When President Obama presented his debt plan over the summer — saying that in addition to severe budget cuts, there should be tax increases on the rich either through raising the marginal rate and/or plugging loopholes — he justified it by saying that the pain of budget balancing should be shared by all.
John Huntsman, the one Republican candidate willing to honestly confront the issue, justified increasing taxes on the very wealthy (though he wouldn’t say those words directly). My favorite columnist, J.J.Goldberg, in a hard-hitting article in The Forward, wrote of the need to reverse “a monumental shift of income to the very rich from everyone else, and a quiet shift of the tax burden from the richest to everyone else.”
I do not believe that increasing taxes on the very wealthy is increasing their burden. The top 1 percent of American taxpayers have not even been paying their share of the current burden. Consider the following: While worker productivity has been rising over the last decade, wages and benefits have not. Guess who has profited from the worker productivity? You guessed it. That lucky 1 percent.
While unemployment has risen, that lucky 1 percent has been sitting on $3 trillion worth of increased productivity. John Boehner and Mitch McConnell tell us that the 1 percent should not be touched because they create jobs through investing. Nice try. But if that $3 trillion had been invested, the unemployment problem would be severely reduced if not solved completely.
Judaism teaches the concept of hakarat hatov, recognizing the good that has been bestowed on you. When many of these 1 percenters were in dire straits — largely due to their own greed — the government bailed them out. They are again earning in the eight figures and, in the words of Warren Buffett, paying less tax than those cleaning their offices.
One would have thought that in recognition of this government largesse, these mighty corporations and their CEOs would have felt an obligation to respond generously by investing in new industry, creating new jobs, or restructuring usurious mortgages for hard-working families. As one of my teachers was wont to say, “lo haya, lo hoveh, v’lo yihiye” — the haves didn’t behave that way during the Great Depression, they are not behaving that way now, and chances are, left to their own devices, they will show this same lack of civic virtue in the future.
One of the oddities of political life in the United States is that those who complain most about the government deficit are the very ones who created it. The deficit began rising under Ford, decreased some under Carter, and rose dramatically during the Reagan administration. It was somewhat moderated under Bush I, was actually balanced with a surplus under Clinton, and increased significantly under Bush II. Under Republican presidents, expenditures rose while taxes, largely on the 1 percent, were significantly reduced. By 2007, the top one-tenth of 1 percent — about 300,000 individuals — took home 23 percent of total income while the share of the pot for the bottom half —150 million — was 12.3 percent. Surely the heavens are crying out at this injustice.
The budget battle has been over numbers rather than the real impact on people. When Headstart funds are reduced, poor children are left behind. When funds are cut from higher education, many middle-class kids either go into deep debt or simply deny themselves the education required for a professional career. Should we talk about slashing funds from mass transit? Who suffers there? Certainly not the 1 percent. Stagnant salaries and reduced benefits have cut into the standard of living of the working and middle class. Now they’re threatening the elderly by reducing Social Security and Medicare payments.
Let’s assume some of the loopholes that enable the rich to get richer were removed from the tax code and that the marginal tax rate was increased to something approximating the 70 percent of the 1960s, when the economy’s growth rate was high. Would this higher tax responsibility cause change in the lifestyles of the top 1 percent? I doubt it. Their children would continue to attend the best private schools, their vacations would be just as luxurious, and the cars they drive would still be top of the line.
This current situation should not be seen as totally advantageous to the 1 percent. I recall being in Venezuela in the pre-Chavez days and walking through the streets of a wealthy neighborhood. The mansions were encircled with high walls and state-of-the-art security. In college, my daughter dated a nice wealthy young man (Jewish) from Brazil and told me that they could not leave the premises without bodyguards. There is a cost to being in the 1 percent, both financial and psychological. Better to pay higher taxes and have peace of mind.
The Forward asked Jews in the Forbes 400 whether they, like Warren Buffett, would agree to pay higher taxes. Four who returned its calls — Edgar Bronfman, George Soros, Michael Steinhardt, and Mark Cuban — agreed. I feel confident that many more would have agreed had they been reached. As Soros said, “the rich are hurting their own long-term interests by their opposition to paying more taxes.”