According to a USA Today analysis that came out earlier this month, Americans paid their lowest share in taxes in nearly sixty years in 2009. At the same time, as this year’s annual Economic Report of the President pointed out, “in recent years nearly half of all income — including both wages and salaries and nonlabor income — has gone to 10 percent of families.” “The top 1 percent of families now receive nearly 25 percent of income, up from less than 10 percent in the 1970s,” the report said.
Given that income concentration has gotten more and more severe recently and that the country has to be proactive in addressing its long-term deficits, it makes sense to increase taxes on those at the top of the income scale. And evidently, Secretary of State Hillary Clinton agrees. Speaking at the Brookings Institution yesterday, Clinton said that, particularly with the high unemployment the country is facing, “the rich are not paying their fair share” in taxes:
“The rich are not paying their fair share in any nation that is facing the kind of employment issues (the United States is), whether it’s individual, corporate, whatever the taxation forms are,” she said…“Brazil has the highest tax-to-GDP rate in the Western Hemisphere and guess what — it’s growing like crazy. And the rich are getting richer, but they’re pulling people out of poverty,” she said. “There is a certain formula there that used to work for us until we abandoned it, to our regret in my opinion.”
Clinton made sure to emphasize that “I’m not speaking for the administration, so I’ll preface that with a very clear caveat.”
Speaking of taxing the rich, the Senate, when it comes back from the Memorial Day recess, will contend with an extenders bill passed by the House today. One of the ways in which the bill’s spending is partially offset is by closing a tax loophole that allows wealthy hedge fund and private equity managers to pay the lower capital gains rate on the income they receive from the investors whose money they manage, instead of paying standard income tax rates.
As I’ve explained before, it’s simply unjustifiable to let this loophole stay in place, as it allows money managers who regularly make hundreds of millions annually to pay lower tax rates than people who make far less money, for no good reason. Here’s an illustration of the situation that the loophole allows:
At this point, simple revenue raisers that only affect the super-wealthy should be embraced with ease. But of course, that’s not the case, and Congress is twisting itself into knots to mitigate the tax increase, suggesting various ways to carve out certain people or subject only a portion of their income to the higher tax. But Clinton is right. The country needs to find places to raise revenues, and leaving loopholes in place that allow the ultra-wealthy to pay lower taxes than their secretaries is simply not fair.