Americans are constantly demanding more bipartisanship. And we’ve come very close to achieving that kind of unity on one particular issue: an aversion to raising taxes on the wealthy.
Beginning with President Ronald Reagan, Republicans began pushing back hard against the idea that the wealthy should bear the lion’s share of the cost for paying for government programs.
Conservatives accused anyone arguing for higher taxes of taking up the banner of “class warfare.” Estate taxes — an accepted part of American taxation for nearly a century — were renamed “death taxes.”
A lot of prominent Democrats, including Governor Andrew Cuomo, have embraced this policy-approach.
But the Congressional Budget Office says the deficit next year will top an astonishing $1.5 trillion, another sizable step toward national insolvency.
I view it as a matter of simple common sense that Americans face a period of Federal austerity, with deep cuts to social programs, infrastructure spending, and the military.
But we may also find ourselves asking that the rich pay more to help close the gap — I’m guessing a lot more.
The reasons aren’t ideological. Americans — yes, even most Democrats — love the idea of getting rich.
But the simple fact is that the wealthy have gotten a lot wealthier the last few decades and at the same time their tax burden has been cut sharply.
From 1980 to 2006, per capita GDP in the US grew from around $22,000 per person to $37,700 per person. That represents a massive 60% increase in our ability to create wealth.
But over that same period, average household income only increased by about 15%, with ever-larger shares of newly created wealth shifting to the richest Americans.
Meanwhile, the wealthiest households — those in the top .01% — saw their incomes rise five-fold, from around $5.4 million a year to $29.6 million a year.
Liberal and conservative platitudes aside, it’s a simple fact that this trend represents a huge redistribution of tax-paying clout in America.
Yet over the same period, tax rates for the rich were cut roughly in half.
As we think about our current fiscal crisis, it’s important to remember that tax cuts for the rich represent a dramatic departure from the bipartisan consensus that existed from the late 1930s through 1980.
The last time America faced a crisis similar to the one we face today — fighting wars abroad, with our Federal government running up huge deficits — wealthy citizens were taxed at marginal rates that ranged from 70% to more than 90%.
This wasn’t just a Democratic approach to paying for government. During Dwight Eisenhower’s presidency, which lasted from 1953 to 1961, the top marginal tax rate was more than 90%.
Eisenhower argued for tax-and-spending policies that in his view would lead the country “down the middle of the road between the unfettered power of concentrated wealth . . . and the unbridled power of statism or partisan interests.”
But today, the highest bracket is just 35% and recent tax breaks have generally benefited wealthy households over the middle class.
The Bush-era tax cuts, for example, saved average middle-income families around $647 a year, or about the price of a low-end laptop computer.
Meanwhile, the top 1% of households benefited to the tune of $35,000 apiece. That’s about the price of a new SUV.
Conservatives defend these ever-deeper tax cuts for the wealthy with three basic claims:
1. Soaring deficits are caused exclusively by bloated government. According to this philosophy, tax cuts are always a net benefit and don’t need to be paid for by off-setting cuts.
2. The rich already pay more than their fair share, even with lower marginal rates.
3. By freeing the rich of a sizable tax burden, American has created far more economic activity.
Beginning tomorrow, I’ll wrestle with each of these arguments in turn, starting with the Big Government debate.
In the meantime, what do you think? Was it wise for America to liberate the wealthy from a chunk of their tax burden? Or will we need the rich to kick in more in order to wrestle this deficit to the ground?