With Tax Day just around the corner, and the nation attempting to recover from our worst financial crisis since the Great Depression, a new report from the Institute for Policy Studies (IPS) — “Reversing the Great Tax Shift” — offers seven strong recommendations on how to pay for the recovery and rebuild an economy of shared prosperity.
There is good momentum for reversing the disaster of thirty years of tax cuts for the wealthy that have contributed to growing inequality, concentration of wealth, and a shifting of the economic burden to the poor and middle class. In New York, for example, a strong progressive coalition won a key victory in pushing through a new tax structure that requires the wealthy to pay their fair share instead of paying the same rate as those earning just $20,000 a year.
The IPS report provides a good dose of historical perspective at a time when Republicans and too many Democrats fulminate at the possibility of raising the highest tax rate from 35 percent to 39.6 percent for households earning over $250,000. It notes that in 2006 (the most recent IRS data) the 139,000 taxpayers reporting incomes of $2 million or more paid just a 23 percent rate thanks to mega-loopholes; in 1955, people earning over $2 million in 2006 dollars paid a 49 percent rate. The top 400 taxpayers paid a 51 percent in 1955; in 2006 they paid just 17 percent of their incomes in federal income tax.
IPS’ seven policy proposals would result in over $450 billion in annual revenues from the wealthiest people who have benefited the most from the failed conservative economic policies embraced by both parties. Some of these practical proposals include supporting the bipartisan Stop Tax Haven Abuse Act which would crack down on individuals and corporations to the tune of $100 billion annually; reversing the Bush tax cuts on income, capital gains, and dividends for households earning over $250,000, bringing in $43 billion annually (and impacting just 2.5% of taxpayers); a progressive estate tax on large fortunes — exempting estates worth under $2 million, or $4 million per couple — that would bring in $40-$60 billion per year while taxing no more than 1 of every 200 estates; a 50 percent tax rate on incomes over $2 million, generating $60 billion a year.
IPS says there are things you can do right now to drive these good proposals. You can contact your representatives and tell them to support the following: the president’s budget — which includes an increase in the top tax rate (35 percent to 39.6 percent) and closes overseas tax havens; the Income Equity Act introduced by Representative Barbara Lee which would eliminate tax subsidies for excessive executive compensation; and the Sensible Estate Tax Act, which will be reintroduced by Representative Jim McDermott later this month (in contrast to too many weak-kneed Senate Dems who have bought hook, line and sinker the absolute hogwashthat the estate tax is hurting small businesses and family farms, and voted with the GOP to cut it.) Wealth for the Common Good is also building support among small and large business leaders and high net worth individuals who will pay these higher taxes.
Finally, in June, look for IPS to formally launch a “revenue campaign” to rally support around these proposals. There will be more opportunities for action as supporters push for further legislative action.
In the mean time, check out this smart and valuable report to learn more about good policies and for a clear historical perspective on tax rates in America. As we look to address challenges on health care, energy, global warming, and a more equitable economy, this is the kind of good work that will help provide the solutions we need.