George W. Bush, over his eight years, took tax and budget policy to the crony-capitalist limit. His White House racked up $5 trillion in national debt by waging reckless wars, shoveling lush contracts and bailouts to corporate and Wall Street insiders, and, perhaps most arrogantly of all, slashing already-low tax rates on the incomes of the super rich.
Few Americans realize just how incredibly little, historically speaking, our nation's wealthy now pay in taxes.
In 1955, America's top 400 taxpayers paid a three-times greater percentage of their income in taxes than did the top 400 of 2006, the most recent year with IRS data available.
This means that if the top 400 of 2006 had paid taxes at 1955 rates, the federal treasury would have collected -- from these 400 taxpayers alone -- an additional $35.9 billion more in revenue in 2006.
The 139,000 U.S. taxpayers who made over $2 million in 2006 averaged $6 million in income. They paid 23 percent of their total incomes in federal income tax. The comparable rate for equivalent high-income Americans in 1955: 49 percent of their income – more than twice as much!This means that if the over-$2 million set in 2006 had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected an additional $202 billion.
We've now lived through 30 years of "shrink, shift and shaft" federal budget and tax policies. Right-wing pols, aided by Democrats who should have known better, have shrunk government and the share of taxes paid by the wealthiest 1 percent. The tax burden, consequently, has shifted off wealth and onto wages, off the federal tax system and onto the regressive tax systems of states and localities.
The direct result: States and localities have gotten the budget shaft -- and that has forced years of chronic underfunding for mass transit, education and myriad public services.
So what can we do, as a nation, to start turning this situation around? Our Institute for Policy Studies report, Reversing the Great Tax Shift, described 3 steps that would generate over $450 billion in additional annual revenue -- dollars that would help finance our recovery fairly:
1. Tax income from capital gains and dividends at the same rates as wage income. Under current law, income from investments gets taxed at 15 percent. Income from work gets taxed at up to 35 percent. No coherent moral justification exists for such an enormous tax preference for income from wealth. According to Citizens for Tax Justice, taxing all forms of income the same would generate an additional $80 billion a year.
2. Create a new top tax rate for incomes over $2 million. Presently, a person with an income of $300,000 faces the same tax rates as a person with an income of $3 million. Instituting a top tax rate of 50 percent on incomes over $2 million would generate more than $60 billion a year.
3. Levy a progressive estate tax on large fortunes. The federal estate tax, our nation's only levy on grand accumulations of private wealth, will expire in 2010 and revert to the 2000 status quo. Lawmakers aren't going to let that happen -- if, for no other reason, to take inflation into account -- and that reality creates an opportunity to make the estate tax more progressive. Therefore institute graduated tax rates on large estates, while exempting estates worth less than $2 million, $4 million for a couple. Such an approach would generate over $100 billion a year a decade from now -- while taxing no more than 1 of every 200 estates.
Polls show that these three steps would enjoy widespread public support.
Our grandparents seriously taxed the rich and economic growth was at a maximum. Why can't we do the same?
All stats have been taken from a recent Alternet article by Chuck Collins and Sam Pizzigati, scholars at the Institute for Policy Studies: