So here is an idea - if it is correct to raise taxes on the top 1%, what if we took all of their money? Would that provide enough money to balance the budget, grow social services, etc. etc.?
In a word, "no." In two words, "Hell, no."
Let's start with the super-rich: folks that make more than $10 million. If you empty their pockets, the Feds would get around $186 billion according to my quick and dirty research (I may be off by a few billion, but close enough for government work). This would cut the Federal budget from $1.5 Trillion to $1.314 Trillion. Hmmmm. Still a pretty big hole.
So let's go after all the folks that make at least $1 million. Adding in the $1-10 million crowd would pull in around $266 billion still leaving us with a little bitty budget deficit - of $1 Trillion.
More income taxes on the top 1% won't solve our budget problems, and no one is talking about 100% tax rates. So this "99% vs 1%" dichotomy misses the point. I think the main issue is a "live now, pay later" attitude that is so deeply ingrained in our mass psyche that we don't even know it is there. Think about the housing crisis - every player in this fiasco was pushing to extract maximum benefit from the residential real estate market with little thought of the possible downside to this short-term thinking. The entire system was tilted to encourage folks to buy the biggest possible house with the smallest down payment. For many decades, U.S policy focused on promoting home ownership for everyone; interest on mortgage is tax-deductible (head north to Canada - mortgage interest isn't tax deductible there). The housing industry was artificially pumped up over the course of a couple generations. Everyone believed a lie - that real estate doesn't decline in value. But I digress...
The individuals that make up the 1.3 million tax payers in the top 1% are a pretty diverse group - doctors, lawyers, business people, entertainers, sports figures and so on. And the group isn't static - people go in and out of the group at a rapid pace depending on their earnings in a given year. My momma taught me that it is bad to villify a large group of people based on a single characteristic. Not all the folks in the top 1% are greedy bloodsuckers. Some just work hard and deploy special talents, thus earning lots of clams.
If the goal is to make the system more fair by taxing high-earning people at higher rates, it is worth remembering that the U.S. tax code is already very progressive. If you are in the bottom 50%, you are not paying a lot of Federal income taxes - in fact, the bottom 47% don't pay any Federal income tax at all (although they get socked for Social Security, Medicare, state and sales taxes). Higher rates for the top 1% might be a good thing for political brownie points and might even help national unity, but it won't fix our budget and it won't be a significant change to the current ridiculous tax system.
There are over 3.7 million words in the U.S. Tax Code. Nobody is an expert on all of its provisions. I am an aging person and I am not very bright, but I always thought that government fiscal operations could be boiled down to two questions - (1) What services do we want our government to provide? (2) How are we going to raise the revenues to pay for those services? While these two questions can't be answered independently of each other, it seems to me that the generalized answer to question number (1) has been "a whole lot" and the generalized answer to question number (2) has been "tax everyone except for me." This leads to a massive hole, which we fill with borrowed money.
When there is a significant percentage of the population that receive the benefits of the Federal government (roads/infrastructure, education spending, military protection, justice system, etc. etc.) but doesn't pay anything for the benefits, it is only natural that those folks will always seek more benefits - if it is cost-free, why not? This is the conundrum of progressive taxation systems. Flat taxes are regressive and unfairly burden lower income people but progressive taxes create moral hazard for the folks that don't pay.
It strikes me that there is a way out of this mess - a moderate path that takes good ideas from several sources. The yelling and screaming that is going on in our political system and on the streets will not help us find that path.
We know that spending has to decrease and revenues have to increase. We need to re-think and reconstruct our entire political and tax system. Subsidies have to end - no more mortgage deduction, no more agricultural subsidies, no more oil & gas depletion allowance. Social security will have to be means-tested and won't be available until you hit 70. Health care services will have to be rationed. Expensive military adventures that do not protect the United States from harm will need to be curtailed. Taxes will need to go up for everybody, not just the top 1%.
It will hurt. Lots of people will fight for their favorite subsidy/government program/tax break. No one wants to pay more taxes.
Let's get on with it.
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