Tax Jujitsu: Why Democrats Should Propose a “People’s Tax Cut”

taxesRepublicans are calling the Democrat’s proposal to end the Bush tax cuts on the richest 3 percent a “tax increase,” and demagoging that it will hurt the economy and small business. This is baloney, to put it politely.

Let me count the ways:

  • Bush’s ten-year tax cut was designed to end this year, so it’s not a tax increase.
  • Ending it for the rich simply returns them to the Clinton tax rate, which was hardly confiscatory (reminder: the Clinton years were damn good for business).
  • Small businesses would barely be affected. Only 3 percent of small business owners earn over $250,000. And because it’s a “marginal” tax, the Clinton rate would apply only to the portion of their incomes over $250,000.
  • Yet extending the Bush tax cut to the richest Americans would give them a $36 billion bonus next year. ($31 billion of this would go to billionaire households.) And that $36 billion would be added to the budget deficit.
  • And it wouldn’t even stimulate demand and jobs, because the very rich save (rather than spend) more of their disposable income than the rest of us.
  • Finally, ending the Bush tax cut for the top is fair. Income inequality has become so grotesque that the top 3 percent of households rake in almost a third of total income (the highest portion since 1928).

But by the time Democrats explain all this, it’s too late. The Republican furor over a “tax increase” has framed the debate.

Republicans understand the art of tax demagoguery: Put the other side on the defensive by forcing them to explain why a “tax increase” is warranted and they lose regardless.

So instead of playing defense, Democrats should go on the attack.

Accuse Republicans of being shills for the rich.

And don’t stop there. Do tax jujitsu. In addition to ending the Bush tax cut for the rich, put forward another proposal for growing the economy that cuts taxes on lower-income Americans.

Democrats should propose eliminating payroll taxes on the first $20,000 of income, and making up the revenue loss by applying payroll taxes to incomes above $250,000.

This would give the economy an immediate boost by adding to the paychecks of just about every working American. 80 percent of Americans pay more in payroll taxes than they do in income taxes. And because lower-income people would get most of the benefit, it’s likely to be spent.

It would also give employers an extra incentive to hire because they’d save on their share of the payroll tax. And most of the incentive would be directed toward hiring lower-income workers – who have taken the biggest hit on jobs and pay during the recession.

robert_reich.jpg

It wouldn’t add to the deficit. Lost revenues would be made up by applying payroll taxes to income exceeding $250,000. This is certainly fair. As it is now, the Social Security payroll tax doesn’t apply to any income over $106,000. Having the tax kick in again at $250,000 would draw on the top 3 percent of earners, who (as noted) now rake in a larger portion of total income than they have in more than 80 years.

Call it the People’s Tax Cut, and let Republicans explain why they’re against it.
Robert Reich

This article first appeared on Robert Reich’s Blog. Republished with permission

Published by the LA Progressive on August 26, 2010
Related Posts Plugin for WordPress, Blogger...
About Robert Reich

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.

Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

Comments

  1. I sort of agree, but I think it would be better to make payroll taxes – “FICA” – progressive, starting at 0 for poverty level earnings and eliminate the cutoff at 106,000 all together.

  2. I think that exempting payrolls up to a certain amount is simply wrong.
    All Americans should pay taxes. Period… even if it is a dollar for the smallest wage earners, at least then everyone could claim that they were vested in the future of the Country.

    Nobody should be paying less than $1 per year to fund our Government. This should be the minimum income tax for anyone. Everyone should pitch in, even if it is a tokin/symbolic amount.

    and reminder: It wasn’t the Clinton years that were good for business… it was the Republican Congress years (starting with the 104th Congress that was heavily chastized for attempting to bring some sanity to government spending) and more… it wasn’t Government being “good” it was less “bad” for business. In the end, it was business that was good to the Government… filling the coffers of the treasury. Governments NEVER create productivity. It is only the work of the general population that does that. All government can really do is maintain law and order in the form of guarantees in property rights, and to enforce contracts between citizens. This is the fertile ground where the sole source of productive work can take root… and always at the hands of the people.

  3. Fred Farkle says:

    Apparently Mr. Reich can’t understand that STRATOSPHERIC SPENDING is the problem here, not low taxes. The Federal government is completely out of control in every way.

    Everything the Feds touch turns to crap. The can’t even run the simplest things well.

    The Post Office bleeds money, but FedEX and UPS are models of well-run enterprises.

    Medicaid and welfare and the public schools are sinkholes for for cash, while the private schools and the Catholic sisters and private charities provide double the results at half the price.

    The government payrolls and unions and pensions are mushrooming like flabby parasites on the public corpse, while private businesses everywhere are desperately economizing and straining to increase productivity.

    And there’s a thousand more examples just like those – you know it’s true.

    Let the people free, Mr. Reich. Take your government boot off the necks of the people. Cut spending. Cut government. Simplify taxes. Slash your own payrolls and pensions. Outsource all non-constitutional functions to the private sector, and watch millions of small businesses energize and bloom and get this economy rolling again. It’s the only way – it’s the proven way – but of course, you’d have to give up your ham-handed control obsession.

    • AL IN STL says:

      WHERE WAS YOUR INDIGNATION WHEN BUSH WAS SPENDING BILLIONS/TRILLIONS & TAKING TRILLIONS IN CHINESE LOANS TO PUT US IN THIS HOLE?!?!?! HOW MANY BILLIONS DID HE & HIS CONGRESS SPEND ON 2 WARS THAT COULD HAVE BEEN SPENT ON AMERICAN CITIZENS…2 WARS WITH OVER 5-6 THOUSAND AMERICAN KIDS MURDERED BY BUSH & HIS ILK TO SUPPORT THEIR LIES TO START & CONTINUE THOSE WARS FOR 9 YEARS. WHERE WAS YOUR OUTRAGE ON THAT? OR THE 250.000+ DISABLED VETS RUINED BY THOSE WARS…HUH????
      WHAT PLANET DO YOU PRACTICE CATHOLICISM ON…CATHOLIC SCHOOLS (LOTS HAVE HAD TO CLOSE) & CATHOLIC CHARITIES ARE HAVING A HELL OF A TIME, ESPECIALLY IN STL, MO… & PARENTS “PAY” FOR THOSE CATHOLIC SCHOOLS/ PRIVATE SCHOOLS TUITIONS BESIDES PAYING LOCAL/STATE TAXES FOR PUBLIC SCHOOLS. HOW GOOD DO YOU THINK THOSE PRIVATE SCHOOLS WILL BE IF THEY ARE INUNDATED WITH 2,3,4 TIMES AS MANY STUDENTS FROM PUBLIC SCHOOLS?!?!?!
      ARE YOU WILLING TO BE A TEACHER, UNPAID, WHEN MORE TEACHERS ARE LAID OFF??? GO SPEND A WEEK IN A PUBLIC SCHOOL TO SEE WHAT’S HAPPENING (HA HA HA…LIKE THAT’LL EVER HAPPEN WITH YOU)…IN STL PEOPLE BUY, THEN DROP OFF SCHOOL SUPPLIES AT FOOD MKT “DROP OFF BOXES” BECAUSE SCHOOLS CAN’T AFFORD KIDS SUPPLIES HERE
      (PROBABLY MOST USA TOWNS & CITIES HAVE THESE BOXES)…
      UNIONS GOT US FAIR PAY FOR FAIR WORK, 40 HR WORK WEEKS, CHILD LABOR LAWS (YOUR “IMPOVERISHED” RICH THEN WORKED HIRED KIDS VERY HARD & HELPED KILL CHILDREN IN FACTORIES, MINES, ELSEWHERE, AS YOUNG AS 4, FOR THEIR PROFITS, 6-7 DAYS A WEEK, 12-16 HOURS A DAY), WORKPLACE SAFETY, PENSIONS TO PROTECT WORKERS IN THEIR ADVANCED YEARS, AFFORDABLE HEALTH INSURANCE FOR THEM & THEIR FAMILIES. NONE OF THIS WOULD HAVE EVER COME FROM OWNERS…NEVER EVER.
      MAYBE YOU SHOULD REALIZE IT WAS BECAUSE OF UNIONS THAT YOU DON’T HAVE TO WORK LIKE THEY WERE FORCED TO. TAKE PENSIONS & HIGH PAY AWAY FROM CONGRESSMEN/WOMEN IF YOU WANNA STOP EXCESSIVE GOVT PAY & BENEFITS…BONER BOEHNER MAKES $191K+ A YEAR YET FINDS TIME TO GOLF 100+ DAYS A YEAR AT A “MEN ONLY” CLUB THAT COSTS THOUSANDS A YEAR…HOW MANY DAYS A YR DO YOU GOLF AT A PRIVATE, EXPENSIVE CLUB WHILE ON YOUR JOB…HUH?

  4. Ah punish the rich for …Being rich. You want to select a group of people for punitive action though they haven’t commited a crime…Bill of attainder?

    You can delude yourself into believing the rich stole their money from you, but you know darn well you never had anything worth stealing.

    A good Tax cut would be for veterens , based on the quanity and quality of their service, you know giving something to people who have EARNED a break.

    OR

    Giving a tax break to small business, that , oh say,Gross less than $250k per person employed,. You know to get people back to work.

    I was worried that Maybe Robert Reich had wrote something that wasn’t completly insane…good to see those worries were unfounded.

    • AL IN STL says:

      GEEZ, IF THE SMALL BUSINESS OWNERS MAKE LESS THAN $250K A YEAR, & MOST DO, THEN THEY HAVE NO PROBLEM…IF GIVING THE RICH TAX BREAKS WILL HELP THE ECONOMY, WHY DIDN’T IT WORK IN THE 8 YEARS UNDER BUSH?!?!?!? YOU CAN’T POINT OUT ONE INSTANCE OF BUSH’S BREAKS DOING ANYTHING…& THEIR TAX IS GOING TO GO UP 5%…WOW…ARE THEY GONNA HAVE TO MOVE INTO SECTION 8 MANSIONS & APPLY FOR FOODSTAMPS?!?!?! WHAT A MA-ROOON…

  5. points you made:

    1.It is,if I pay more,that is an increase, already happened to me.
    2.I remember Bill having a GOP congress more months than a DEM.
    3.maybe
    4.so you are concerned with the deficit? why now?
    5.I am saving all I can, so I will be able to help others.
    6.Maybe

    your final thought. do you propose to increase the limit on which social security is paid AND do what you wrote in point 1 also??? Is that not two increases or did I miss read that?

Trackbacks

  1. Anonymous says:

    Twitter Trackbacks…

Speak Your Mind

*

Visit us on Google+