The New York Times reported today that Democratic leaders, “bowing to unease among lawmakers and governors in their own party,” are reconsidering the House Ways and Means committee’s proposal to implement a surtax on the richest one percent of Americans as a way of financing a portion of health care reform.
There has indeed been a lot of pushback against the surtax proposal, which prompted Speaker of the House Nancy Pelosi (D-CA) to suggest that only households making more than $1 million should be subject to it, instead of the graduated scale starting at $350,000 that Ways and Means proposed.
But those feeling squeamish about the tax should take a look at this analysis in the Wall Street Journal, which shows how big a slice of the income pie the rich are currently receiving:
Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data — without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don’t include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.
In the five years ending in 2007, earnings for American workers rose 24 percent, while the highest-paid saw a 48 percent increase. So as Kevin Drum noted, “in other words, the executives got a 48% increase, the rest of us got approximately nothing, and it all averaged out to 24%.” And to top it all off, median pay raises for this year and next are set to be the lowest in decades.
Income growth in America for the last few decades has been overwhelmingly concentrated at the top. Between 1979 and 2006, the inflation-adjusted after-tax income of the richest 1 percent of households increased by 256 percent, compared to 21 percent for families in the middle income quintile. According to the Center on Budget and Policy Priorities, households in that richest one percent “had $617 billion more income in 2006 (or $656 billion more if measured in 2009 dollars) than they would have had if the 1979 income distribution still prevailed.”
Increasing taxes on this small percentage of people — who have done very well for a very long time — would raise revenue to put toward health reform, which is the single biggest problem for America’s bottom line. As Sen. Bernie Sanders (I-VT) said, “it certainly is okay for me to tell my friends on Wall Street, who just got a bonus of $600,000, they’re going to pay more in taxes so we can lower health care costs in America.”