I love that this guy's analysis leaves out how much the different groups pay in income taxes. You'd think that when you say something like "it seems only reasonable that taxes should rise on the wealthy" that you might like to discuss what percentage of taxes they pay.According to the story, the richest 1% earn 21% of all income while the bottom 50% earn 12.8% of all income. What it doesn't do is break down the rates by what those people pay in taxes. According to the IRS, the richest pay about 37% of taxes while a group that earns 13% of income is paying only 3% of taxes. So, why is it reasonable that the group already paying an amount of taxes disproportionate with their income pay even more?What's also interesting is that the wealth of the richest grew the fastest under President Clinton. When Clinton took office, the richest 1% made about 13% of income. When he left office, that same group made about 21% of income. When President Bush took office, that rate dropped back to around 17% and only now has it grown back to the level it was when Clinton took office.Most idiotic, of course, is his suggestion that if the rich would leave the country in retaliation for our raising their taxes that we should just let them. I'm not sure how we could account for nearly 40% of the Federal Budget if the richest 1% were to up and leave. I'm sure he'd come up with something.What concerns me the most about this is the ephemeral idea of "fair." Somehow, there seems to be no point at which it becomes unfair to tax the rich. Currently, we have half the people in this country who pay 97% of all taxes. We have half the country who pay a negligible amount of taxes. We have 1% of the people in this country who pay 37% of taxes. What share of taxes do the richest 1% have to pay before they have paid their "fair share"?Of course, back to the original proposition: that the reason the rich should have to have their tax rate increased is because they are earning a larger percentage of total income. The author fails to mention that when income becomes more concentrated at the higher levels, it is taxed at a much higher rate and thus more taxes are generated. In other words, increases in income at the top will generate much more tax revenue than increases in income at the bottom.Why Democrats are afraid to raise taxes on the rich
Could it have something to do with the recent affection of hedge-fund managers for the Democratic Party?
Current Opinion for Salon
New data from the Internal Revenue Service show that income inequality continues to widen. The wealthiest 1 percent of Americans earn more than 21 percent of all income. That's a postwar record. The bottom 50 percent of all Americans, when all their wages are combined, earn just 12.8 percent of the nation's income.
Considering the magnitude of challenges ahead for America, it seems only reasonable that taxes should rise on the wealthy. Taxing the super-rich is not about class envy, as conservatives charge. It's about the nation having enough money to pay for national defense and homeland security, good schools, and a crumbling infrastructure, the upcoming costs of boomers' Social Security (the current surplus has masked the true extent of the current budget deficit, but it won't be for much longer) and, hopefully, affordable national health insurance. Not to mention the trillion dollars or so it will take to fix the Alternative Minimum Tax, which is now starting to hit the middle class.
To some extent, the major Democratic candidates for president appear to agree. They are unanimous in their pledge to roll back the Bush tax cuts. That means that the wealthiest Americans, who are now taxed at a marginal tax rate of 35 percent, would go back to paying the 38 percent marginal rate they paid under Bill Clinton. So far, however, no democrat has suggested that the nation should raise the marginal tax rate on the richest Americans above that 38%, as will probably be necessary if America is to avoid an economic meltdown in the years ahead.
The biggest emerging pay gap is actually within the top 1 percent of all earners. It's mainly a gap between corporate CEOs, on the one hand, and Wall Street financiers -- hedge-fund managers, private-equity managers (think Mitt Romney) and investment bankers -- on the other. According to a study by University of Chicago professors Steven Kaplan and Joshua Rauh, more than twice as many Wall Street financiers are in the top half of 1 percent of earners as are CEOs. The 25 highest-paid hedge-fund managers are earning more than the CEOs of the largest 500 companies in the Standard and Poor's 500 combined. While CEO pay is outrageous, hedge-fund and private-pay equity pay is way beyond outrageous. Several of these hedge-fund managers are taking more than a billion dollars a year.
At the very last, you might think that Democrats would do something about the anomaly in the tax code that treats the earnings of private-equity and hedge-fund managers as capital gains rather than ordinary income, and thereby taxes them at 15% -- lower than the tax rate faced by many middle-class Americans. But Senate Democrats recently backed off a proposal to do just that. Why? It turns out that Democrats are getting more campaign contributions these days from hedge-fund and private-equity partners than Republicans are getting. In the run-up to the 2006 election, donations from hedge-fund employees were running better than 2-to-1 Democratic. The party doesn't want to bite the hands that feed.