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On Raising Taxes and Restoring the Dream


We have all benefited from lower taxes in the years since 1980. So we can’t simply say that the rich have benefited. We all have lower taxes than we otherwise would. Of course, the more money you make, the more you are taxed. So the rich, even at these lower rates, pay more by far than the poorest even earn, let alone pay. On average a millionaire would pay about 20-25% in actual dollars to the government. Just the amount they pay in taxes is four the average annual wage of the American worker.

But what happened in the 1980s when taxes were first drastically reduced had two consequences, either intended or unintended, depending on how much of a conspiracy theorist you are. First, the taxes for the rich were cut dramatically more than they were for everyone else. At the top level, people were paying 74% of their income, (74% of everything over something like $300,000 or $500,000) and that was dropped to 50% and then to 28%.

Naturally, when the top rate is 28%, then the taxes for others were commensurately scaled down. Many of those in the bottom half of society, simply because of scaling down, paid very little or no taxes at all. Well, the Republicans, who were in charge, didn’t care because they were playing with “house money.”

In other words, they were happy with large deficits as long as they were in control, because the money that was saved in taxes went to the top income groups and the deficit spending often went to outside contractors like Bechtel and Halliburton and GE and the Carlyle Group, who were their sponsors.

They were also pleased to cut all taxes because they have long avowed that their ultimate goal is to reduce the size of government because, they maintain that private firms can do most government jobs better. We have some examples that do bear out that point…contracting is usually handled by private contractors building roads and bridges and airports for the government.

But other services do not work that way. In every other advanced country, health care services are either handled by the government or handled by private, but non-profit, companies who are very tightly regulated by the government. All these countries, France, Germany, Switzerland, the Scandinavian countries and so on, all have far better health care than we do here.

Now here’s the important point. If you consider a tax cut or rebate and being lost revenue to the government, things look far different from simply “cutting taxes.” Breaks that are given to people in average households, multiply many times over when given to households with very large incomes. Lower income people pay lower tax rates, but higher income taxpayers have not only more tax deductions but more valuable tax deductions.

The point is this. The deductions that the wealthy, the top 2%, get annually amount to about $1.2 trillion. In other words tax “expenditures” tax money that it spent on the wealthy by giving them extraneous deductions would pay for our entire budget deficit.

We would not need cuts in anything or tax rate increases as such. All we need to do is eliminate the tax breaks that take our top income earners from a published and agreed-upon top tax rate of 35% to an actual paid tax of only 23%. If the top income earners paid all their taxes according to the rate schedules, the budget would balance.

Let’s not lay all responsibility for deficits at the billionaire’s door. American citizens voted in the Republican House. They voted in a Republican President and enough Republican Senators and Right-leaning Democrats between 2000 and 2010 to pass all these tax cuts over the objections of Liberals.

Liberals may have been at one time the big spenders, but from the days of Bill Clinton through the end of the Bush era, they were the Party of “paygo.” In other words, what new spending you legislate must be replaced by spending cuts. That policy was abandoned by the Republicans in 2001 and it was only resumed in 2006 when Nancy Pelosi and the Democrats took legislative control.

So the voters themselves elected enough Republicans to the Presidency, the House and the Senate to push through massive tax cuts not only for the rich but cuts scaled all the way down the income ladder. So when a rich man got a tax cut, a middle class family got a tax cut too. So now we have a smaller percentage of income than any time in the last 50 years being paid by the middle class as well.

The fact is that, however unpopular, everyone must have at least some share in tax increases. It is only fair and every bit will help reduce the deficit. Of course, in order to pay taxes you must earn a living. So we must first generate jobs.

The Republican corporations, the giant international corporations are creating jobs overseas. In order to create jobs here in the United States we need to do several things. First, we need to shut down investment in foreign manufacturing plants by U.S. manufacturers and outsourcing of jobs to foreign countries. Corporations cannot do it because it would be adding to their company’s costs and not maximizing the profits for their investors. But the government could do it. The government can do whatever is in the best interests of the People.

Once we have taxed those foreign factories and put penalties on companies that hire abroad, we need to create manufacturing jobs here, using some of those revenues. Take the money we are now sending to China and use much of it to create U.S. jobs. What will China do? Nothing.

China is heavily invested in the U.S. They are owed money by the U.S. in U.S. dollars. The better the U.S. economy does, the stronger our currency and the more value their investment is to them. They have a domestic consumer market of 1 billion people and surrounding countries have another billion in population. They don’t need the U.S. market to survive and grow.

There are numerous industries in which we can create more jobs today, right now, here in the U.S. But the big numbers, the thousands of jobs at a stroke of a pen are done by the major corporations. We need to bring some of those jobs home and some of that manufacturing back to the U.S. If you are driving a car, you know one way we can start creating jobs here right now. Transportation, other than by gasoline-powered vehicles, and energy powered by other than oil, coal, natural gas and nuclear must be a priority.

Next, we need to create a certain number of domestic jobs via direct government employment. Those same Wall Street hotshots who created those less-than-reliable investments of the mid-2000s are now holding on to their cash. They are still investing it, creating more bubbles in a smaller way and passing the earnings back and forth among themselves. We don’t have private investment capital in the market. Therefore we need government investment.

If we create several million jobs by using revenues from the taxes on imported products by U.S. corporations manufacturing abroad, we will jump start the economy. If we make people pay the taxes that show up without extraordinary deductions, we will close more of the budget gap.

And if we all stop thinking that we may be that one exception to the rule that everyone must pay his fair share, then we may be able to restore the United States to the most powerful economic engine the world has ever seen.

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