Obama to Boehner: “John, I’m Getting Tired of Hearing You Say That”

This was President Obama’s reply, during fiscal cliff negotiations, when House Speaker John Boehner declared, for the umpteenth time, that “ The U.S. has a spending problem.” 

I can understand the president’s irritation. How could anyone believe that we have a “spending problem?’

Look around. Consider the state of our bridges, our roads and our crumbling inner city public schools. Are we spending too much on the nation’s infrastructure?

Next, think about unemployment. During this recovery we have lost 750,000 public sector jobs.  Republicans are intent on “starving the beast” (of government) and as a result Washington has not given states the financial support they need continue delivering public services. Across the nation, public school teachers have been laid off in droves, while class sizes increase at unprecedented rates.  Does this sound like government spending run amuck?

One in five American children now lives in poverty. Seventeen million children find themselves in homes where they can’t be sure of getting enough to eat.  (a.k.a. “food-insecure households.”)  At the end of the month, many kids go to bed hungry because the government Food Stamps program (now known as Supplemental Nutrition Assistance Program, or SNAP)  gives families less than $1.50 per person per meal. Are we being overly generous?

During the past two wars, we sent millions of American men and women to Iraq and Afghanistan –many went back for repeated tours. In some cases, their bodies were not  broken–but their minds were.  Now 1.3 million Vets seeking mental health services are told they must wait of 50 days before getting treatment.   A recent government report suggests that 22 Vets die by suicide every day – about 20 percent of all Americans who kill themselves. Are we spending too much on healthcare for Veterans?

Let me suggest that we don’t have a spending problem. We have a revenue problem. Current federal revenue levels are at their lowest levels since the 1950s. 

                      How Anti-Tax Pledges Have Weakened the Nation

In a recent post, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, nailed it: “The tax system doesn’t raise enough revenue.  And that’s not just the recession; it’s also tax policy and anti-tax pledges  . . . The system has become less progressive, with the largest declines in effective tax rates at the top of the income scale.

A few days ago, a New York Times editorial agreed: “Contrary to Mr. Boehner’s “spending problem” claim, much of the deficit in the next 10 years can be chalked up to chronic revenue shortfalls from the Bush-era tax cuts, which were only partly undone in the fiscal-cliff deal earlier this year.

“And the only way to raise taxes now without harming the recovery is to impose them on high-income filers, for whom a tax increase is unlikely to cut into spending.

“Those taxpayers are the same ones who benefited most from Bush-era tax breaks and who continue to pay low taxes,” the Times editorial added. “Even with recent increases, the new top rate of 39.6 percent is historically low; investment income is still taxed at special low rates; and the heirs of multimillion-dollar estates face lower taxes than at almost any time in modern memory.

“As for entitlements, Republicans mainly want to cut those that mostly go to the middle class and the poor, while ignoring nearly $1.1 trillion in annual deductions, credits and other tax breaks that flow disproportionately to the highest income Americans and that cost more, each year, than Medicare and Medicaid combined.”

Think about that last sentence. It helps puts things in perspective.

Of course, this does not mean that we should ignore the waste in our Medicare system. Today, we overpay for a great many drugs and devices. And by paying providers fee-for-service, we encourage  unnecessary tests and procedures that expose patients to risks without benefits. By changing how we pay for care, and rewarding better outcomes at a lower prices, we can save billions.

But the Times’ editorial reflects a growing consensus: we should pursue the reforms embedded in the Affordable Care Act calls for AND raise taxes at the top. Otherwise, we won’t have enough money to meet our obligations.

After years of neglecting our infrastructure, paring spending on education, ignoring climate change, and waging two wars, those obligations have grown.

The original bi-partisan Simpson- Bowles commission understood this. The initial budget plan released in December 2010 by former Republican senator Alan Simpson and former Democratic White House chief of staff Erskine Bowles, would have raised  taxes by more than $2.6 trillion (in today’s dollars)  over the next 10 years.

President Obama also recognizes that if the government is going to stimulate the economy, it needs more revenues. When he ran for a second term, his budget called for $1.7 trillion in tax increases. At the time, he pledged that he would  oppose any compromise that didn’t raise tax rates on families making more than $250,000. But in the end, he agreed to a  fiscal-cliff deal that raised just a little over $600 billion in revenues, while lifting tax rates only ono families hauling home $450,000 or more.

                         “Asking Less and Less of Those at the Top”

In recent decades, our tax system has become more and more regressive. As the Center for American Progress (CAP) observes in a recent report: “The very highest-income households have enjoyed substantial tax cuts, even as their incomes have risen. From 1979 to 2007 the pretax incomes of the top 1 percent more than tripled, while their tax rates declined by about one-fifth.”  

“It is important to remember that the federal income tax is only one piece of a larger national tax system,” the authors of the CAP study add. “Most of the other pieces—excise taxes, payroll taxes, state and local taxes—ask much less of high-income households than they do of low- and moderate-income households. Taken together, our national tax system is already less progressive than it might appear –which is one reason why it’s so important for the federal income tax to be substantially progressive.” (For CAP’s proposals for raising taxes seeTable  1 of the report.

                                 A Brief History of Tax Rates

Here it is crucial to distinguish between “marginal tax rates” and “effective tax rates”—what people actually pay. In the ‘Seventies, the top marginal rate for the very wealthy was 70%. In the ‘Eighties, it fell to 50% and stayed there until 1987, when an era of tax breaks for the rich began. In the1990s, rates rose, but never broke 40% and as a new century begain President Bush once again slashed rates. By 2012, the marginal rate at the top had plunged to 35%.). 

“Hold on,”  say conservatives. Back in the ‘Seventies and early ‘Eighties, they point out, the wealthy enjoyed some extraordinary tax shelters. This is true. Prior to the Tax Reform Act of 1986, I recall writing about elaborate schemes that let people avoid taxes by investing in race horses, and if memory serves, there was a deal that involved trafficking in human blood. Maybe Warren Buffet sent 70% of his income to the IRS, but if so, he was one of very few.

Republicans argue that this is why we should ignore “marginal rates,” and look at “effective rates” (what people wind up paying after deductions and shelters. )

They are right. But when you focus on what people actually pay, you discover that: the wealthy are asked to pay a much smaller share of their earnings than they did in the past—even while their incomes ballooned.  In 1979 those sitting on the top step of a hundred-step income ladder paid an average of 37% of their incomes in federal taxes; by 2011 they were parting with just 29.5%. 

Consider  what it would mean if you earned more than 99% of your fellow Americans, and lower  rates let you save 7.5 % of your income (37% minus 29.5%), year after year, for 34 years. Now imagine those dollars compounding.

                                  Moving Tax Policy to the Right

Last month former Bush administration Congressional Budget director Douglas Holtz-Eakin observed: “Beginning with Ronald Reagan’s Economic Recovery Tax Act, conservatives have waged a 30-year war over low tax rates” and, he added, “it looks like conservatives have won the war. . . Now, it is time to wage the next war: entitlement spending.”

 Senate Minority Leader Mitch McConnell agrees: “The tax issue is finished, over, completed.” 

Republicans believe they have won the tax war because when it came to raising taxes for the top 2% (individuals earning more than $200,000 and families with incomes over $250,000), President Obama caved.  “This is the success of the radicalization of the right,” observes CAP president Neera Tanden: “Everyone moves right to appear in the middle.”

But I would suggest that Holtz-Eakin and McConnell postpone putting on their party hats. At the end of 2012 polls showed that 61 percent of Democrats– and fully 48 percent of Republicans– believed that the Bush tax cuts for individuals  earning over $200,000 should expire.

                                            The Public Weighs In

A few days ago, a new Bloomberg poll revealed that three out  of five Americans back raising taxes for high-earners and corporations. (Majorities also favor overhauling entitlements, but with cuts targeting wealthier Americans.)

Clearly the tax issue is far from resolved—at least if you assume that Congress cares about what voters think.  I recognize that some conservative legislators believe that they are in Washington to represent “principles”—not “the people.”   But I remain convinced that a significant share of Republican Congressmen realize that their party is in trouble. This is why they have done an about-face on immigration: they hope to court the Latino vote. If roughly half of Republican voters disagree with them on tax cuts for the top 2%, they may need to re-think their position on this issue as well.

Americans are becoming increasingly aware of economic inequality. Over time,the merely rich have become super-rich. Meanwhile,  the upper-middle class has become middle-class; the middle-class has become working class, the working class has become poor, and the poor have become homeless. The widening gaps that divide us undermine not only our economy but our society.

As Jared Bernstein observes: “this is where the legitimacy of the tax code—a critical issue in a democracy—comes into play.  If average folks feel like the economically privileged can get a much better deal out of the tax system than they can, that system will lose legitimacy and that is, of course, a real risk today, one that was highlighted in the recent election.

“To tie this to a concrete policy, when we privilege a particular unearned income and debt financing over paychecks, we’re chipping away at legitimacy.  Now, there could be good reasons for accepting such a tradeoff, e.g., if such favorable treatment led to faster growth and more investment.  But it doesn’t.  And this is a real problem we could and should fix.”

Granted, growing inequality in this country is not mainly a matter of an increasingly regressive tax system. Wealthy Americans also have seen both their incomes and the value of their investments in stocks and real estate spiral.  Over the same span, middle-class wages stagnated  But tax cuts for the wealthy have made the problem worse.

                        Why Tax Increases Must Target the Rich

Republicans suggest that if taxes are going to rise, the middle-class should share in the increases.  In theory, this sounds reasonable. But if conservatives looked beyond their theories to the facts, they would recognize that, today, after paying federal, state and local taxes, 90% of American  households–those on lower 90 steps of that 100-step income ladder are just squeaking by. Over the past thirty years, their share of the nation’s prosperity has declined.

It wasn’t always this way. From 1940 through the late 1970s, 90% of U.S. households shared in roughly 65% of the wages and investment income that the nation enjoyed. But since the early 1980’s, their piece oft the income pie has shrunk to about 50%. 

Recently, things have gotten worse.  From 2007 to 2011, average income for an individual in the bottom 90% fall from $35,173 to $30,370.

Let me be clear: I am not arguing that households earning over $250,000 should shoulder the  full l burden of funding this  nation’s future obligations. Without question, families earning more than, say, $150,000 could afford to contribute at least slightly more. But we don’t want to raise their taxes in the middle of a recession: economic recovery depends on these affluent households spending more.

        Why Most Americans Cannot Afford Higher Taxes

Going forward, we cannot, and should not, raise taxes for what I would describe as “the broad middle-class”–which  includes families living on less than, say,  $100,000 to $125,000. Given rising  prices for the necessities of life—which include education, food, utilities and transportation—these families  are struggling to try to send their children to college. Meanwhile parents don’t have the discretionary income needed to  build a nest egg for their own retirement.

If we squeeze them, fewer children will get the educations they need, and we will fall further behind in global competition. And if parents in this group can’t save for retirement, taxpayers will wind up shelling out more to support them in their old age.

Make no mistake:  I am not arguing for “soaking the rich.” But the Times is right :“Raising taxes at the top is neither punitive nor gratuitous.”  In this bold editorial, the Times says what needs to be said. Raising taxes at the top, “is a needed step, both to achieve near-term budget goals and to lay the foundation for a healthy budget in the future.”

For this reason, I predict that sometime in the next year or two, President Obama will go back to Congress and insist on letting all of the Bush tax cuts for the top 2% expire.   The public is already behind him.

                                     But: What about the Deficit?

Many readers might ask: “Even if we lift taxes, can we really afford to spend more on infrastructure repair, education, the poor, and the environment? Shouldn’t we use those revenues to pay down the deficit?

What too few Americans realize is how much progress we already has made in shrinking the deficit.

During the final fiscal year of President George W. Bush’s administration the deficit stood at $1.4 trillion.  In President  Obama’s fourth fiscal year it will come in at around $800 billion. (Hat tip to The National Memo and Steve Benen on Maddow Blog.)  It is worth noting that the deficit has never before fallen this quickly without triggering a recession.

Nevertheless conservatives have been remarkably successful in persuading the public that President Obama is a reckless spender who cares little about debt. The most recent  Bloomberg poll reveals that only 6% of Americans are aware that, on Obama’s watch, the deficit has been sliced nearly in half

Progressive bloggers and journalists must let voters know the truth: we can afford to stimulate our economy, create jobs, invest in our children, help the poor, keep our promises to seniors, expand Medicaid and address global warming. In fact, we can’t afford not to.

13 thoughts on “Obama to Boehner: “John, I’m Getting Tired of Hearing You Say That”

  1. Maggie —

    There are two issues here. The first is the distribution of the tax burden. The second is the appropriate size of the federal government. When I read posts like this, I get the impression that liberals see virtually everything the federal government does or tries to do as underfunded with the exception of defense. Since World War II federal revenue averaged around 18% of GDP while spending was about 20% or so. What’s the right number for spending – 21% of GDP; 25%? What is it? Economists will tell you that at some point high taxes as a percentage of GDP will hurt the economy’s ability to grow. Unfortunately, nobody can say with any certainty or precision exactly where that point is.

    It shouldn’t be any surprise that most people support raising taxes on high income people because they themselves won’t pay them. This is another way of saying, I want all the benefits I’ve been promised and I expect someone else (the rich) to pay for them.

    Even the New York Times in its recent editorial agreed that at some point taxes on the middle class will have to be raised. Maybe it will be in the form of a phased in carbon tax and/or a value added tax. Yes there is some room to raise taxes on high income people, especially on investment income, but the money likely to be raised will be nowhere near enough to both mitigate the deficit and finance the liberal agenda.

    By the way, the wage stagnation that you write about is mostly attributable to the relentless increase in healthcare costs nominally paid by employers. If you look at total compensation, including all benefits for which the employer pays cash, it grew at a respectable rate but rapidly rising health insurance costs crowded out much of the employers’ ability to raise wages. If you want to see more of that compensation in the form of wages, fix healthcare cost growth. Even there, lots of middle class people who think wrongly that more care is better care and more expensive care is better care are part of the problem.

  2. Is it possible that we have BOTH a spending and revenue problem? I’d say so, and NOTHING will benefit the nation until we eliminate the campaign bribes from the people who have benefited from our corrupt political system. We MUST get rid of campaign bribes with public funding of campaigns. I’d rather that our politicians work in the best interest of the nation.

    THEN we can trust the politicians to run the country. Had we done this decades ago we’d not have today’s problem.

    • Jack–
      I agree. Lobbyists have so much influence because political campaigns in this country are so expensive. Even if honest politicians try to avoid taking what are clearly bribes (and some do), they still need corporate money,Wall Street money, and money from some very wealthy individuals to run for office.

      The problem, I think, is that our campaigns are way too long. Most Americans don’t learn that much about the politicians involved during 9 month campaigns. In most cases, 2 months– or less– should be sufficient for some televised debates and sufficient to give reporters time to report on the candidates, their beliefs and goals. . .

      But our television networks and cable all depending on the huge amounts of money spent on campaign ads. We literally would have to find another way to finance them. This of course, is not a reason to run such long campaigns, but it helps to explain why we have let this problem continue.

      • I agree that the campaigns are too long, Maggie, but we have a Constitution that guarantees free speech. Limiting them to 2 months would be challenged. And the Main Stream Media likes the length because it adds to the costs (and their income), which means that they also are biased towards the politicians (and their bribes, since they filter down to them). Unfortunately, we have very few in the press willing to take the gloves off in the presence of corrupt politicians.

        But on single payer, as an example, it failed to get on the table because of $125 million in campaign bribes from the insurance and drug companies. Now look at the cash from the defense industry (wars) and private correctional institutes (drug war) and the Fat Cats (taxes), and the money from the mining industry and etc, and our country is in pretty dire condition. That’s why I’ve pretty much concentrated on the corruption issue, because if we don’t fix that nothing else will get fixed.

  3. Barry–

    What % of GDP should government be spending?
    See Jared Bernstein’s post.

    He points out that our obligations are much greater than ever before and thus we need to spend a larger percentage of GDP than in the past to responsibly address these problems.

    For instance: today, we have more Vets who actually survive wars.. We’ve gotten much better at getting them home alive–but often they are maimed physically and/or mentally. Meanwhile, as the Vietnam Vets age, physical and mental problems are catching up with them. We have a responsibility to provide more funding for the VA (which Obama is doing).
    We have more poor children than ever before (and no they are not the children of illegal immigrants.)
    Hunger in America is a problem in a way that it hasn’t been since the Great Depression. We need to put more money into Food stamps and programs that let people use Food stamps at green-markets as well as “urban farming”– growing vegetables on the roofs of buildings in ghettos and then selling the
    vegetables to people who live there.
    In NYC, people who want to make a profit on urban farming have gotten involved, and guess what they’re doing? Selling the vegetables to up-scale Mahattan restaurants for very high prices. People who live in the neighborhood even see the produce.
    (This is why government needs to do these things.)

    Real unemployment (including those working part-time who want and need full-time work) is at historic highs. We are spending more on unemployment benefits than ever before– as we should be– and we’ll need to continue that spending until there are more jobs..
    (Anyone who thinks that people on unemployment are taking a “paid vacation” has never lost a job, never experienced the loss of identity and depression of losing a job, and has never tried to feed a family on unemployment benefits.)
    Global Warming is a new problem that threatens the food supply on the planet. Only government will address it. (For some time, corporate America in the private sector has tried to deny it.)
    We have neglected our roads and bridges for so long . . . People die when bridges collapse. Govt needs to invest more in infrastructure repair.

  4. Barry– moving on to some of your other points.

    You write: “Economists will tell you that at some point high taxes as a percentage of GDP will hurt the economy’s ability to grow ”

    What economists? No one believes in the Laffer Curve or Reagonomics any more. In the late 1990s, taxes were higher than they are today, and this did not slow GDP.
    Middle-class wages did not stagnate because of rising health care costs. They began to stagnate when employers realized that they did have to give out raises to keep loyal employees over time.
    In the 1980s, they decided that they didn’t necessarily want long-time employees.
    They preferred to “down size” (lay-offs) whenever it seemed convenient, then hire new people (often younger and cheaper) as needed.
    This would break the employer-employee contract.
    In the mid-nineties, health care costs in the private sector actually flattened (due to managed care)l.
    Did employers give out raises? No. Why?
    Because they didn’t have to. There was an adequate supply of workers.
    In the early 1990s, we had high unemployment, and even those who held onto their jobs were “working scared.” No one dared ask for a raise, and no one got one.
    Middle-class wages went up only at the end of the 1990s–and then very briefly.
    A well known analyst at MOrgan Stanley wrote about how in the late 80s and 90s corporate America was not sharing profits with workers–and how this would hurt the economy. Corporations preferred to share profits with investors (so that the share price of stocks and options that executives own would rise.)

    When the New York Times says that at some point in the future taxes will also have to rise for the middle class, they are talking about people earning “$85,000 to $240,00”– this was the definition of middle-class in NY in a reason Times story about what counts as middle-class.
    I’ve worked at the Times. I know a great many people there with joint income of over $200,000 who truly believe they are middle class.
    Median income is a totally foreign concept/
    So when the times talks about taxes rising for the middle-class they are not talking about people making under $100,000.
    CAP’s recent tax proposal (which is very good) reduces taxes for households earning less than $100,000
    Will we have a consumption tax? No–it’s regressive unless it is sharply limited to luxury good (purchases over, say $75,000).
    Finally, you suggest that “the middle class” thinks that “more care is better care.”
    The true middle-class can’t afford to take time off work every other month to see a specialist. (Their bosses would fire them.)
    Go to a specialist’s office in Manhattan and who will you find in the waiting room? Very well dressed people who believe in getting every test possible– full body scans, pricey (and ineffective) treatments for prostate cancer, knee replacements so that they can play a better game of tennis, heart surgery to relieve angina (temporarily) and “executive physicals.”
    These are the people who are over-treated, not the middle class. If you’re under 65 and middle-class, your insurance just isn’t that rich.

    • Maggie:

      “The true middle-class can’t afford to take time off work every other month to see a specialist. (Their bosses would fire them.)”

      How true on taking time off. I am getting the evil eye because I need to do Cardiac Rehab. I am middle management. If I change jobs I can not easily do Cardiac Rehab either. My newest boss suggests I find a fitness club which has lesser capabilities. As I pointed out to him, they would not monitor me while exercising.

      Damned if you do and damned if you do not.

      • Run–
        First, i’m very sorry that you are experiencing these problems.

        Secondly, I agree.

  5. Maggie,

    I read Bernstein’s post and he made several points that I agree with but you ignore which include: (1) President Obama, in his SOTU speech outlined an ambitious agenda but said “not a peep” about how to pay for it, (2) Obama created the impression that all we have to do is raise taxes on high income people and that would take care of our fiscal problems, (3) there is a disconnect among the majority of people between what they want and expect from government and what they’re willing to pay for, and (4) maybe dedicated taxes to pay for services like healthcare, infrastructure, education and the like might not be a bad idea.

    Regarding how high revenue should be as a percentage of the GDP, he said he didn’t know but suggested it should be higher than the historical average of 18%. He didn’t quantify how much higher. At some point, a higher tax burden is destructive to economic growth and incentives to invest and take risks. Along the same lines, Paul Krugman recently argued that raising the minimum wage to $9.00 per hour probably wouldn’t hurt total employment in his view but trying to raise it to $20 an hour would. There are limits to everything in economics and we need to be sensitive to that.

    On tax rates now vs. what they were during the Clinton period, the top marginal rate on ordinary income is now back to 39.6%, the same as under Clinton and applies to incomes above $400K for single filers and $450K for joint filers. The capital gains tax is actually higher now than it was then for single filers who make more than $200K and joint filers earning over $250K. The top capital gains rate was 20% under Clinton but is now 23.8% including the new 3.8% Medicare tax on investment income for high earners and the increase in the base rate from 15% to 20% for everyone effective January 1, 2013. Bernstein also noted that economic growth during the Clinton period was a much more significant factor in driving how much revenue the federal government took in than the tax rates per se.

    The middle class in European countries pays a far higher tax burden than their counterparts in the U.S. in order to support their extensive social safety net. Broad based value added taxes average 20% in Europe and are as high as 25% in the Scandinavian countries. In Germany, payroll taxes to cover healthcare, retiree pensions, unemployment insurance and long term care insurance total 40% of wages up to a middle class level income threshold. Top marginal income tax rates are somewhat higher than in the U.S. but not much higher in most countries.

    Bernstein also argued in his post that tax expenditures are as important as direct federal spending in thinking about potential reforms and I agree with that. I’m all for broadening the base and lowering the rates so the wealthy wind up paying a higher effective tax rate than they do now but a lower marginal rate. There is plenty of support, including in the financial community, for ending the carried interest preference. Even Warren Buffett only suggested taxing incomes above $1 million at 30% and incomes above $10 million at 35%. He didn’t argue for returning to the ultra high World War II level marginal rates or anything close to it. It would be a disaster if we tried to do that but I’m confident we won’t.

    • Sorry Barry:

      The Clinton growth period was driven by a Greenspan bubble. Today, we are paying for a similar Greenspan bubble under Georgie Bush.

  6. Jack–

    Actually, the vast majority of the American public was (and remains) against single payer.

    Most Americans have employer-based insurance and they don’t want to give it up for a government plan.

    They lilke the fact the employer pays 65% of their premiums They know that if we got rid of employer-based insurance, employers would not givie the average worker raises equallling the amount they spend on health care
    Most Americans also don’t trust government. (And with good reason: the majority of Americans have managed to elect some terrible leaders in recent years.)
    Would you really want George W. Bush rwunning our health care system?
    Thank of what Margaret Thatcher did to health care in the UK. They’re still trying to repair it.
    If Jed Bush became president 3 years from know what do you think would happen to contraception as part of health reform? What would happen to a husband’s right to say: “I know my wife wouldn’t want to be kept alive ona ventilator” What would happen to subsidies for low-income and middle-income Americans to help them
    buy insurance?
    Finally, no European country has single-payer.
    Only Canada and the UK have single-payer and their healthcare is not as good as care in Germany’, Switzerland’, Denmakr, , France . . .I could go on.
    What countries in Western Europe have is health care that is regulated by the government, but not controlled or owned by the government. Essentially they have wage & price controls, though ususally government (or some part of govt) negotiates those wages & prices with doctors, hospitals, drug makers etc.
    This is what Medicare is beginning to do now. Since it’s the largest payer in the coutry, it has the clout.
    Private insurers will followl

  7. Barry–
    Here’s the bottom line on taxes and incomes:
    : “The very highest-income households have enjoyed substantial tax cuts, even as their incomes have risen. From 1979 to 2007 the pretax incomes of the top 1 percent more than tripled, while their tax rates declined by about one-fifth.”

    “It is important to remember that the federal income tax is only one piece of a larger national tax system,” the authors of the CAP study add. “Most of the other pieces—excise taxes, payroll taxes, state and local taxes—ask much less of high-income households than they do of low- and moderate-income households”

    The wealthy are contributing a smaller share of their income than ever before–even while their incomes have been ballooning.

    This is why we have to raise taxes for the top 2% (individuals earning over $200,000) and begin to redistirbute income from the top 2% to the lower 90%. We will do this through progressive income taxes, inheritance and estate taxes and corporate taxes.
    (See what Bernstein says about corporate taxes.)
    Why am I so confident that we will do this?
    Barry, the country is changing. The demographics are changing. The true (median income) middle-class is growing, if not in wealth, in numbers. And they are voting.
    We have an African American in the White House–and he was re-elected. His poularity rating is at an all-time high.
    A white liberal woman (Hillary Clinton) is ever more popular than she is.
    If Bill remains in good health and campaigns for her my guess is that she can win the White House in 3-plus years.
    Elizabeth Warren is in the Senate, and she is a fierce advocate for the middle class. Her power will grow. We are going to see increased regulation of banks, credit card companies and WAll Street
    Don Berwick may become governor of Masschusetts.
    Health reform is here to stay.
    Barry, the people who have been running this country since the early 1980s will not be running it in the future.
    Younger men, women, Latinos, African Americans,, Asians all will be sharing power.
    In the near future, conservatives will lose the Southwest–and parts of the Solid South.

  8. Maggie –

    Picking 1979 and 2007 as the starting and ending points for the tax data you cite is classic cherry picking that both parties are equally guilty of. It reminds me of the saying, “There are lies, damn lies, and statistics.”

    In 1979, we were in the midst of double digit inflation which was driving everyone into higher tax brackets without Congress having to vote to do so. The Dow Jones Average was less than 1,000 and interest rates were very high and heading toward sky high. It was not a happy time for the middle class. In 2007, the market peaked with the Dow Jones Average over 14,000. Wealthy people who owned most of the stock and other real assets realized big increases in capital gains and increased value of real estate, oil and gas and timber among other things. The wealth of senior executives increased sharply thanks to stock options and restricted stock awards much more so than salaries.

    In some states, including NJ and CA, the top 1% of earners already pays 40%-50% of state income taxes. All of the other taxes including those on sales, payroll and property do take a smaller percentage of income from the wealthy than the middle class as you say. I think, in the end, if you look at the total federal, state and local combined tax burden as a percentage of gross income paid by everyone from the 50th percentile of income on up, you would find that it’s surprisingly flat. The exception is that mega wealthy people who derive most of their income from capital gains and dividends and carried interest are paying historically low rates and far less than they should in my view. This is where increases should be targeted. Those who earn high incomes from salaries and bonuses are already paying enough, I think.

    In NJ, the average family pays 11% of income in property taxes while the wealthy pay far less. When combined federal, state and local spending already adds up to 35%-37% of GDP and liberals want to increase that by probably at least several percentage points of GDP over time, the middle class will have to pay more even if the wealthy pay more beyond the new taxes imposed at the start of 2013. To argue otherwise is disingenuous. Middle class people in Europe are willing to pay 50% of their gross income in taxes of one sort or another, including payroll taxes nominally paid by their employer, to pay for a comprehensive social safety net. If middle and lower middle class Americans want something similar, the cost in taxes will also be similar.