The wealthy’s taxes must be raised
Billionaire investor Warren Buffett wrote an op-ed in The New York Times on Monday, describing how the wealthiest Americans have been “leaving the middle class in the dust.” Buffett suggested that a minimum tax rate of 30 percent should be enacted on Americans making more than $1 million each year.
Xingzhou Zhu | Daily Trojan
Buffett’s comments come as Congress prepares to address the Bush tax cuts, which are set to expire for all Americans on Jan. 1. His argument that the wealthiest Americans should pay higher taxes is embraced by many pundits, politicians and citizens who claim that the rich are not contributing enough federal revenue, especially during the nation’s current economic downturn. Though Congress must raise tax rates for the wealthiest Americans from a practical, fiscal standpoint, it’s wrong to assume this is justified because they do not pay their fair share of taxes.
America’s top earners already contribute almost the total amount of federal income revenue. According to the Congressional Budget Office, the top 20 percent of Americans carry 67.9 percent of the federal tax burden. And about 40 percent of these taxes are paid by the top 1 percent alone.
In contrast, the bottom 47 percent of U.S. households pay no federal income taxes, as documented last year by the nonpartisan Tax Policy Center. If anything, this broad overview of America’s tax system implies that the rich are paying too much — a talking point that has certainly become popular with conservative pundits.
But the truth is that America’s wealthy have been able to make increasing financial gains despite carrying an ever-larger share of the country’s total tax burden. The Wall Street Journal used data from the Tax Foundation to show that, during the last decade, the top 1 percent’s share of income grew nearly five times faster than their share of taxes paid. To be fair, the wealthy are carrying federal income taxes at the highest percentage in years — The Wall Street Journal reported last year that the top 1 percent of earners now pay double the share of the tax burden that they paid in 1980. But new loopholes have made it easier for the very wealthy to skirt the system — especially the ability to classify income as “carried interest,” which effectively taxes earnings at a low 15 percent capital gains rate.
The fact that wealthy Americans take advantage of these tax deductions is not directly unfair, as these options are available to all U.S. citizens. The payoff, however, is much higher for wealthy citizens because of the drastic difference in tax rates.
Those who argue vehemently against higher taxes on the wealthy frequently push for a flat tax, under which every American will be taxed at the same rate, but the rich pay more because they earn higher incomes. A flat tax seems superficially simple and beneficial, but unfortunately would force the tax rate to be unsustainably low. After all, a family of four with a total annual income of $40,000 can’t afford to even pay $8,000 in taxes with a 20 percent flat tax. But if that flat rate is any lower, the rich will be getting the exact same break they currently enjoy with “carried interest” capital gains tax rates. For Congress to adopt a flat tax rate would be fiscally irresponsible.
Percentage wise, the rich are certainly paying their fair share. They can afford, however, to contribute more, and, in these dire economic times, they must. America’s deficit is more than $16 trillion and states are in dire need of fiscal aid. Washington should pursue a multi-level strategy to increase federal income through increased taxes and an overhaul of loopholes and superfluous tax credits.
And students should lobby for this. People often disregard students’ arguments for higher tax rates on the wealthy because of our limited work experience. For their points to be taken seriously, students should avoid the misguided argument that “the rich don’t pay their fair share.” America doesn’t need to penalize the wealthy — it needs to ask them for help.
Ryan Townsend is a sophomore majoring in business administration. His column “The Blame Game” runs Tuesdays.
The problem is, “rich” is considered income above $250,000. While $250,000 might seem like a lot on paper, think about the average family of four (yes, I admit that assumption is hetero-normative and that not all families look like that nowadays).
Think about your USC tuition, which is something we can all relate to. Cost of attendance here is upwards of $40,000 and for most people student loans and other financial aid doesn’t cover it completely. I know we make sacrifices for our education, as do many of our parents. After state and local taxes, federal taxes, and other things that come with the cost of living, $250,000 doesn’t stretch so far anymore. Once you have all those taxes, tuition is much harder to pay.
Then come the collateral side effects. Once you account for all those taxes and other costs, it becomes harder to pay things like mortgages and car loans. That family of four will cut out “frills” such as going out to dinner, which would hurt the local restaurants in their city. Maybe it won’t replace household appliances, which would hurt the local stores. Maybe it can no longer afford tutoring for their child struggling in math.
So while the “tax the rich” philosophy is all well and good, think about what actually happens and where that money really goes.
Not to mention the number is entirely arbitrary. As was mentioned below, no one deserves to pay more just because the government can’t control its spending problem. They got us into this mess with all these sweeping initiatives at once, some of which are ok, but refuse to accept responsibility for their spending.
To all those yelling “tax the rich” with their torches and pitchforks, would you want yourself to be taxed more, whether rich or not, just because the yahoos running the budget can’t manage it properly?
It’s impractical to advocate for no new taxes on the wealthy, because Obama has centered his whole 2nd term around carrying out a promise he believes got him a 2nd term. Obama is shrewd to understand he won’t overcome Republican objectionism if revenue increases aren’t more than matched by cost cuts. Even though Obama’s a liberal and added to the social safety net with Obamacare, it’s clear he’s seen the numbers and knows entitlement programs must face some major cuts. Conservatives will hurt their 2014 and 2016 chances if they fight new taxes on the richest Americans. It’s quite remarkable to see how some enlightened Republicans are even backing out of their Norquist pledges (which should be illegal anyway, it amounts to bribery of public officials a jailable offense). So the best thing for Conservatives to do is aim for the highest possible ratio of spending cuts to revenue increases, and to push for true reforms in tax administration, entitlement programs, and overall government bureaucracy. That’s where bipartisan compromise can be achieved.
Hogwash. The USA, like California, has a spending problem, not a revenue problem. Cut spending and address waste, fraud and abuse FIRST. The politicians are dreadful stewards of our money. They spend recklessly, well beyond their means, when the money runs out and they have no more money to flush down the drain they declare a fiscal crisis and demand that those who make the most bail them out. When the government demonstrates it knows how to handle money, then we can talk about raising taxes. But even if they tax 100% of the wealthy’s money, it would be drop in the bucket compared to the deficit and the debt. The idea that the problem is the wealthy not paying enough in taxes while ignoring the reckless spending and the cost of the out of control entitlements, etc. is a joke.
Thank you! Very well said. It’s so much easier to spend everyone else’s money. Now we’re deep in debt for spending too much on too many programs without accountability. This was always unsustainable, and attacking the “wealthy” is just a red herring.
I think we should take a wait-and-see approach to our country’s debt crisis. Let’s all follow Obama the Great to the Coliseum and watch the lions massacre a former hegemon, Greece. Like all great empires, we too will turn a blind eye to history and repeat the same mistakes. Hint: higher taxes are not the answer.
High taxes do not harm the rich. High taxes harm people that aspire to be rich. The high taxes are a barrier to wealth accumulation. High taxes keep the poor from rising to the middle.
Incrasing taxes only causes those in government to spend morre, not spend less. The problem is not that the rich dont pay their fair share, they certainky do and pay more. The issue is the out of control spending that is occuring in govnment today. There must be entitlement program reform. There must be a complete overhaul of the tax code to close some loopholes, but the point you make twhat the rich mus pay more is absurd.
You fail to mention tha tthe 47% who dont pay any taxes are the folks reeceiving all the benefits from those who do pay the taxes. There is something wrong with that picture.
Carried Interest? What the heck is that, another phrase at mis directs folks away from the fact that unearned income or interest income is momey earned on savings accts, investments and such. This is money that has already been taxes at the corporate rate of 35%, plus the 15% unearned income tax rate, so that makes for aeffective 50% tax rate on that $1 earned. Are you seriously stating that you ae for a 50% tax rate on this income?
The fools in Washington are banking on the American public being fools themselves for allowing th out of control spending to continue and to raise taxes in order to fund more spending. You do not hear froObama, Pelosi, Reid, the Dem in the House and Senate talking about fiscal responsibility, educing spending and getting the budget under control. It is not the Dem party platform.
You kids are being snookered into giving away more of your income to today’s government, a goverment not of the people, not for the people, not by the people, but a government for themselves.
You must remember this… When the goverment taxes you more in order to spread the wealth, pay for more programs without spending reduction programs in place, in order for the rich to pay their fair share, etc….. You will soon find that the definition of rich starts dropping into your middle american incomes. Who determines wha tis rich these days? That definitiocertianly has xhanged over the past 10 yrs, let alone 30 yrs ago!
If you fall into ts trap, it will be decades before anyone mit be able to get us out of the spend, spend, spend attitude of government.
You might want to rethink your political approach from taxing more, to spending less. That’s the only way the USA will ever get back on its feet, otherwise, Obama and his minions will spend us into complete financial chaos, and you kids, will forever be known as the Debt Generation, as it will be you who will have to deal withi this mess as you move on into the real life after college.
Good luck.
Yes taxes on the wealthy must go up. But if they went to 100% it would not come closing the deficit gap. Taxes on the middle class are going to have to go up–considerably. And/or expenditures are going to have to be cut–considerably. However, with a larger and larger share of expenditures going to pay interest on the debt and non-discretionary items, cutting expenditures becomes even more difficult. The government can deflate the money (which it is doing) and make paying those debts easier.
Have you heard of the Laffer Curve. Found by a USC alum
https://www.youtube.com/watch?v=ayad5mbSSrU&feature=player_embedded
Time to wake up and do your research. The feel good tax the rich mantra feels good, but it does not work in the real world.