During the debt ceiling debate the Congressional Republicans stood firmly against raising revenues of any kind, even defending loop holes and subsidies for corporations. In fact the Republican stance against taxes is so extreme, that even discussion on raising taxes on the wealthy is rebuked. The criticism of raising taxes on the wealthy is often characterized as punishing the successful or engaging in class warfare. Republicans are still clinging to the supply-side theory of trickledown economics, and that taxing the rich will damping job creation.
In 1936, President Franklin Roosevelt said that his principle was that “taxes shall be levied according to ability to pay. That is the only American principle.” Adam Smith wrote in the Wealth of Nations that the “subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” The idea that taxes should be levied in a progressive manner according to someone’s ability to pay them is no radical idea.
Research from economists Peter Diamond of MIT and Emmanuel Saez of the University of California at Berkeley in a recently published paper, The Case for a Progressive Tax: From Basic Research to Policy Recommendations, shows that not only would raising taxes on the wealthy not will undermine incentives to work and save but that the government should be taxing the wealthy at a much higher rate. In fact, they suggest that optimal tax rate for the top marginal tax bracket could be raised from its current 35% to as much as 76%.
Would taxing the wealthy at a higher rate have any effect on the nation’s revenue problem? According to a report from the Campaign for Americas Future, if just corporations and households making $1 million or more a year were taxed at the same rate they were in 1961 there would be $716 billion more in revenue per year. That would nearly cut our current budget deficit in half. The report, which cites an Institute for Policy Studies paper, that “if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally vanish over the next decade.”
Associate Justice of the Supreme Court of the United States Oliver Wendell Holmes said that “taxes are the price we pay for a civilized society.” However, it seems that the wealthy and moneyed interests want to pay less and less for this society – despite the fact that their wealth is due to the strength of this society. Public schools create educated work forces and public roads provide transportation for goods and services. All of the things “job creators” utilize from the public domain to create jobs – while they are instead padding their paychecks. If you don’t soak the rich you shouldn’t expect more than a trickle.