We are in an era of exceedingly high and ever-increasing wealth and income disparity. This is unsustainable and history tells us it will inevitably lead to either a police state or to an uprising. We must fix it if we are to maintain a free and open society.
Tax reform is essential. Currently, hard working Americans pay a disproportionately high percentage of their income for taxes while those at the very top pay a disproportionately low percentage of their incomes. Here’s the fix:
- Middle-income earners should be able to deduct 100% of the dollars they pay for (a) child care (b) healthcare and (c) higher education.
- Drastically simplify the tax code. It is a cruel joke to impose thousands of pages of tax code on our citizens and expect compliance. We should eliminate most other deductions and contract our categories into four progressive brackets, 10%, 15%, 20%, & 25%, applied to income earned by 99.5 % of our citizens. Bracket thresholds must be dynamic, adjusted annually when appropriate.
- We should also change to two corporate brackets, 15 & 20%, depending upon a business’s profitability, again with dynamic thresholds established periodically.
- At the tippy-top of our wealth and income distribution, i.e., the upper 0.5% of earners, we must return to a substantially higher rate of taxation on personal income, similar to the high progressive rates of decades past. Here’s my proposal: Four additional progressive brackets, thus
- Earning more than $1M to $2.5M/year, 30% (the Buffet Rule)
- More than $10M/year, 50% of the amount between $10M & $25M
- More than $25M/year, 70% of the amount between $25M & $50M
- More than $50M/year, 90% of the amount greater than $50M
We must understand that the trickle-down argument touted by the G.O.P. does not work at the current level of taxation. This economic theory may have worked in the past, though that is subject to debate, but even if it did, it was only during times when personal taxes were at prohibitively high levels. The highest marginal tax rate was 94% in 1944-1945 and was 70% before Reagan lowered it to 40%. We are not in either of these zones now. At this point in our history, continuing this erroneous, obsolete, and dangerous path threatens our society. Even at the present level of disparity, the super-rich will not allow their excess wealth to trickle down. Instead, they will hoard it and use it to purchase ever-increasing power for themselves at the expense of all the rest of us, a scenario that will only intensify until disparity is reversed and then held in check.
More equitable distribution of wealth and income is essential for our great capitalist society to function properly going forward. When we increase disposable income for our majority we will increase demand for sustainable goods and services. This will increase hiring and job formation, which, in turn, will increase wages again, driving even more demand for goods and services, resulting in more profits for our businesses. This cycle of increasing prosperity for all is the key to our survival.