Tuesday, January 17, 2012

Read My Lips: Raise My Taxes!

A report by the Congressional Research Service leaves little doubt. The income gap has grown enormously!
by Charlie Leck

Is it important that I state up front that I am not in the middle or lower income tax brackets. In a fair world, I should be paying more taxes. This statement is only a preamble to the subject of today’s blog about the dramatic growth of the separation between the wealthy and not-wealthy in this nation. I only think your understanding of my standing makes the following statement more credible.

A report has just been released by the (nonpartisan) Congressional Research Service that seems to explain the reasons for the growing divide in economic status in America. For a full explanation of the report I recommend this story in Monday’s edition of the Washington Post. If you really want to read the report itself, you can find it here.

What you’ll find is that Warren Buffet has been right-on in what he’s been telling us about the income tax rate for years; essentially that “the share of total after-tax income attributable to dividends and capital gains grew by 40 percent, faster than any other category.” Those in our society who receive such income pay a much smaller rate on it than the fellow who files his w2 forms on his earned income at the end of the year.

George W. Bush’s income tax cuts for the wealthy made an enormous difference in this country and are primarily responsible for this huge and widening gap. “…the Bush tax cuts of 2003 blew it wide open by slicing the top rate on dividends and long-term capital gains from 28 percent to 15 percent.” (Don't get me wrong, a Congress controlled by Democrats had to approve the Bush tax cuts!)

And, the impactful recession we’ve just gone through has made matters even worse by deadening the ability of middle class income to grow.

“Not only does this foster inequality, it also creates an incentive to seek investment income rather than the ordinary kind…”

The report argues convincingly that this income of the wealthy has already been taxed at the corporate level to the tune of approximately 35 percent. While a hike in the amount of taxes the wealthy pay on dividend and capital gains taxes seems appropriate, a lowering of the corporate tax rate might also make sense.

One has to decide whether this growing and enormous gap between the haves and the have-nots in this country is creating an unhealthy society. To me, there doesn’t seem to be much to argue about.

Our federal tax system must be reformed in a manner that will enable a strengthening of the middle class.

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