Facing South

The movement builds for progressive tax policy

RaiseIncomeTax.jpgIt's Tax Day across the land.

Even as people make that last minute dash to file their taxes today, around the country economic justice advocates are calling on federal and state leaders to restore fairness to the tax code.
In fact, a movement aimed at shifting the nation's tax policy by raising taxes for the wealthiest is taking off across the country. Such a shift in policy would mean reversing 30 years worth of federal tax and budget policy that has primarily favored the rich.

Improving tax policy was a large part of President Barack Obama's campaign program. Although he's implemented one of the largest tax cuts for working families in U.S. history, economic justice advocates say that Obama's tax proposals must do more.
In order to promote economic recovery, federal and local governments will need to expand their sources of revenue to provide for investments in healthcare, environment, and infrastructure. A truly "progressive taxation" system -- one where people are taxed according to their ability to pay -- is the best way to raise the funds needed to pay for the bold initiatives in Obama's stimulus and budget plans, advocates say.
A new report by the D.C.-based Institute for Policy Studies finds that a more progressive system could raise almost a half a trillion dollars per year. "By seriously taxing the top, as we did in the 1950s, we could raise the revenues we need to better invest in infrastructure, education, and retrofitting our energy system," says Chuck Collins, one of the report's authors. "Appropriately targeted, higher taxes on the top would also serve to dampen the speculative frenzy that has cratered our economy."

In fact, over the past three decades the tax burden has shifted from the nation's wealthiest to the middle class and working poor. America's highest-income taxpayers pay a much smaller share of their income in taxes than did America's rich back in the 1950s. In 1955, the year April 15 became the IRS tax-filing deadline, America's top 400 taxpayers paid three times more of their income in taxes than the top 400 of 2006, the most recent year with IRS data available, according to the IPS report. 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 report also found that the 139,000 U.S. taxpayers who made over $2 million in 2006 averaged $5.9 million in income. If these individuals had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006 alone, an additional $202 billion.
IPS offer seven proposals that would raise over $450 billion a year and over $3 trillion over the next five years:
  • Repeal tax breaks for households with annual incomes over $250,000: $43 billion per year.
    Tax financial transactions: $100 billion per year.
  • Eliminate the tax preference for capital gains and dividends: $80 billion per year.
  • Levy a progressive estate tax on large fortunes: $40-60 billion per year.
  • Establish a new higher tax rate on extremely high incomes: $60-70 billion
  • End overseas tax havens: $100 billion per year.
  • Eliminate subsidies for excessive executive compensation: $18 billion per year.
Another tax day report, this one by United for a Fair Economy, a nonpartisan economic justice group, compares the proposals in Obama's federal budget that focus on high-income taxpayers with the alternative set of tax proposals from the IPS report. UFE concludes that Obama's tax proposals could be sharply improved by increasing taxes on the wealthy. In fact, IPS's proposed tax package raises $309-369 billion per year, about $300 billion more per year than Obama's tax proposals on the wealthy.

The UFE report finds that several other improvements could reduce the kind of tax incentives that led to the extreme financial risk-taking and speculation by the rich, which encouraged and enabled the financial meltdown and the recent crisis on Wall Street. "Those who profited most from the binge, and who bore the most responsibility for the bust, were among the highest income earners," says the UFE report.

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The UFE report underscores that progressive taxation could prevent this affluent minority from continuing to warp the tax rules in their favor -- for example, the financial sector spent more than $5.1 billion on political influence purchases over the last decade, according to the report.
"Like many other industries, the financial industry is enjoying a self-reinforcing cycle between favorable tax treatment and political influence," the report says. "The more the industry profits from low taxation, the richer it grows. The richer it grows, the more it invests in politicians who will deliver favorable regulations and taxes."
What about the states?
There is also spreading movement by a growing number of states to shift the tax burden back to the wealthy and off the backs of their most vulnerable. States are struggling with record-breaking budget crises, and tax reform advocates are asking state legislatures to pursue better tax policies that would benefit working people.
As the tax code shifted to benefit the wealthy over the past three decades, states and local governments suffered under a heavier tax burden. As a result, state budgets suffered, leading to massive underfunding of public services such as education, healthcare, and mass transit. Nowhere is this underfunding seen more so than in the poverty-burdened South. Now policy leaders are calling for progressive taxation at the state level, pointing out that taxing high-income residents is better for economic growth than budget cuts.
This past week policy experts at the Progressive States Network hosted a national conference call discussing how legislative leaders and advocates in New York, Maryland, and several other states were implementing these practices -- raising income taxes on their wealthiest residents to help close their budget gap -- and how similar measures can work in other states, including the South.
In a recent analysis, the Progressive States Network underscores that sustainable economic recovery would involve state governments making investments in state programs that benefit working people. Taxing from the top and reinvesting in social services is the best way to promote economic growth and recovery, advocates say.
As PSN finds:

Raising taxes on the wealthy and directing those funds to job growth in our states is the most effective tool policy leaders have to address the current economic crisis. Despite the argument put forth by some politicians that tax cuts for the rich will "trickle down" to everyone else, the reality is that they don't. In fact, the best way to help low- and moderate-income families is to do so directly through state spending programs that fund jobs and provide services. This is not just because it improves the lives of those families, but because it drives broader economic growth as well.

Progressive taxation advocates are hopeful that more states across the nation, and particularly in the South, will join the movement and take up the call for a fairer tax code as a way to promote economic recovery.

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re: The movement builds for progressive tax policy

.........and the real reason why. CEO compensation has bred dis-trust between the average worker and the CEO(s) of the companies. These big fleecing artists are laughing all the way to the bank while the workers keeps on strugling week to week with expenses. Fix this and the movement goes away real quick.

http://www.pbs.org/now/politics/politics_pop/index.html