A 70 percent tax bracket for the richest Americans is pure fantasy --
even suggesting it represents such a fundamental disconnect with the
world as it exists today that it is hard to see why it should be taken
seriously. I would be deeply worried about the sanity of a Democratic
president who proposed such a thing.
Fantasy? I don't know Mr. Leonard's age but perhaps he could
be forgiven for not recalling that between the late 1940s and 1980
America's highest marginal rate averaged above 70 percent. Under
Republican President Dwight Eisenhower it was 91 percent. Not until the
1980s did Ronald Reagan slash it to 28 percent. (Many considered
Reagan's own proposal a "fantasy" before it was enacted.)
Incidentally, during these years the nation's pre-tax income was far
less concentrated at the top than it is now. In the mid-1970s, for
example, the top 1-percent got around 9-percent of total income. By
2007, they got 23.5 percent. So if anything, the argument for a higher
marginal tax should be even more realistic now than it was during the
days when it was taken for granted.
A disconnect with the world as it exists today? That's
exactly the point of proposing it. For years progressives have whined
that Democratic presidents (Clinton, followed by Obama) compromise with
Republicans while Republican presidents (Reagan through W) stand their
ground -- with the result that the center of political debate has moved
steadily rightward. That's the reason the world exists the way it does
today. Isn't it about time progressives had the courage of our
conviction and got behind what we believe in, in the hope of moving the
debate back to where it was?
Would a Democratic president be insane to propose such a thing?
Not at all. In fact, polls show an increasing portion of the electorate
angry with an insider "establishment" -- on Wall Street, in corporate
suites, and in Washington -- that's been feathering its nest at the
public's expense. The Tea Party is but one manifestation of a widening
perception that the game is rigged in favor of the rich and powerful.
More importantly, it will soon become evident to most Americans that
the only way to reduce the budget deficit, preserve programs deemed
essential by the middle class, and not raise taxes on the middle, is to
tax the top.
In fact, a Democratic president should propose a major permanent tax
reduction on the middle class and working class. I suspect most of the
public would find this attractive. But here again, the only way to
accomplish this without busting the bank is to raise taxes on the rich.
Republicans have done a masterful job over the last 30 years
convincing the public that any tax increase on the top is equivalent to a
tax increase on everyone -- selling the snake oil of "trickle down
economics" and the patent lie that most middle-class people will
eventually become millionaires. A Democratic president would do well to
rebut these falsehoods by proposing a truly progressive tax.
Will the rich avoid it? Other critics of my proposal say
there's no way to have a truly progressive tax because the rich will
always find ways to avoid it by means of clever accountants and tax
attorneys. But this argument proves too much. Regardless of where the
highest marginal tax rate is set, the rich will always manage to reduce
what they owe. During the 1950s, when it was 91 percent, they exploited
loopholes and deductions that as a practical matter reduced the
effective top rate 50 to 60 percent. Yet that's still substantial by
today's standards. The lesson is government should aim high, expecting
that well-paid accountants will reduce whatever the rich owe.
Besides, the argument that the nation shouldn't impose an obligation
on the rich because they can wiggle out of it is an odd one. Taken to
its logical extreme it would suggest we allow them to do whatever
antisocial act they wish -- grand larceny, homicide, or plunder -- because
they can always manage to avoid responsibility for it.
Some critics worry that if the marginal tax is raised too high, the
very rich will simply take their money to a more hospitable
jurisdiction. That's surely possible. Some already do. But paying taxes
is a central obligation of citizenship. Those who take their money
abroad in an effort to avoid paying American taxes should lose their
Finally, there are some who say my proposal doesn't stand a chance
because the rich have too much political power. It's true that as income
and wealth have moved to the top, political clout has risen to the top
But to succumb to cynicism about the possibility of progressive
change because of the power of those at the top is to give up the battle
before it's even started. Haven't we had enough of that?