to raise or lower taxes?

[Quantess]

10. K & R