The rich should pay their fair share of taxes.
But how can we tell what’s fair? With all this “Buffett Rule” hullabaloo you might think the rich pay less than ordinary people. Not so. The more you earn, the higher a percentage goes to income tax. The top 5% of earners pay 57% of all income taxes; the wealthiest 1% (with 19% of the income) pay 37% of income taxes. And these percentages have been rising, mainly because the richies’ biggest tax break is the lower rate on investment gains – but since 2008 most investments have fallen (also, by the way, reducing wealth inequality).*
So, can we say the rich don’t already pay their fair share? Or even more than a fair share?**
But meantime income taxes on the whole are too low in relation to the government spending level that voters seem unwilling to change. Much spending goes to the rich, so whether to cut that, or raise their taxes, is really an equivalent choice. But as long as voters won’t accept cuts even in welfare for the rich, then taxes are too low.
However, for President Obama and the Democrats to advocate only raising taxes on the richest Americans is a disgraceful cheap shot, not only because demonizing the rich is demagogic, but mainly because this addresses only a tiny sliver of the problem. Squeezing a bit more tax out of the highest earners wouldn’t begin to come to grips with the massive and growing gap between spending and revenue, and the economic catastrophe this presages.
So the Democrats have nothing to say about that; they take a pass on the great issue of our time. So do the Republicans. They say it should be all spending cuts. But it’s doubtful they’ll suddenly find the cojones to actually put through massive cuts in the teeth of public opinion. And it couldn’t happen anyway without Democratic support; the Democrats won’t make such a deal without tax increases; but the Republican presidential candidates unanimously say they would not accept even $1 in tax rises for $10 in spending cuts.
Obama might have chosen to fight them on that turf, seizing the responsible center, arguing for the reasonableness of a balanced package of tax increases and spending cuts (the “grand bargain”). Instead, he opted to veer sharply left, and into his re-election campaign, with a same-old same-old job stimulus plan combined with a populist “tax-the-rich” plan, neither of which has a snowball’s chance in Hell of getting enacted either (making his fiery speeches advocating them fundamentally dishonest). But this stuff is catnip for the activist left wing of the Democratic party. In short, Obama chose political posturing in lieu of governing.
Maybe he can eke out re-election this way. But to what end? He’ll still have a Republican controlled House and likely a GOP Senate as well. The country will be more polarized and gridlocked than ever, with no centrist mandate for the sensible, balanced, necessary approach that our economic mess cries out for.
It’s just like the Palestinian impasse. The obvious deal stares us in the face, majorities on both sides actually want it, but the zealots make it impossible. Arafat’s walking away from the Camp David deal in 2000 was the Palestinians’ Original Sin. Obama’s Original Sin was walking away from his own Simpson-Bowles deficit reduction commission’s recommendations. That was the moment of opportunity when a real leader might have gotten the nation to face reality and move toward responsibly tackling our fiscal problems.
What a tragedy. Obama is very smart and very likable. But as president, disastrous.
* Click here for some data on all this.
** The idea of the Wall Street protests, dividing the nation between a decent 99% and an evil 1% whose greed causes all the problems, is flat-out childish and useless for addressing our true economic problems. See a recent David Brooks column.