Eco-nomics

Make the Wealthy
Pay More in Taxes

Fairness demands higher rates on higher incomes.

As you pay your taxes this month, take a moment to reflect on what has happened to your tax system. It has become cruelly unfair. It doesn't raise enough revenue. It is horribly complicated. And it keeps changing.

In a fair system, we all - whether high or low income - would feel the tax sting more or less equally. Since an additional dollar of income doesn't mean as much to a wealthy person as it does to a poor one, this means we need progressive rates - higher rates on higher incomes, lower rates on lower incomes.

We used to have a progressive tax system. In 1972, tax brackets ran from 14% to 70%. Even so, the economy was strong, and high income earners were not leaving for other countries in droves. That may have been because, popular misconceptions notwithstanding, taxes in the United States were and still are among the lowest in the industrialized world.

But recent changes have made our tax system a lot less equitable. Presidents Ronald Reagan and George Bush supported, and congress passes, laws that effectively served to redistribute the wealth. Not like Robin Hood, from the rich to the poor, but like the robber barons, to the most affluent from everyone else. As a result, the share of national wealth held by the wealthiest 1% grew at a rate which, if continued unabated, would see this small group owning all the wealth in the nation in just 35 more years - all the stocks and bonds, all the real estate and housing, all the automobiles and appliances, all the money.

We can have a tax system that is effective, fair, simple and stable. Here's what we need to do:

  • Institute a "progressive flat tax" for individuals. That means progressive income tax rates - perhaps five brackets at 10%, 20%, 30%, 40% and 50% - with high personal exemptions but no other deductions (most tax deductions simply benefit those with higher incomes anyway). Keep it simple.

  • Enact a wealth tax - a tax on assets of both individuals and corporations. A 4% annual wealth tax on individuals, with a $500,000 per person exemption, could raise $225 billion per year - half the amount now raised by the income tax. Yet a couple with $1.5 million would pay only $20,000. Add in the amount from corporations and we could readily finance health care, eliminate the deficit or provide full employment for everyone.

  • Raise the inheritance tax substantially after allowing a generous exemption, and get rid of the crazy loop-hole that lets billions in capital gains go untaxed. Let's give corporations a fair stake in our tax system, too. Corporations benefit from government services at least as much as individuals, yet they are deprived of the opportunity to share fairly in the financing the government of this nation. In fact, the share of the national tax burden borne by corporations has dropped from about one-third in the 1960s to only one-tenth today. We need to:

  • Restore pre-1980 corporate tax rates; they were fair, they raised more revenue and they did not hurt the economy. While we're at it, eliminate the bizarre corporate foreign tax credit that rewards corporate America for sending jobs out of the country.

  • Don't cut capital gains taxes. Research shows such cuts do not help the economy, but they do subsidize income from capital at the expense of income from labor.

Above all, stop talking about a national sales tax, a consumption tax, a value-added tax, or a straight flat tax; all of these hit lower and middle-income earners harder. We had enough of that sort of meanness in the 1980s.

Americans have historically shown a willingness to support a fair tax system. They have also been willing to revolt against one that is clearly unfair. During the 1980s, our national tax policy tilted toward the wealthy and large corporations. It is past time to reverse that tilt and start again on the path toward a fair, progressive national tax system that all Americans can support.

Congress is lobbied constantly and continuously by wealth special interests. If you want an effective, fair, simple and stable tax system, your voice must be heard too. Go ahead and file your tax return. Then pick up the phone and call Congress.

The number is (202) 224-3121.

Written by Ralph Estes, Published by USA TODAY, April 12, 1994

Copyright © 1996. The Light Party.

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