Among the wealthy, a new voice for fiscal sacrifice

By Katrina vanden Heuvel Tuesday, November 30, 2010 President Obama’s discussion Tuesday with leaders of both parties about the expiring Bush tax cuts comes at a time when a growing chorus of progressives and other reasonable-minded Americans have been ramping up pressure on the White House to allow the cuts for millionaires to end - as intended - at the end of the year. Last week that chorus was joined by a group of unlikely, albeit welcome new singers: the millionaires themselves. In a November letter to President Obama, a group calling itself Patriotic Millionaires for Fiscal Strength argued that the wealthiest Americans do not need, and should not be given, an extension on tax cuts that have done next to nothing to improve broad economic prosperity. “We are writing to urge you to stand firm against those who would put politics ahead of their country,” the letter’s authors write. “Now, during our nation’s moment of need, we are eager to do our fair share.” Signers include a number of early Google executives as well as leaders of companies such as Ben and Jerry’s, Men’s Wearhouse and Princeton Review. They aren’t the first group of ultra-wealthy people to signal discomfort with senseless fiscal policy designed to benefit the top 2 percent. A group of 700 business leaders and individuals known as Responsible Wealth have called the Bush tax cuts “irresponsible” and “downright inexcusable.” Bill Gates Sr. and Warren Buffet, of course, have also called for a change in priorities. For the most part, these are not the kinds of proclamations we have come to expect from America’s rich. More often than not their views are distilled through megaphones such as the Chamber of Commerce, which wield outsized influence and use both foreign and national dollars to further the causes of the relative few. We have come to expect America’s wealthy to stand behind the Republican Party - a party itself composed largely of millionaires in Congress - and to demand new income tax cuts, or corporate loopholes, or the end of the estate tax, even while they peddle faux concern about the federal government’s long-term debt position. It’s worth remembering, however, that it wasn’t always this way. There was a time when the concept of patriotism - the idea of putting country above self - extended beyond our foreign policy. There was a time when economic patriotism was very much a part of the business community’s mind-set, even embedded in the worldview of the kinds of Northeast Republicans who are now all but extinct. Robert Johnson, for example, one of the founders of Johnson & Johnson, urged his business colleagues in a 1947 speech never to ignore the plight of the working class. Doing so, he said, “is as foolish as it would be to ignore public health, crime, and the need for education.” During the golden era of the 1950s, a Republican president, along with Republican members of Congress, accepted a top marginal tax rate for millionaires that was 91 percent. “The only way to make more tax cuts now is to have bigger and bigger deficits and to borrow more and more money,” President Eisenhower argued. “This is one kind of chicken that always comes home to roost. An unwise tax cutter, my fellow citizens, is no real friend of the taxpayer.” That sentiment would be unimaginable coming out of the mouth of a modern Republican. Ideology has trumped that kind of frankness and logic. Instead, the business community and the wealthy, and the Republican Party they prop up, have abandoned principle and policy - as well as any sense of a social compact - in exchange for a totally distorted view of reality. After all, any honest look at our economic plight suggests that we must change our posture if we’re to confront these challenges successfully. There may have been a time, during the boom of the '90s perhaps, when the business community and the wealthy would have had great incentive to focus their efforts on reducing their tax rates and lobbying for lax regulations that they could argue might otherwise stifle their profits. But that kind of selfishly narrow worldview, that kind of chipping-away-at-the-margins attitude, has no place in this time of deep and painful economic hardship. It isn’t regulations and tax rates that are stifling business. It’s a lack of demand, spurred by a lack of investment by business, caused by an economic crisis that was, in turn, the result of the kind of reckless deregulation these same individuals and businesses spent the last several decades fighting for. Millionaires aren’t better off over the long run with the continuation of the Bush tax cuts. They’d be better off if the $700 billion it will take to pay for those cuts was instead put into new stimulative efforts - the kind of efforts that would spur real economic growth. Those initiatives would create jobs and new prosperity not just for the wealthy, but for everyone. They would drive demand. When business is doing well, millionaires will be doing well too. In the meantime, their selfishness hurts everyone, including themselves. Will they ever snap out of it and see the new reality as it presents itself in front of them? Only time - and perhaps the negotiations that began today - will tell. In the meantime, this group of Patriotic Millionaires gives us hope. They give us reason to believe that not everyone at the top believes that it’s only the top that matters. http://www.washingtonpost.com/wp-dyn/content/article/2010/11/30/AR2010113002961.html?nav=most_emailed Can anyone justify tax cuts for millionaries in times of such unprecedented debt and deficits and with so many poor and middle class suffering in the country?Why should the deficits be managed only on the backs of the middle class? Should not everyone sacrifice in such difficult times?

we don’t have a revenue problem, we have a spending problem.

jbaldyga Wrote: ------------------------------------------------------- > we don’t have a revenue problem, we have a > spending problem. But what spending are you going to cut without disastrous consequences for the middle class and more unemployment? How about we strictly use the proceeds from giving up the tax breaks to pay off the deficit?

I believe our collective tax burden as a % of GDP is very low both by historical standards and by comparison to other wealthy countries. I’m all in favor of the efficient use of public money and taxes being as low as possible, but someone has to pay for all of the many desirable things government does that we all take for granted.

how bout we make “the middle class” responsible for their own well being. our politicians cast them as victims and tell them their only hope is to rely on them to make their lives better. all they have to do is cast their vote for them and everything will be all right. maybe it’s time for everyone to get a little dose of self reliance.

We could very well tax the middle class more and still have their standards of living be above those of other developed countries.

ohai Wrote: ------------------------------------------------------- > We could very well tax the middle class more and > still have their standards of living be above > those of other developed countries. Yeah why not tax only the middle class and at 90 percent? They (we) could all live in slums and shanties and still be above the developing countries.

jbaldyga Wrote: ------------------------------------------------------- > how bout we make “the middle class” responsible > for their own well being. our politicians cast > them as victims and tell them their only hope is > to rely on them to make their lives better. all > they have to do is cast their vote for them and > everything will be all right. maybe it’s time for > everyone to get a little dose of self reliance. Are you implying that the hard working middle class in this country is not self reliant and somehow leeching off the wealthy?

The working middle class is the class getting screwed the most. Not wealthy enough to have something safe to bank on, and not poor enough to get the handouts, and still paying 35% tax rates.

i’m not implying anything. I’m saying that if our politicains allowed everyone the dignity of being responsible for their own happiness, then we’d all be a lot better off and the quality of life for everyone would increase dramatically. Instead - and by design - our politicians pit the working class against the wealthy in order to expand THEIR OWN power and wealth. They tell middle class americans that the reason they’re unhappy is because of the greed of the wealthy. But just vote for them and they’ll fix the injustices, as if being wealthy is a crime. Really what politicians are doing is enslaving the middle class by instilling hate and jealousy towards the wealthy. This is great currency for politicians. Give people an excuse to fail and they will take it every time. The government cannot create happiness it can only take it away.

jbaldyga Wrote: ------------------------------------------------------- > we don’t have a revenue problem, we have a > spending problem. +1000 I also find this article amusing since it is “the weathiest Americans” signing this thing, most of which are sooo wealthy that the expiration of the Bush tax cuts will be about as significant as a rounding error.

No one is answering my question. What spending are you proposing we cut without disastrous consequences for the middle class and more unemployment?

jbaldyga Wrote: ------------------------------------------------------- > we don’t have a revenue problem, we have a > spending problem. Yes, no one is spending, so businesses don’t have enough revenue.

^read the NFIB survey of small businesses for the LAST TWO YEARS and you’ll know where the bottlekneck in self-sustained growth lies.

marcus phoenix Wrote: ------------------------------------------------------- > No one is answering my question. What spending are > you proposing we cut without disastrous > consequences for the middle class and more > unemployment? A direct reponse to this question only takes this discussion into many various tangents that are going to quickly cause this thread to be doomed. For the record, I do think the best approach is a compromise where the tax cuts are extended for those earning up to $500k or $1m, something north of $250k.

BValGuy Wrote: ------------------------------------------------------- > marcus phoenix Wrote: > -------------------------------------------------- > ----- > > No one is answering my question. What spending > are > > you proposing we cut without disastrous > > consequences for the middle class and more > > unemployment? > > > A direct reponse to this question only takes this > discussion into many various tangents that are > going to quickly cause this thread to be doomed. > > For the record, I do think the best approach is a > compromise where the tax cuts are extended for > those earning up to $500k or $1m, something north > of $250k. I can live with that. In fact, I would propose a higher cutoff for people living in high cost of living areas such as NYC and a lower cutoff for people living in North Idaho. Tax cuts should incorporate the cost of living in the region.

BValGuy Wrote: ------------------------------------------------------- > jbaldyga Wrote: > -------------------------------------------------- > ----- > > we don’t have a revenue problem, we have a > > spending problem. > > > +1000 > > I also find this article amusing since it is “the > weathiest Americans” signing this thing, most of > which are sooo wealthy that the expiration of the > Bush tax cuts will be about as significant as a > rounding error. Tax rates are always based upon marginal income, so allowing the bush cuts to expire would affect someone making $1,000,000 way more than someone making $275,000. Now people who already have significant net worth outside of their income may not be very affected, but to be honest I don’t feel bad for them, especially at the rates we’re talking about.

Giving tax cuts to wealthy will save the economy because they will reinvest in their businesses and hire people. And pigs will fly.

Palantir Wrote: ------------------------------------------------------- > Giving tax cuts to wealthy will save the economy > because they will reinvest in their businesses and > hire people. And pigs will fly. Palantir, right on and well said!! Except for the pigs part…

Because we all know that people with large sums of money that could be put to use around will only actually put it into a business if they pay 2% less marginal tax on the profit portion of that investment. Otherwise they will just spend it and pay 4% sales tax on the entire amount. People who are entrepreneurs and create businesses clearly are only in it for the money, so 2% on the revenues, if their portion of the revenue is over a quarter million dollars, will make them decide that it’s better to stay home and do nothing. That’s what’s great about being an entrepeneur… you’re not actually in it to make the business work. You only do it for the money, and so if you’re getting 2% less profit, it’s better to go work for a boss in a cubicle. Tax increases will have an effect on businesses, but the real effect is that it puts MARGINAL businesses out of work. Businesses that have negative profits under a higher tax scheme go out of business, whereas businesses that are still profitable under a higher tax regime will still operate, because they still make money. So the main difference is that some businesses that are barely profitable under the current regime are in danger of being put out of business. EXCEPT that if a business is barely profitable, its profits will fall below the level where tax rates increase. So truly marginal businesses will actually not be taxed at a higer rate. But what about the investment side of the question? Higher tax rates will surely make capital providers hold back. After all, why should one accept additional income from an investment when the government might get some of it? Surely it’s better to have less money at the end of the year, mitigated by the satisfaction that the goverment didn’t happen get any of it. That way I have less, and the government has less, and no economic activity took place. A true win-win situation! No, what is going to happen is that there will be some companies for whom the after-tax return is no longer sufficient compensation for the risk. So the highest risk companies may not be able to raise capital, and lower risk companies may have to trim thier higher risk projects. Now this is a real effect that we have to be concerned about, but we can try to lower taxes on precisely these kinds of activities in order to encourage them, or use industrial policy. Yes, entrepreneurial activities tend to be high risk, and we need to encourage that kind of activity, and the additional tax bill on the uber-wealthy might make it harder to raise capital for these activities, but we can target tax cuts to specific employment-creating and industry creating activities. So a payroll tax cut, or maybe a payroll tax cut for those who have been out of work for 99 weeks. I’m not against cutting taxes; but the taxes that get cut need to be cuts that are tightly linked to investment and employment and rebuildnig the country’s industrial and technological leadership.