Billionaire financier Warren Buffett recently made headlines with his call for the mega-rich to pay a fairer share of taxes (link here):
Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
…Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
We need to talk specifics
To get beyond Buffett’s general call, we need to talk specifics. A good starting place is to ask: What should be the top income tax rate for those at the highest rung of the income ladder? In a lengthy piece for The Atlantic on the future of the middle class, Don Peck gives us some perspective (link here):
Over time, the United States has expected less and less of its elite, even as society has oriented itself in a way that is most likely to maximize their income. The top income-tax rate was 91 percent in 1960, 70 percent in 1980, 50 percent in 1986, and 39.6 percent in 2000, and is now 35 percent. Income from investments is taxed at a rate of 15 percent. The estate tax has been gutted.
We should be careful about calls to soak the rich — especially given natural tendencies to label as wealthy anyone in the next tax bracket or higher.
However, moderate tax hikes applying to those who can most easily afford them would be fair and are needed. This is all rather subjective, but here’s my sense. Even as someone who isn’t worried about reaching the highest tax bracket, top tax rates of 91 percent and 70 percent strike me as being too high. But somewhere between 40 and 45 percent seems fair — at least for folks making multiple millions. Some increase on taxes for investment income also would be appropriate.
Payroll taxes, too
In addition, we need to look at the payroll tax, which funds Social Security. As I noted last fall, although the Social Security retirement fund is facing an eventual shortfall due to the crush of Baby Boomers hurdling towards retirement, in reality it is among our most stable social programs. Jane Slaughter from Labor Notes observes that there’s a relatively easy fix to ensure the program’s ability to pay out full benefits long into the future (link here):
There’s an easy and equitable solution: make high earners pay their fair share. Today, most workers pay the 6.2 percent FICA tax on their entire incomes. But the fortunate ones—roughly the top 6 percent of earners–pay FICA only on their first $106,800. Eliminate that cap, keep their benefits the same, and we’d end up with another surplus after 2037.
Personal responsibility and public need
Unfortunately, powerful forces disagree with all of this. In fact, Republican leaders in Congress are mulling around ideas to impose higher taxes on those who are struggling the most, reasoning that those of low and moderate incomes who are paying few or no taxes are not doing their share to help this country.
In the meantime, the jobless rate remains very high. Teachers, police officers, and firefighters are being laid off. Important safety net programs such as Social Security disability and FEMA relief are crying for funding. Public libraries are closing or cutting their hours. Bridges and roads across the country are in dire need of repair. Too many people are hungry and broke, through no fault of their own.
Surely this harkens back to the observations of John Kenneth Galbraith, one of my intellectual heroes, when he wrote of an affluent society grounded in “private wealth” and “public squalor.”
President Franklin D. Roosevelt — a member of the patrician class himself — said that taxes “are dues that we pay for the privileges of membership in an organized society.” I think this dovetails well with the Biblical reminder that when someone is given much, much will be required in return. In sum, we should be asking more of those who can afford to contribute a greater amount toward the public good.