Today's post is from Chuck Collins, co-founder of Wealth for the Common Good, a network of business leaders and high net worth individuals that support progressive taxation and shared prosperity. He is co-author, with Bill Gates Sr., of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes.
Congress is actively debating whether to retain President Bush's 2001 and 2003 tax cuts for the wealthy that are due to expire at the end of this year. President Obama supports extending tax cuts for households with incomes under $250,000, but ending the tax breaks for higher income households.
Here are five good reasons for Congress to let them go.
1. Borrowing to Give the Rich Tax Breaks is a Really Bad Idea. We've already borrowed $700 billion since 2001 to pay for these tax cuts. Maintaining them for another decade would cost an estimated $700 billion, plus interest on the national debt estimated at $126 billion. Does it really make sense to send interest payments to China and millionaire bond-holders in the U.S. -so that we can cut taxes for U.S. millionaires and billionaires?
2. There are 700 Billion Better Ways to Use the Money. Consider the superior ways to spend $700 billion. We could use a portion to reduce budget deficits. We could make long overdue investments in infrastructure such as bridges, roadways, railroads, water treatment facilities, retrofitting buildings -things that make our economy strong and competitive. We could direct funds to make the transition to the new economy that is less dependent on foreign oil. In the short-term, all these investments would create millions of jobs. In the long term, it would put the economy on better footing for the future. There are a billion better ways to use the money.
3. Restores Balance to Tax Code. Over the last half century, Congress has steadily reduced tax obligations for the very rich and global corporations. Between 1960 and 2004, the top 0.1 percent of U.S. taxpayers -the wealthiest one in one thousand -have seen the share of their income paid in total federal taxes drop from 60 to 33.6 percent. Restoring the tax rates to pre-2001 levels would be a very slight increase, yet begin the process of rebalancing the tax code.
4. It Won't Hurt the Economy. You've heard the blather about how taxing the rich is going to hurt the economy. But cutting the taxes for the wealthy are an ineffective way to help the economy. A recent analysis by the Congressional Budget Service ranked 11 strategies to spur the economy and create jobs. Cutting taxes for the rich was the worst ranked strategy. Here' the reality: Taxing the rich is different than taxing the middle class. According to Moody's, the rich save more of their tax cuts while working people and middle class spend it in the economy. Over the last decade, the top wealth holders have shifted trillions of dollars into speculative investments that have hurt the economy.
5. Reduces the Dangerous Concentration of Wealth and Power. We're living in a period of unprecedented economic inequality. A recent series by Tim Noah in the online journal Slate examined the "Growing Divergence" of wealth and income. Taxes is one of the ways we reduce these inequalities.
A final reason is that the U.S. public supports letting these tax cuts for the rich expire. A recent Gallup Poll reveals that 59 percent of the population support letting the tax cuts for the rich expire -while 37 percent support extending them. Polls rarely reveal support for any form of taxation -which indicates that a majority of Americans -including those who will pay the higher taxes - recognize the imprudence of extending them. Alan Greenspan, who supported the tax cuts in 2001, has now reversed his position and believes the time has come to raise taxes.