- The Register Citizen (Torrington, CT) on April 7, 2010
- The Union (SC) Daily Times on April 8, 2010
Reverse the Tax Shift
April 5, 2010 · By Chuck Collins
When rich individuals and corporations don't pay their fair share, the bills get passed to the middle class.
In my community we’re facing severe cuts in schools and elder services, and our local public library and community recreation center will soon close. Yet our local property taxes and fees are rising. Why are we paying more and getting less for it?
Each year as Tax Day approaches, there’s a national mud fight about taxes and the proper role of government. Some argue that the middle class is overtaxed and that we don’t get what we used to for our tax dollars. Others point to the practical necessity of raising revenue to reduce our national debt and make long-overdue investments to upgrade our aging infrastructure. Both sides of this debate are correct.
Middle-class households are overtaxed. For 50 years, the tax burden has shifted off the very wealthy to the middle class and from global corporations to small business. By adding to our national debt, we’re shifting taxes off of today’s taxpayers onto tomorrow’s workers, who will pay interest for decades to come.
This is the Great Tax Shift. It’s happening in slow motion, under both Republican and Democratic presidents. It’s the reason why our cities and towns are strapped and our federal debt is increasing.
Since 1960, the share of household income that middle-class households paid in federal taxes has increased slightly, from 15.9 to 16.1 percent. But the wealthiest Americans have seen their tax outlays, as a share of income, drop by almost half. The top 1 percent of taxpayers, whose incomes start at $2 million, saw their share of income paid in federal taxes decline from 60 to 33.6 percent between 1960 and 2004.
During George W. Bush’s presidency, we expanded tax cuts to Americans with incomes over $250,000. That added another $700 billion to the national debt. Meanwhile, Congress failed to close loopholes for global corporations, resulting in thousands of profitable U.S. companies paying no corporate income taxes--at all--between 1998 and 2008.
When rich individuals and corporations don’t pay their fair share, the bill gets passed to the middle class and our debt grows. That’s hard to appreciate until things start to hit close to home. When we see our roads, mass transit, schools, and veterans’ services suffer, we start to understand. Our public services have been chronically underfunded for 40 years, and all states and municipalities are grappling with budget crises.
We must reverse the Great Tax Shift, starting with three changes to our tax code:
First, Congress should maintain the middle-class tax cuts passed in 2001 that expire at the end of this year. And lawmakers should rebalance the tax code by allowing tax breaks for the rich to expire.
Second, Congress should crack down on overseas tax havens, which allow global corporations to pretend they’ve earned all their profits in countries like the Grand Cayman Islands and their losses here in the U.S. These loopholes create an unlevel playing field, where small businesses and patriotic enterprises compete against tax-dodging companies. Businesses that enjoy our nation’s privileges--including national defense, public infrastructure, and property rights--should pay their fair share.
Third, we need a modest financial speculation tax on Wall Street transactions, including the purchase and sale of exotic financial investments such as derivatives, hedge funds, and speculative stock trades. One proposal before Congress, modeled after existing laws in England and Taiwan, would place a one-cent levy on every $4 in transactions while exempting retirement funds and the first $100,000 in investments. The Wall Street financiers who drove our economy off a cliff should help pay for the clean-up operation.
Together, these three measures would generate over $300 billion a year in revenue without increasing taxes on the middle class. This revenue would both reduce the federal deficit and help states and localities avert damaging budget cuts.