Sunday, October 17, 2010

Can top earners really afford elimination of Bush tax cuts?

Last month's Census data showed the widest income gap ever between the most and least affluent in the U.S.  This also confirms recent IRS data showing the greatest income disparity since the Great Depression.  Why then *DID* Congress recess without eliminating the Bush tax cuts for the top 3% of U.S. income earners, families earning more than $250k/year?  Based on this past year's tax returns, scrapping the Bush tax cuts would realize another $700 billion over the next decade.

"Trickle down" apologists claim those income earners in the top 3% will cut jobs or be unable to grow businesses unless the marginal tax rate stays at 35% instead of increasing to 39.6%, same as it was in the prosperous 1990's.  But what happened to all the job growth since we've been at the 35% marginal tax rate?  According to the Institute for Policy Studies, in 1980 the CEO to worker average pay ratio was 30-1.  As of 2009 that ratio had grown to 263-1, yet as the Census shows, the burden of the Great Recession has fallen mostly on those at the bottom of the employment chain.  In 2009 we had the largest number of U.S. citizens, 43.6 million, living in poverty in the 51 years that poverty has been measured along with the highest poverty rate, 14.3%, since 1998.  Millions more would have been in poverty without the cash safety net: the expansion of unemployment insurance kept 3.3 million out of poverty.

While incomes at the top have soared, Congress has gone in the opposite direction by cutting tax rates on the top earners.  The highest tax rate was 70% in 1980, as compared with 35% today.  Recent census & IRS data clearly shows our country's movement towards a wealth-concentrated feudal society is just being stoked by our existing tax structure.

The idea that a 4.6% increase in the marginal tax rate on the wealthiest U.S. citizens will somehow eliminate jobs is unsupported by any credible evidence.  In fact, given the significant rise in disparity between average CEO vs. worker pay and the increase in U.S. citizens living in poverty, it appears the tax cuts merely allowed top earners to simply keep more of their income.  If the intent of the tax cuts was to create jobs, that memo evidently never reached CEO's desks, or they simply deleted the email thinking it was SPAM.

Corporate America gets rewarded for 1 thing: keeping Investors and Majority Shareholders happy.  And the easiest way to keep Investors and Shareholders happy is by keeping conservative in all business ventures, not taking risk, and reducing costs by workforce reduction or keeping workforce numbers steady.  If CEO's were creating jobs and helping get our economy back on the road to recovery through job creation I'd be all for keeping the Bush tax cuts.  Profits continue to increase while job creation does not.  I advocate we eliminate the Bush tax cuts and require our government use the extra tax income to directly create more jobs.  I also challenge CEO's, Investors and Stockholders to consider short term profit pain to help the economy grow such that the long term gain will be even better when the economy recovers.

I have no doubt some (many?) will disagree with my stance to eliminate the Bush tax cuts.  I ask this question in response: since the tax cuts clearly haven't led to economic growth or jobs creation and in fact we've seen an increase in workforce reduction, how could we guarantee top earners create significant job growth if we keep the Bush tax cuts in place?

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