Clinton labor secretary: 'Bought out' Democrats won't raise taxes on rich
Americans are facing skyrocketing costs to fuel their cars, heat their homes and visit their doctors as government spending continues to run up huge federal deficits, leading one economist to ask: Why aren't Democrats upping taxes on the rich to fill the country's financial hole?
"Taxing the super-rich is not about class envy, as conservatives charge," argues Robert Reich, secretary of labor under Bill Clinton, in a Salon essay Thursday. "It's about the nation having enough money to pay for national defense and homeland security, good schools and a crumbling infrastructure, the upcoming costs of boomers' Social Security (the current surplus has masked the true extent of the current budget deficit, but it won't for much longer) and, hopefully, affordable national health insurance."
All the top Democratic presidential candidates have said they would roll back President Bush's tax cuts, returning the tax rate for top earners to 38 percent from the 35 percent it sank to during the Bush years. But Reich argues this approach is small potatoes compared to what's needed to fund necessary programs, and he said Democratic fealty to raising taxes creates the appearance that "the rich have bought them out."
The widening income gap has put 21 percent of the country's income into the hands of the top 1 percent of Americans, while the bottom 50 percent of workers earn just 12.8 percent of wages, creating the highest concentration of wealth since the 1920s.
"The biggest emerging pay gap is actually within the top 1 percent of all earners," Reich notes (emphasis his). "It's mainly a gap between corporate CEOs, on the one hand, and Wall Street financiers -- hedge-fund managers, private-equity managers (think Mitt Romney) and investment bankers -- on the other."
Several hedge fund managers take more more than $1 billion per year, and their income is treated as capital gains -- not income -- so they pay a 15 percent tax rate, which is lower than that paid by most middle-class Americans, Reich notes.
"At the very least, you might think that Democrats would do something about the anomaly in the tax code. ... But Senate Democrats recently backed off a proposal to do just that," he writes. "Why? It turns out that Democrats are getting more campaign contributions these days from hedge-fund and private-equity partners than Republicans are getting. In the run-up to the 2006 election, donations from hedge-fund employees were running better than 2-to-1 Democratic. The party doesn't want to bite the hands that feed."
Reminding readers that the top marginal tax rate reached 91 percent under Republican President Dwight D. Eisenhower, Reich said Democrats need to do more to force the wealthy to pay their fair share. He called for a 50 percent tax rate on those earning more than $500,000 per year, and he said Democrats need enough backbone to stand up to their corporate backers to advance the public interest.
"You say the rich will leave the country rather than face a marginal tax of 50 percent?" he asks. "Let them, and take away their citizenship."