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Froma Harrop
Froma Harrop
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Tax the Rich ... First

Comment

We who've been going on and on about the need to raise taxes on the rich need to catch our breath. There's no need to reverse course, but also no obligation to totally love President Obama's approach for doing what we've been asking for. An explanation is in order.

One may brush off the usual charges of "class warfare" that follow any proposal to hike taxes on the affluent. But President Obama does not improve the atmospherics by constantly telling the public, "This is about them, not about you."

The Bush-era tax cuts have been disastrous for America's fiscal standing. The 2001 and 2003 tax cuts piled more than $1.7 trillion onto the deficit over 10 years, according to the Center for Budget and Policy Priorities. The two-year extension pushed by Obama will add another $858 billion.

Obama's budget would end the Bush tax cuts for those with incomes of $250,000 and up. That's fine, but an honest conversation with the masses is in order. It should focus on two realities: One is that the Bush tax cuts favored the rich royally, so ending them for everyone does hit the well-to-do more than we lesser taxpayers. The other is that the added revenues from just raising taxes on the top incomes would not close the deficits, even with big spending cuts.

Obama also proposes taxing rich people's dividends as ordinary income, which is to say at the highest marginal rate (to be 39.6 percent next year if it goes back to pre-2001 levels). That's also fine. Dividends were taxed as ordinary income when Ronald Reagan left office. In the George W. Bush years, the rate was lowered to 15 percent.

But why further complicate the tax code with different rules for different income groups? If we want to treat dividends as ordinary income, let's treat everyone's dividends as ordinary income.

People who are not wealthy would end up paying less than those with top incomes, anyway.

Meanwhile, we can ignore the beef that dividend taxes are a tax on corporate profits that have already been taxed. For starters, many companies pay little if any of that corporate tax due to an arsenal of loopholes. Furthermore, the property or sales taxes we pay comes out of earnings that have already been subject to income taxes. The system is riddled with so-called double taxation.

At some point, Americans will have to engage in a grown-up discussion about a value-added tax, which is a kind of national sales tax. Critics on the right complain that it's a sneaky way to fund government programs. Critics on the left grumble that it is regressive: It doesn't distinguish between rich and poor shoppers.

To the left we say, if it funds government programs for the middle-class on down, its end results are progressive. That's how Europe pays for its social safety net.

To the right we say, the VAT is a tax on consumption, not investment. That's how your hero Margaret Thatcher pulled off cutting income taxes without bankrupting Britain. As prime minister in the early 1980s, Thatcher raised the VAT to 15 percent from two rates of 8 percent and 12.5 percent.

Expecting Obama to share stern truths before the November election may be unrealistic. And getting a useful conversation going among Republican candidates — all of whom say they'd refuse $10 of spending cuts for $1 of new taxes — is impossible.

But one can hope that Obama will at least launch us on some baby steps toward understanding what must be done — considering a VAT, for example. And when talking about higher taxes, rather than saying "for the rich only," he should say, "The rich come first."

To find out more about Froma Harrop, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

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Comments

10 Comments | Post Comment
By replacing all these taxes with a sales tax the more some ones spends the more taxes that the individual would pay. No more loop holes. Also wether rich or poor, no more mooches living off somebody else's work. But the social progressives dont want that because the government can not pay people to support the ever expanding size and power of Uncles Sam aka Big Brother.
Comment: #1
Posted by: SCOTT
Thu Mar 1, 2012 5:44 PM
So she goes from how the Bush tax cuts favor the rich more, then proposes a VAT? That makes no sense. If she an economist? Most economists on the left and right say that a VAT would be disasterous and most of the burden would be on the middle class. Here's a good rule of thumb: If Europe does it, lets not do it. Their economy is the standard for crisis.
Comment: #2
Posted by: Chris McCoy
Mon Mar 5, 2012 7:01 AM
Typical liberal agenda, including attacks on those who work for a living and ABSOLUTELY NO discussion of addressing the REAL cause of our financial problems - EXCESSIVE SPENDING!
You don't need to be an economist to understand you can NOT continue to spend more than you have year after year but this is too basic for those who know better and live off the public tax dollar while in Congress.
VAT??? Yes, it has worked so well in Europe hasn't it? Just look at the budget of ANY European nation and the REALITY of Big Brother Government becomes easily visible, unless you are a Progressive.
It does not matter how the income is achieved if the spending is 40% over the income for years and years. Even though Obama said he would CUT the debt in half, he has done the EXACT OPPOSITE and wants EVEN MORE for the future! How can we take anyone who makes such lies seriously???
If the author REALLY wants "tax fairness" then she should trash the VAT AND our present regressive tax system and SUPPORT a SIMPLY FLAT RATE system in which Congress has NO power to pay off supporters! But again, that would work, thus is beyond the ability of those who think they know better.
Comment: #3
Posted by: Bob
Mon Mar 5, 2012 9:16 AM
Typical liberal agenda, including attacks on those who work for a living and ABSOLUTELY NO discussion of addressing the REAL cause of our financial problems - EXCESSIVE SPENDING!
You don't need to be an economist to understand you can NOT continue to spend more than you have year after year but this is too basic for those who know better and live off the public tax dollar while in Congress.
VAT??? Yes, it has worked so well in Europe hasn't it? Just look at the budget of ANY European nation and the REALITY of Big Brother Government becomes easily visible, unless you are a Progressive.
It does not matter how the income is achieved if the spending is 40% over the income for years and years. Even though Obama said he would CUT the debt in half, he has done the EXACT OPPOSITE and wants EVEN MORE for the future! How can we take anyone who makes such lies seriously???
If the author REALLY wants "tax fairness" then she should trash the VAT AND our present regressive tax system and SUPPORT a SIMPLY FLAT RATE system in which Congress has NO power to pay off supporters! But again, that would work, thus is beyond the ability of those who think they know better.
Comment: #4
Posted by: Bob
Mon Mar 5, 2012 9:16 AM
Re: Chris McCoy
But the Left Stream Media is NOT about to allow the facts to get in the way of their agenda!
Comment: #5
Posted by: Bob
Mon Mar 5, 2012 9:19 AM
Re: Chris McCoy
But the Left Stream Media is NOT about to allow the facts to get in the way of their agenda!
Comment: #6
Posted by: Bob
Mon Mar 5, 2012 9:19 AM
Bob, your point about Obama cutting the debt in half then doing the opposite is so very true and political gold for the November election. I hope Romney has the sense to use that arguement when the time comes.
Comment: #7
Posted by: Chris McCoy
Mon Mar 5, 2012 9:30 AM
I don't know what Ms. Harrop studied in college but I would guess it was not economics. Let us ignore the fact corporations don't pay taxes for the moment (societies pay taxes, corporations just pass them on to the people that purchase the goods). The idea a country with one of the highest corporate tax rates should tax dividends at 40% is folly. I am all about taxing the rich as much as we can but not if it is counter-productive. Conservative economists don't want to avoid tax increases on the rich because they like rich people. It is because they calculate our economy will suffer if we tax the engine too much. The middle class pays the taxes anyway. Many in this country pay zero income tax and there aren't enough rich to make a difference. What we need to do is get spending under control.
Comment: #8
Posted by: John
Tue Mar 6, 2012 3:57 PM
America should pay it's bills and get out of debt. Taxes were cut and slashed for many years before the current adminstration, to the benefit of the ultra rich and to the detriment of the middle and lower income classes, and also to the detriment of future generations. We are saddling our children with debt. It amazes me how the cult of the right manages to convince it's followers that making the rich, richer is a good thing, and doing so is somehow going to create more jobs. It is usually painted as the lower income classes, somehow trying to take advantage of us because we will be creating a welfare state. Susceptible minds are convinced if this mantra is repeated often enough.
Right now we have a welfare state of and for the benefit of the rich.
Comment: #9
Posted by: defrimtd
Sat Mar 10, 2012 9:15 AM
America should pay it's bills and get out of debt. Taxes were cut and slashed for many years before the current adminstration, to the benefit of the ultra rich and to the detriment of the middle and lower income classes, and also to the detriment of future generations. We are saddling our children with debt. It amazes me how the cult of the right manages to convince it's followers that making the rich, richer is a good thing, and doing so is somehow going to create more jobs. It is usually painted as the lower income classes, somehow trying to take advantage of us because we will be creating a welfare state. Susceptible minds are convinced if this mantra is repeated often enough.
Right now we have a welfare state of and for the benefit of the rich.
Comment: #10
Posted by: defrimtd
Sat Mar 10, 2012 9:15 AM
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