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Issue Position: Taxes & Revenue

Issue Position

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When the economy is healthy again, that will be the time to address the remaining deficit. Restoring prosperity is the crucial first stop toward closing the deficit. Part of the rest of the task of closing the deficit involves increasing federal revenues. The Republican refusal to consider the revenue side of the equation has no justification, in view of the facts about how the American distribution of wealth and taxation has become unbalanced and unjust in favor of the richest.

Measures that should be taken include: 1) closing inappropriate tax loopholes for corporations; 2) raising taxes on the richest Americans back to the level in the prosperous 1990s; and 3) creating various tiers for the richest Americans, so that billionaires are taxed at a higher marginal rate than a couple making $275,000.

Restoring prosperity is the crucial first stop toward closing the deficit. Revenue will increase as employed people and prosperous businesses pay taxes. Expenditures will be reduced because employed people do not need unemployment compensation, and there is less need for food stamps. Economic problems are contributing to the deficit more than vice versa.

Restoring prosperity is the crucial first stop toward closing the deficit. Revenue will increase as employed people and prosperous businesses pay taxes. Expenditures will be reduced because employed people do not need unemployment compensation, and there is less need for food stamps. Economic problems are contributing to the deficit more than vice versa.

But according to the Republicans, spending is way out of control while taxes in America are way too high. Do the facts support this? No. The yawning deficit gap has been caused less by a take-off in spending and more by a plunge in revenues. Tax rates have been declining for years, especially for the rich, and these graphs show it.[http://www.americanprogress.org/issues/2011/06/pdf/low_tax_graphs.pdf]

* Total revenue as a share of gross domestic product has now been under 15 percent for three straight years--the first time since before World War II.

* In 1960, the top marginal income tax rate was 90 percent. Today it is just 35 percent, and the Republicans in the House of Representatives want to lower it to 25 percent, which would be the lowest top rate since 1931.

* Taxes on investments are at their lowest rate since 1933.

* The estate tax has been nearly eliminated.

* The taxes paid by corporations have declined fairly steadily over the past 65 years, and now stands at only 1.3 percent of GDP, in contrast with 7.2 at the end of World War II.

* The effective rate paid by American corporations is well below the average paid by their foreign rivals.

* The total rate of taxation in the United States is one of the lowest among developed countries.

What's the bottom line?

Those who say that the United States is overtaxed do not have evidence on their side. Those who say that the tax burden has increased are simply wrong.
And those who say that higher taxes are incompatible with strong economic growth don't have much of a case either. The greatest periods of economic growth in living memory were in the decades following World War II, when tax rates, especially on the rich, were much higher than now, and in the 1990s after the tax increases that the Republicans claimed would drive the American economy into a deep recession.

Conversely, the years after the Bush tax cuts--when the national debt doubled--did not see vigorous economic growth.

One would think that the Republicans would not have much credibility on these matters.

If America has been changing in terms of tax policy, it has been in the direction of having the very rich pay less and less. And if our current budget problems call for changes, it would seem only fair for that change to be in the direction of those corporations and individuals who command the most wealth to pay more. It's their fair share.

And consider this: The gap between the richest 1 percent and the rest of America is now greater than it has been in living memory. The richest 1 percent now owns more than one-third of the total wealth in the nation. And the channeling of wealth to the top has accelerated still more with respect to the top one tenth of 1 percent.

Recent discussions about renewing the Bush tax cuts focused on a cut-off above an income of $250,000 for a married couple. Treating the 250,000st dollar earned by a couple the same as the billion-and-first dollar earned by a billionaire seems unjustifiable. The top 2 percent can be broken up into various segments, treating multi-millionaires and billionaires differently from the upper middle class.

Wealth inequality has been shown to be correlated with social and political pathologies. Republican proposals have been all about protecting the most privileged at the expense of average Americans. These policies should be repudiated as both unjust and unwise.


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