President Obama has broken through the silence about revenue in Washington’s dominant budget and deficit debate.
“At a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more,” Obama said in a speech at Georgetown University on Wednesday. “I don’t need another tax cut. Warren Buffett doesn’t need another tax cut.”
He lambasted the GOP budget proposal put forward by House Budget Chairman Paul Ryan. “There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires,” he said.
In addition to reversing tax hikes on the wealthy, Obama made vague recommendations about closing loopholes, especially for high-income households. Unfortunately, he avoided the important issue of corporate tax dodging through off shore tax havens.
“Unnecessary Austerity,” the IPS report I recently co-authored , questions the assumption that budget cuts are the only path to fiscal health. Instead, we argue, Congress should focus on reversing tax cuts for millionaires and billionaires — and closing tax loopholes and overseas tax havens that enable corporations to shrink their tax bills.
The United States is far from broke. The problem is that wealth and income have become concentrated in the hands of the richest 1 percent of Americans and our largest multinational corporations. Yet over the last generation, we’ve greatly reduced taxes on the wealthy and global corporations.
For example, if the federal government taxed households with incomes over $1 million and big corporations at 1961 levels, the Treasury would collect an additional $716 billion a year, or $7 trillion over a decade. We’ve reduced the actual tax levy on millionaires by almost half during the past 50 years. In 1961, families with more than a million dollars of annual income paid 43 percent of their income in federal income taxes. This year, they will pay just 23 percent.
“I believe that most wealthy Americans would agree with me,” Obama said. “They want to give back to their country, a country that’s done so much for them. It’s just Washington hasn’t asked them to.” His argument in favor of increasing tax rates for the wealthy is reinforced by a new call to action by Wealth for the Common Good and Patriotic Millionaires for Fiscal Strength. Those groups encompass more than 100 millionaires calling on Congress to raise their taxes.
Obama has public opinion on his side. Polls show that the majority of voters would rather hike taxes on millionaires than slash spending. But some of his proposals — like reducing charitable and home mortgage interest deductions for millionaires — may encounter tough sledding. Those proposals will mobilize opposition from not only corporate lobbyist and a segment of the wealthy. They’ll face the wrath of the second-home real estate lobby and charity advocates.
But one way or another, taxes on the top are going to rise in the coming two years.