Today is tax day, the yearly opportunity for millions of Americans to shake their fists at the government and declare their contempt for the ideas of mutual concern and collective responsibility. So on this most practical of days, it's good to remind ourselves of some realities. First, the taxes we pay are, by international standards, fairly modest. Second, despite what some would have you believe, the wealthy are not crushed by the burden of taxation. And third, though nobody particularly enjoys giving part of their income to the government, taxes are the price we pay for having an advanced, democratic society.
In February 1913, exactly a century ago, the Sixteenth Amendment gave Congress a constitutional green light to levy a federal tax on income. Later that same year, lawmakers made good on that opportunity. An income tax has been part of the federal tax code ever since.
This piece is the fourth in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos.
The “Buffett Rule” proposed by President Obama and now being considered by the Senate would be an important symbolic step toward a fairer tax system. By instituting a minimum tax on very high earners, it would advance the principle of progressive taxation and reform the tax code in an overdue way.
If the last ten years of debt and jobs destruction have taught us anything, it’s that we must change our tax system and soon, or face economic disaster. Instead of maintaining our infrastructure, we are consuming it. Instead of investing in education and research with an eye to later wealth, we’re cutting our way to a poorer future.
Mitt Romney has now disclosed that he paid only 14.5 percent of his reported income in federal income taxes in 2010. That’s no surprise. My group, Citizens for Tax Justice, predicted as much last fall, based on Romney’s previous disclosure that almost all of his 2010 income came from capital gains and dividends taxed at the low 15 percent top rate.
Newt Gingrich insists that this is not fair. Touting his own “flat tax” proposal on January 17, Newt said, “I think we ought to rename our flat tax, we have a 15 percent flat tax, so this would be the ‘Mitt Romney flat tax.’ All Americans would pay the rate Mitt Romney paid. I think it’s terrific.”
Mitt Romney’s newly released tax returns, showing that he paid taxes in 2010 at a rate of just 13.9 percent on income of $21.6 million, should provide ammunition for President Barack Obama’s newly rediscovered populism. Obama is on record supporting a “Buffett Rule,” that the boss should pay at least the same tax rate as the help.
In the watered down economic dialogue of 2012, a flat tax rate rather pitifully passes for the progressive position. Not so long ago, progressives were of the view that the more money you made, the higher your rate should be. The tax schedule should be, well, progressive. The original presidential sponsor of this concept was that Bolshevik, Theodore Roosevelt.
Today—the same day that New York’s Mayor Bloomberg had his cops clear Zuccotti Park—Richard Fisher, the president of the Federal Reserve Bank of Dallas, called for breaking up America’s biggest banks, calling them “too dangerous to permit.” Also today, Warren Buffett, in an interview posted on the Business Wire of Berkshire Hathaway, his company, continued his criticism of American plutocracy. “Through the tax code, there has been class warfare waged, and my class has won,” Buffett said. “It’s been a rout. You have seen a period where American workers generally have gone no place, and where the really super rich as a group increased their incomes five for one in this rarified atmosphere.”
As I lament just how few deductions I can take to move that digital Turbo Tax counter up toward a fat green refund, I have to consider what it'd be like if, instead of corporations being people, people like me were corporations. Because then, as my colleague at Demos David Callahan writes today, I'd be sitting pretty in "Loophole Land" instead of toiling over here in "W-2 Ville".
Jonathan Chait addresses a pet peeve of mine: conservative writers who insist on minimizing the out-sized effect of luck on life outcomes:
[O]f course, Gates (as he has acknowledged) benefited enormously not just from his family situation but from the timing of his birth, which put him in the work force at a moment when computing technology was set to explode. If he had been born a decade or two earlier, he probably would have been an anonymous lab geek if he had followed his mathematical inclinations, or perhaps the owner of a successful grocery store chain if he had pursued his entrepreneurial instincts.
Kevin Drum's piece on the decline of labor unions and the rise of corporate power is excellent and definitely worth a read. It also contains a wealth of great charts, including this one, which compares the current income tax rate on millionaires to its rate in the past. Short story? Millionaires are doing very well for themselves:
The latest argument against the tax deal goes like this: After the payroll tax, which funds Social Security, is temporarily cut to stimulate the economy, Republicans will never let it go back up again, and indeed, that's what they're tellingRyan Grim on the Hill. This is all just a secret plan to roll Obama and go after the social safety net. Jon Walkerwrites at Firedoglake, "The payroll tax holiday was never a progressive idea."
Though I ultimately disagree with her conservative takeaway, I actually found myself agreeing with much of Katrina Trinko'sargument that sin taxes -- taxes on everything from cigarettes to soda -- are politically cowardly and cheap:
That's because during this recession, politicians are increasingly resorting to sin taxes to help close budget gaps. Aware that Americans, facing high unemployment and underemployment, won't rush to support (or re-elect) those who raise income taxes, politicians are devising less obvious ways to boost revenue. Raising fees on government services is one such way; increasing or instituting sin taxes is another.