This is something that I have thought about a lot and David Swanson’s July 8 piece “There’s Plenty of Money of Act of 2012 provides an interesting blueprint. As we have seen the tax code become more and more regressive in recent years it becomes more difficult to even imagine what progressive taxation would look like circa 2011. David makes a suggestion and it is worth looking at in detail.

      He begins with the “STOP KILLING PEOPLE” (Section 2) demand to bring all US soldiers home and to end the CIA, the NSA, no secret budgets. etc. I find some of these proposals, certainly ending the CIA or NSA, no secret budgets, as much easier said than done. If the US ended the CIA tomorrow what would that mean that all the other countries in the world keep their equivalent intelligence agencies open? While I certainly would like to see considerable military cuts where not needed much of this would much greater analysis to justify.

       Still this isn’t the focus of the main point for me in the piece: progressive taxation.  This is secton 3 called “WE CAN NOT AFFORD BILLIONAIRES”    Off the bat this seems to me somewhat problematic. The idea that “we”, society will not allow any individual more than a billion dollars strikes me as out and out communism. As FreedomfromALL comments, “Proper fair taxation can be progressive, but your setting artificial limits by imposing 100% taxation as an penalty. It is the equivalent of fining an citizen for making too much money.”

         There has been much  discussion in recent years-particuarly since Reagan, unsurpisingly-about rising income equality and the explosion in top incomes. Yet it seems to me that Americans are conflicted on the whole matter of economic equality. While no one can not be concerned about economic inequality in recent years-what concerns me the most is that median incomes have been flat while the 1% has soared-most Americans don’t necessarily believe that is a crime against society to make a lot of money as such. Part of the American dream is the idea that anyone can get rich. Most Americans probably won’t agree to outlaw wealth as they themselves on some level hope to get rich themselves and simply telling them this hope is illusional does not convince them.

           Putting this aside, the meat of David’s proposal is fascinating. While it taxes 100% of income beyond the threshold that would make someone a billionaire, it actually completely exempts anyone who makes less than 2000% of the mininum wage per hour. As today’s federal minimum wage is $7.25 that means that someone making up to what amounts to $14,500 per hour would pay no income tax assuming a 40 hourweek this would be $580,000 per week with no tax.   Assuming 50 work weeks a year someone could make up to  $29,000,000-and this includes investment income, only excludes inheritance income.  He then has a rising scale-income up to twice above this base($29 million dollars) will pay a 1% income tax, someone who makes more than twice but not more than 3 times the base pays 2%, etc. all the way to somebody who makes more than 9 times but not more than 10 times the base(again $29 million) will pay 10% income tax-this would be $290 million dollars with an income tax of 10%. However all income above this 10%, 290 million threshold would be taxed at 100%

          What stands out here is-just like the recent House Progressive Caucus budget they released-Swanson gives us many more tax rates and brackets. This is exactly counter to the tendency of this talk of “tax simplification” that we have heard so much about in recent years-Neil Boortz who recently went off on a rant about “thugs” was an early populizer of this view. Simplicity is somehow equated with fairness. In this sense, David and HPC are in the opposite direction of “simplicity.”  This is good as “simplicty” and fairness are hardly mutually inclusive. If tomorrow Steve Forbes got his 17% flat tax this would be very simple-can’t get more simple and easy to remember and understand-yet very unfair. The trick is they try to suggest that if everyone pays the same rate that is “equal” and so “fair.”

             What is also true-again also of the HPC-is that many income levels which are actually part of the infamous top 1 percent of taxpayers actually do a lot better here. Under David’s plan even someone who makes $290 million would pay just 10% income tax. Might they then be tempted? No because they likely dream of being a billionaire and would feel like there was no more incentive for them to do anything.  Which again leads us back to the problem of 100% on all income above this $290 million level. Then too, this would have to be indexed to inflation as in a few years we’d have the famous “bracket creep.”

            Still, it is a very interesting starting point. I would certainly like to see the Economic Policy Insitute analyze it and see what the overal macroeconomic effects would be. 


Mike Sax

Mike Sax