Taxing the rich

In a time of financial volatility and great austerity, would it make sense to gift rich families and individuals a monetary gift over the coming decade? If you ask the average guy on the street, the answer would be a firm an emphatic no. Incredibly, however, this very idea is gaining momentum in Washington as laughable as it sounds on paper. It’s like a modern day Robin Hood is in our midst, except that he’s the antithesis of the classic folk tale figure.

The debate in question pertains to former President George Bush’s tax cuts, and whether they should be extended partly, fully or repealed. These cuts are due for expiry at the end of the year and the main reason for their expiry is that they were instituted in the guise of being temporary. They’re so temporary, in fact, that some Capitol Hill fat cats want it to be around for longer. So just how do you define a tax cut? If the law does lapse, will it be considered a return to normalcy or an increase in taxation levels? Additionally, if certain facets of the current tax cuts are extended, will they also count as tax cuts?

President Obama has already proposed retaining tax rates for income levels up to $200,000 for individuals and $250,000 for all couples. This proposal, if implemented will represent a tax cut relative to those in force during the Clinton regime. The Republicans are however up in arms and saying that they will staunchly oppose this bill unless all taxpayers remain at current levels of taxation. So without saying as much, the Republicans are saying that everyone should cough up money, and that includes the middle and lower income class. To support their position, they claim that it would be unwise to raise taxes in a weakened economy. That’s fair enough, but what about economics having zero sum games? That is to say any losses made at some level will be recouped elsewhere, thus balancing things out.

The aim must be to spark our economy into life, and taxing the rich might be cost-effective since they save a significantly larger amount of money than the poor. Additionally, the Republicans are saying that having any other outcome other than extending tax cuts universally would be tantamount to “class warfare.” That concept in itself is laughable, and the best rejoinder to that absurd argument comes from Warren Buffett who said, “There’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.” And it’s not just bluster on the part of Buffett either; two economists, Thomas Piketty and Emmanuel Saez, have provided data to show that since 1980, the top 1% of American households earned 20% of the nation’s wealth. A fifth, and the Republicans are worried about them being bled dry!

Obviously, as these households hold so much of wealth, other strata’s of society have lost wealth and find their share to be on the wane as their income remains steady without growing. We can’t allow the rich to keep on hogging the pie; there’s a reason Bush’s tax cuts were dubbed temporary and what’s the point of saying something is temporary if it isn’t? Demanding a tax cut for the rich is laughable and elitist and not something in keeping with the greater good.