Who Shold Pay for the Deficit?

Throughout the debates on the economic stimulus bill we heard the bill’s naysayers echo the mantra about our grandchildren having to bear the burden of the nation’s deficit. That sounds like a good populist complaint, but I have a better idea: the people who have profited by cheating, lying, deceiving the public, avoiding taxes, and extracting disgustingly huge salaries and bonuses as heads of finance, commerce, and industry should pay.

It’s fine to say that in America no one should be restricted from making lots of money. But issues of honesty and fair dealing should not be left off the table. Is it OK for conmen to earn and keep great wealth? How about those credit card companies whose deceptive practices and small print lead to interest rates of 29% and more? How about all the Bernie Madoffs who have not yet been caught, or the highly compensated corporate board members who authorize their CEOs to walk away with tens or hundreds of $ millions in salaries and bonuses while their companies fall into bankruptcy? These are the people who should pay for the deficit! Their ill-gotten rewards should be stripped from them to cover the nation’s debts.

Not all corporate CEO’s are dishonest, of course, but we should not forget those unpatriotic thieves—both corporations and individuals—who hide their profits in offshore banks to avoid paying taxes. Joe Biden was right when he said that paying taxes is a patriotic duty. (The fact that people mocked him for saying it says a lot about their own patriotism—or lack of it.) Paying taxes is not only a patriotic duty, it’s the law of the land. And here’s where things get dicey: there’s the “intent of the law,” and there’s the “letter of the law.” Super wealthy individuals and corporations avoid the intent of the law by finding loopholes in the letter of the law. Leona Helmsley once famously said that rich people don’t pay taxes. She was right. And in my book that makes them criminals, because they use their resources and connections to avoid the intent of the law, while (not always) abiding by the letter of the law.

So how can we address the nation’s growing deficit? First we should reinstate a truly progressive tax code. When the income tax was first introduced in 1913 the minimum taxable income was $3,000. In today’s dollars that would be about $65,000. So let’s exempt any income less than $65,000. Next we should simplify the tax code and eliminate the zillions of loopholes used so effectively by the super rich. Then we should raise tax rates on the highest incomes. Between 1951 and 1963 incomes over $400,000 ($3.3 million in today’s dollars) were taxed at 91% and we had unprecedented economic growth. Now the highest tax bracket has dropped to 35% and look what’s happened to our economy. So let’s temporarily raise that back up to 80%. Admittedly, this would be a hard pill for the super rich to swallow after the tax vacation years started by Reagan in the mid 1980’s and made extreme by George W. Bush.

But let’s be reasonable about this. As Benjamin Franklin noted, the wealthy of our nation owe their ability to make and retain wealth to our economic and political stability—all made possible by a society that values and obeys the rule of law. (The super wealthy of 18th century France, or 20th Century Russia didn’t do so well when revolution broke out). As we face the worst financial crisis since the Great Depression, it’s time for those who have done well in our free society to step up to the plate. Making our grandchildren pay the burden of our national debt while the super wealthy continue to enjoy virtual immunity from taxation goes against the most basic values of fairness and justice upon which our free and egalitarian society is based.

--Peter