Robert Reich - The logic of Taxing the Rich, and Why Dems are Afraid to Use It

[Mass]

The logic of Taxing the Rich, and Why Dems are Afraid to Use It

No candidate for president has suggested that the nation should raise the marginal tax rate on the richest beyond the 38 percent rate it was under Clinton (it’s now 35 percent, but the richest of the rich, as I’ll explain in a moment, are paying only 15 percent). Yet new data from the IRS show that income inequality continues to widen. The wealthiest 1 percent of Americans are earning more than 21 percent of all income (the data are from 2005, the latest the IRS has examined). That’s a postwar record. The bottom fifty percent of all Americans, when all their incomes are combined together, is earning just 12.8 percent of the nation’s income.

The biggest emerging pay gap is actually inside the top 1 percent. It's mainly between 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 five hundred companies in the Standard and Poor’s 500 combined. CEO pay is outrageous; hedge and private-equity pay is way beyond outrageous. Several of these fund managers are taking home more than a billion dollars a year.

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 percent – 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 Dems are getting more campaign contributions these days from hedge fund and private equity partners than Republicans are getting. They don’t want to bite the hands that feed.

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If the rich and super-rich don’t pay their fair share of this tab, the middle class will get socked with the bill. But the middle class can’t possibly pay it. America’s middle class is under intense financial pressure. Median wages and benefits, adjusted for inflation, have been going nowhere for thirty years; health costs are soaring (employers are quickly shifting co-payments, deductibles, and premiums to their employees), fuel costs are out of sight, the prices of the houses occupied by the middle-class are in the doldrums.

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If the Democrats stand for anything, it’s a fair allocation of the responsibility for paying the costs of maintaining this nation. So far, neither the Dem candidates for president nor the Senate Dems have shown a willingness to uphold this fundamental principle. It seems the rich have bought them out.

[lonestarnot]

1. I do not know why this gets danced around with no real movement toward

implementation. Sell outs suck ass!

[librechik]

2. are we about to see this toxic culture poison and transform the Democrats

until they are no different than pukkkes?

It's hard to believe. The Rush culture is a big dud, while the liberal culture is vast and joyful! Why don't they believe in themselves anymore?

Because Big Daddy Bush has bludgeoned them into blubbering wimps. Then the enablers come in like mamas and give the abused children money to make up for The Leader's spanking.

We need an intervention.

[ChicagoRonin]

3. What happens if the middle class collapses in the U.S.?

I'm wondering. It's shown that trickle down economics don't work. The rich (especially the super-rich) tend to spend their money on stuff that enriches or entertains themselves. Invention, innovation and creation, whether in science, technology or the arts, seems to originate largely from members of the middle class, thanks to the benefits of education and economic stability. Take that away, and it seems that modern society would rapidly stagnate.

[ProfessorGAC]

4. Good Question

I built a model in 1997, that was published in two journals, that showed there is a firm and direct correlation between the buying power of the middle class (real income vs. price) and the health of the economy. The "health" elements included productivity, employment levels, real GDP growth, inflation (WPI and CPI), and gov't revenues.

The stronger the middle class, the better the economy. So, a diminishment of the size and robustness of the middle class is an economic negative.

The Professor

[Selatius]

7. It is in the interests of greedy people to squeeze the middle class slowly.

This way, the middle class becomes habituated to steadily decreasing standards of living, like a frog in increasingly hot water warmed over a long period of time until boiling point. If you do it too fast, it provides too much of a shock to the population, and the result is something like France 1789, where the peasants chopped off the heads of the wealthy aristocrats.

[blondeatlast]

5. The middle class seems to always be the driving force behind a strong economy, but the neocons don't

want a strong "working" economy NOR a middle class. They want themselves--and the servant class.

This nation is de-evolving by the day.

I was never a big Big Dawg fan, but damn--he knew how to put together his advisors. Reich was brilliant--and still is. We need to listen to him.

Couple more recs fro this, gang?

[Selatius]

6. There's a reason why everything gets shittier in America every year.

And it's because of conflicts of interest that arise when you take money from the people you're supposed to regulate.