Ten years ago today, the first Bush tax cuts were signed into law. The fiscal damage they have inflicted is still unparalleled. But while the tax cuts for the top 2 percent of American earners will stay off the table until December 2012, there are any number of other progressive tax increases that Washington could adopt, but won't even consider. The public deserves to know what they are. Here are my picks:
1. Scrap the cap on earnings subject to the Social Security payroll tax. Did you know that millionaires and billionaires only make payroll tax contributions on earnings of $106,800? If you didn't, it could be because you are among the 94% of American earners who make less than that amount -- and are taxed on all of their earnings as a result. Social Security payroll taxes are only paid on wages up to $106,800 with employees and employers contributing equally. Scrapping the cap on earnings subject to the payroll tax, while not counting earnings above the cap toward benefits, would eliminate Social Security's entire long-term shortfall. Since Social Security doesn't contribute to the deficit, scrapping the cap won't reduce the deficit. It will make Social Security solvent for the next 75 years, and tie its financial health to growth in earnings in the upper strata, which continue to grow more rapidly than middle- and lower-income earnings. (Click here for a complete fact sheet outlining different options for scrapping the cap.)
2. Enact a modest financial speculation tax. If we levied a 0.25 percent tax on every purchase and sale of stock, and a 0.02 percent tax on every purchase and sale of a future, option, or credit default swap, we would raise $1 trillion in revenue in the next decade. (Credit to Dean Baker for all the data.) It would have the added advantage of discouraging financial speculation, since its effect would be minimal on people holding investments for long periods of time.
3. Increase the corporate income tax rates by 1 percentage point. CEOs love to complain about how high the top corporate tax rate is in America. They say it discourages competition. They say we should have a rate that is closer to Ireland's 12.5 percent. (How's that doin' for Ireland?) But the truth is that all their whining is just empty bravado. While the top corporate tax rate is officially 35 percent, thanks to countless tax loopholes and accounting tricks, 115 out of the 500 companies on the Standard & Poor's index paid a total rate of less than 20 percent over the last five years. Maybe if we jack up their rate a little bit it will offset the effect of some of the loopholes. The Congressional Budget Office (CBO) estimates that, despite the loopholes, raising all corporate tax rates by 1 percentage point will generate $101 billion in revenue over the next ten years.
4. Impose a fee on large financial institutions. Remember the bailouts of 2008 and 2009? Good times. We gave the big banks over $1trillion in interest-free loans. The banks paid back the money they owed, but never paid interest on the principal. Nor do they pay for the implied guarantee that if they go under, the taxpayers will pick up the tab. A 0.15 percent tax on all financial institutions with assets of $50 billion or more is one small way to fix that. It will also provide the treasury with $71 billion over the next ten years, according to CBO.
5. Tax carried interest as income. The carried interest loophole is how hedge fund managers claim a portion of the earnings on funds they manage -- typically 20 percent -- and it is taxed at capital gains rates, which are much lower than income taxes. That's why, among other reasons, Warren Buffett pays a lower tax rate than his secretary. Taxing those earnings as income would net $21 billion over the next ten years. Again, my source here is CBO.
Runner up: Increase tariffs on imports from developing countries with lower labor and environmental standards. It's a great idea. It would strengthen American exports, protect our patented technology, and bring the government much-needed revenue. I just could not find a scored proposal of how much it would save.
I left out a carbon tax and a value-added tax, because absent significant correctives, neither is progressive. (Though both may be necessary.)
There you have it. Five progressive tax increases buy you an end to Social Security's funding gap, and more than $1.2 trillion in revenue. Bring income tax rates back to Reagan levels, and throw in a millionaire's surtax, and we could be enjoying single-payer health care clinics aboard our high-speed trains.
Oh, well. It's nice to dream.
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5) This should have been done already - trouble is the DNC gets big donations from hedge-fund managers.
4) I'd rather go back to the old way of having small banks that we never bail out. Break up the big institutio
3) Instead, let's have a VAT. Tax their earnings at the cash register - and then there are no loop holes.
2) In the era of electronic trading - this is futile. The trades will be placed on exchanges off shore and you won't see a dime.
1) Tax all earnings - from cap gains, interest, and work - for Social Security - the tax could actually be lowered and the program would be solvent. Keep in mind, there is no such thing as a "permanent fix" - name one entity, one business, one program that doesn't need to make adjustment
2) taxing financial transactio
3) Corporate tax rates should go down and loopholes closed not the other way around. You don't leave the loopholes and increase the supposed rates. You can actually increase and make more fair the code by eliminatin
4) Your #4 and 5 by your own account simply don't add much money to the treasury but instead of fixing things through expenditur
Instead, how about 1) Allow the Bush (now Obama tax cut to lapse). It's easy no new laws, just let it lapse. 2) Cut Defense spending 3) Make Medicare means tested. Anyone with assets over $1M or earning over $100K/ year should pay their own healthcare costs.
No new taxes to enact. Medicare is a benefit and therefore the gov't can choose to cut it.
On corporate taxes, I'd favor a VAT - tax them at the cash register - no loop holes - no fancy tax tricks - and a lot of unemployed CPA's. We spend a great deal of money just working around the tax code and gerrymande
On 4&5 - carried interest is just a tax give away, special taxes for special people.... it should be shut down. On the institutio
I also agree with you on breaking up the big banks. In general, gov't tends to think it is so clever that it can regulate and in a perverse way, they prefer to have large companies that are "easy" to regulate. However, it rarely ends up working and it turns into a cozy, oligarchy that thwarts the market and is not well regulated. Fannie, Freddie and Sallie are all good examples.
Here is how I would fix it.
http://bet
It is important to note tax cuts have inflicted very little fiscal damage on the United States and that under normal economic conditions
1) Your point about SocSec is noted. They only pay in is capped but you failed to point out that so is their pay out. They could pay more, but then they would take out more. That would be fair.
2) A financial speculatio
3) We already pay the highest nominal corporate tax in the world, and one of the highest effective corporate taxes in the world. And our tax is on a GLOBAL basis, not a TERRITORIA
4) Actually they did pay back the interest they owed. Goldman, Morgan Stanley, JP Morgan, etc. paid back their money within a year, at an annualized rates of 17%-20%, making it probably one of the most profitable US investment
5) It is taxed at lower rates because this income is subjected to RISK. Tax hedge funds and watch them move next door to Canada, they are going to a 15% corporate tax as the base corporate tax rate. Just to put or rapacious tax rates in perspectiv
And your last point about increasing tariffs, really a regressive tax on the consumer hurts the poor disportion
Kai
Suggestion 3 is a terrible idea. Corporate taxes should be cut by at least 10%, and loopholes closed.
I'm not enthusiast
I like 2, but the tax on stock transactio
Modest tariff increases, definitely
So why not tax other unrealized capital gains?
When the uber-rich borrow against capital, that includes un-taxed, unrealized capital gains, and then pay no tax on the amount borrowed..
But the corporate tax RATE isn't the problem -- it's the EFFECTIVE corporate tax rate, especially on the top scofflaws.
We need an AMT for the Fortune 500, say 0.5% of revenues.
private property and personal freedom are so overrated.
shared sacrifice.
(Hint: They're not.)
Frankly, I wouldn't mind seeing my taxes raised, and I don't even make anywhere near that 108,000 figure or whatever it is (I used to, and didn't mind paying my taxes then, either). But it is interestin
I guess rich people / the GOP don't have to adhere to that Jesus-stat
If these Benedict Arnolds of corporate America want to move to the third world, then good riddance.
Seriously, this ridiculous notions of "chasing companies away from America" are just stupid right wing talking points that have no meaning and aren't based on any facts whatsoever