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WRITE ON WEDNESDAY
This week the buzz in Washington is about the fiscal cliff and where we are going to f8ind the money to balance the budget. A budget that need I remind you the GOP blew through in one administration. With President Obama set to clean up the mess created by the neo cons, here are some ideas from economist Steve Ratner that was in Sunday's New York Times.
More Chips For Tax Reform
Almost lost in the tug of war over whether the top income tax rate should be 35 percent or 39.6 percent is another consequential tax issue: the proper rate for capital gains and dividends.
It was the absurdly low rate on those forms of income — just 15 percent — that yielded Mitt Romney’s embarrassingly small tax payments. And that’s what also led to Warren E. Buffett’s lament that his tax rate was lower than his secretary’s.
So as we scurry around looking for new revenue to help address the yawning budget deficit, let’s zero in on this special preference.
President Obama has proposed much of the needed adjustment, including eliminating the special treatment of dividends and raising the tax on capital gains to 20 percent for the rich.
Personally, I would go further and raise the capital gains rate to 28 percent, right where it was during the strong recovery of Bill Clinton’s first term, and grab hold of a total of $300 billion of new revenues over the next decade.
Inevitably, a chorus of outrage would greet any such increase. Capital investment would be severely impaired! Some of the wealthy might decamp from America! With a new 3.8 percent Medicare tax on unearned income about to take effect, this would exacerbate the disincentives for investment!
Put me down as skeptical about such dire forecasts. During my 30 years on Wall Street, taxes on “unearned income” have bounced up and down with regularity, and I’ve never detected any change in the appetite for hard work and accumulating wealth on the part of myself or any of my fellow capitalists.
Remember also that corporate leaders have pretty much convinced policy makers of both parties that business taxes should be reformed to allow them to compete more effectively around the globe. Providing this relief makes sense, but since the benefits would flow to shareholders, this is yet another argument for higher taxes on dividends.
Increased revenues, meaning higher taxes, will be a central element of any successful long-term budget plan, and President Obama is right to insist that the wealthy — the slice of America that has come through the recession in by far the best financial health — should provide those funds.
Here’s the math: We need at least $4 trillion of long-term deficit reduction, with a substantial portion — on the order of $1.2 trillion — coming from new revenues.
That means other veins belonging to the wealthy will need to be tapped. Raising the tax rates for American households with incomes above $250,000 per year, as President Obama has proposed, would certainly be a productive and welcome step.
But viable alternative measures are available. At a minimum, we need to implement the “Buffett Rule,” the concept that Americans making more than $1 million a year should pay at least 30 percent of their income in taxes. This wouldn’t raise a huge amount of money — between $47 billion and $160 billion depending on what else is done to rates — but it would reinforce the responsibility of the wealthy to pay their fair share.
Steve Ratner was a former advisor to President Obama and is a commentator on MSNBC TV.
WRITE ON WEDNESDAY (PART 2)
PLYMOUTH COUNCILMAN NEEDS PARDON
The issue of the action that Plymouth Borough Council took against one of their own still is talked about locally. Peter Gagliardi wrote a story about this for voicesyahoo.com, and urged a pardon from the President for Bill Dixon. We are prohibited from reprinting it but here's the link:
Peter Gagliardi is a former federal employee, ran for Wilkes Barre City Council and is a contributing writer to various websites and newspapers.