Need to Know, March 9, 2012: Cleaning up the tax mess

Transcript
Need to Know: Episode 226
Airdate: March 9, 2012

ANNOUNCER:
This is Need to Know with Jeff Greenfield, Maria Hinojosa, Scott Simon, and this week, Ray Suarez.

RAY SUAREZ:
On this special edition: Four big thinkers weigh in on the problems with our tax code.

BRUCE BARTLETT:
I think it’s a mistake to treat people making $250,000 dollars a year and people making 10 billion dollars a year the same way.And suggest how it can be reformed.

DOROTHY BROWN:
This notion that all tax increases are bad just isn’t viable anymore.

Fixing our tax mess — next on Need to Know.

FUNDER BED

RAY SUAREZ:
Welcome to Need to Know. This week, a special program that affects every one of you, taxes. We want to start with some big numbers. In 2011, the federal budget was $3.6 trillion. But federal revenues were only $2.3 trillion. Most of that money comes from taxes. Individual income taxes, followed by Social Security taxes, Medicare taxes, corporate taxes, gasoline taxes, and the rest. Despite all those tax collections, the U.S. still had a budget deficit of nearly $1.3 trillion during the last fiscal year. Of course, much more rapid economic growth would mean more tax revenues and help close that deficit. But unless and until that happens, we’re left with two ways to make the budget whole: cut spending or raise more money from taxes. Today, our focus is on that side of the equation, taxes. Specifically, how we can raise more money and make the tax code fairer for everyone. Joining us from left to right in every sense, Eliot Spitzer is the former Democratic Governor of New York, Dorothy Brown is a Professor of Law at Emory University, specializing in federal tax law. Bruce Bartlett was a former policy analyst in the Reagan White House. He helped draft the nation’s last major tax reform in 1986. He’s written a new book called “The Benefit and the Burden.” And Dan Mitchell is a senior fellow at the Cato Institute and previously served as an economist for the Senate Finance Committee.

RAY SUAREZ:
Guests, thank you all for being here. Fairness, as it turns out seems to be at the heart of a lot of complaints about the tax code. Now, conservative critics point out that nearly half of all Americans pay no federal income tax. They wonder if that’s fair to the other half, the top half, Professor Brown, who pay just about all of the federal income tax. Is it?

DOROTHY BROWN:
Well, it’s fair because as we’ve seen with the release of Mitt Romney’s tax return and Warren Buffett’s tax return. Their tax rates are much lower than the middle class taxpayers. And I would argue that’s not fair.

RAY SUAREZ:
But that’s percentage. What about the bulk – I f you look over the whole American population, isn’t most of the tax being paid by the upper half?

ELIOT SPITZER:
Can we agree, fairness is in the eye of the beholder? When you consider all the various taxes imposed upon us, those at the top — the top 1 percent that earns about 20 some odd percent of all income, pays about 20 some odd percent of all taxes. So we have neither an excessively progressive nor regressive tax system when all of these various tax burdens are imposed.

RAY SUAREZ:
President Obama proposes eliminating tax breaks introduced by President Bush on all family income above $250,000 a year. Does that get us some of the way to where we need to go?

BRUCE BARTLETT:
I think it’s a mistake to treat people making $250,000 a year and people making $10 billion a year the same way. I don’t understand why we can’t have other brackets above the current one that apply at much higher levels of income. I think that’s a way to get at the people — the Warren Buffetts of the world who say they would be happy to pay more taxes — without really affecting incentives for anybody who — who really matters.

RAY SUAREZ:
Dan Mitchell?

DAN MITCHELL:
As an economist, what I’m concerned about is how can we make the tax code less destructive to economic growth and competitiveness? I look at jobs and — and investment flowing to places like China and India instead of the U.S. And for the life of me, I don’t understand why people are so fixated on trying to penalize those who are contributing a lot to our economy — or who have the capability of contributing a lot to the economy but might take their business elsewhere.

BRUCE BARLETT:
We talk a lot about one particular type of fairness, which is the the richer you are, the more you oughta pay. But a much more important problem today is people with roughly the same incomes pay wildly different taxes, depending on their individual circumstances, whether they own a home or rent a home — the form of their income, whether it’s wages or whether it’s capital income. And I think this is really where — a bigger problem that we should be talking about.

RAY SUAREZ:
Let’s talk a little bit more about rates, because that’s where a lot of the focus of this debate goes, isn’t it? The president and others complain that the rules, as they’re currently written- – allow Warren Buffett to pay a lower tax rate than his secretary. Is that fair?

ELIOT SPITZER:
Look, I think implicit in your question is the answer, it isn’t fair. Warren Buffett gets $500 million because he has dividend payments out of Berkshire Hathaway, and somebody’s earning $50,000 working 12 hours a day, eight hours a day. The lower rate that Warren Buffett pays strikes people at a very fundamental level as being unfair. I would support, and I’m sure many others would not, but support getting rid of the differential between capital gains and ordinary income, tax it all at one level. Maybe that rate could go down if we broadened the base as all of us, I think, would agree would be a good thing. You could have some sense of fairness, but we’d all pay the same rate on whatever income we get.

BRUCE BARTLETT:
It’s worth remembering that in 1986, Ronald Reagan agreed that income from capital and income from wages should be taxed the same–

ELIOT SPITZER:
Exactly right.

BRUCE BARTLETT:
–in the 1986 Tax Reform Act–

DOROTHY BROWN:
And it had.

BRUCE BARTLETT:
He raised the capital gains rate from 20 percent to 28 percent and—

DOROTHY BROWN:
And lowered the taxpayer wages–

BRUCE BARTLETT:
And lowered the tax on income.

RAY SUAREZ:
One adjunct of this debate over progressivity and tax rates is the flat tax, which several Republican candidates have either advocated going to for all, or at least — squash down, simplified, fewer rate level tax code.

RICK PERRY:
Flat tax. Simple. Keep it simple.

HERMAN CAIN:
Pass, the nine percent, nine percent business flat tax.

NEWT GINGRICH:
I have proposed an alternative flat tax.

RAY SUAREZ:
Does a flat tax answer some of these problems with our current progressive system?

DAN MITCHELL:
A flat tax isn’t just one rate. Yes, that’s part of it. The most public part that most people understand. But a flat tax also means getting rid of all loopholes, deductions, credits, exemptions and preferences. If we can just bring the tax rate down, or tax rates down, that solves a lot of problems. Credits and deductions and — preferences won’t be as valuable if tax rates are low. If the tax rate’s 50 percent, we all care about finding different ways of protecting our income. But if the tax rate’s 20 percent, we say, “oh, whatever.” You know?

RAY SUAREZ:
But wouldn’t that also have the perhaps unintended consequence of raising taxes significantly higher on those least able to pay,

BRUCE BARTLET:
These people would suffer massively large tax increases And — and this is — I think the Achilles heel of this whole proposal that is generally ignored by those on the right.

RAY SUAREZ
Professor?

DOROTHY BROWN:
Well, that’s absolutely right. And the flat tax proposals would completely exclude from taxation capital gains and corporate dividends. And I don’t think most Americans would think that would be fair.

RAY SUAREZ:
Another idea that gets circulated from time to time is a consumption tax. The United States is the only major Western industrial power without a value-added or consumption tax. In the U.K. it’s 20 percent, in Germany it’s 19 percent. Do we need one?

BRUCE BARTLETT
I am one of the very few people, that think we do need a value-added tax. I think we could use it right now to pay for needed tax reforms. Don’t necessarily raise net revenues from it. But at least it would give the government–

RAY SUAREZ:
Well, let me go to the professor, you know, because in the middle of the income distribution, around $52,000 family income, what changes about your daily life if there’s a 17 percent, 18 percent, 19 percent value-added tax?

DOROTHY BROWN:
To me, a value-added tax is very regressive. So middle-income compared to high-income, they’re gonna pay a higher percentage of their income in taxes. And at first–

RAY SUAREZ:
Just because we know wealthier people—

DOROTHY BROWN:
Right.

RAY SUAREZ:
Cumulatively spend less of the money they earn.

ELIOT SPITZER
It is, as the professor said, intensely regressive. In order to get meaningful revenue from a sales tax, a value-added tax, you either have to put — make it hit numbers that would be enormously painful to everybody who was less than upper, than sort of upper middle-class and below, or exempt so many of the basic necessities, milk, clothing, the essentials that we buy every day that you have only a very thin set of products subject to it. In which case, even then it’s very hard to get the revenue.

DAN MITCHELL:
I agree with this side of the table that I don’t like the VAT. But you won’t be surprised to know it’s for different reasons. Why on Earth would we wanna copy Greece and Italy and Spain? You look at Europe 40 years ago, right when they were first implementing VAT’s. The burden of government wasn’t that different than it is in the — was in the United States at the time. Now, since then, the burden of government has climbed some in the U.S. But it exploded in Europe, because when you put in a VAT, it is like putting blood in the water with hungry sharks around, it’s like giving the keys to a liquor store to a bunch of alcohols. The guys in Washington are salivating; they’re drooling. Government already is too big in the U.S. I don’t wanna give the 535 least competent people in America a giant new checkbook.

RAY SUAREZ:
But right now, we have a central government that spends $3.6 trillion and collects $2.3 trillion. Can we close that 33percent, roughly, canyon between what we’re spending and what we’re collecting?

BRUCE BARTLETT:
Sure, it’s very simple. We just do nothing. Allow all the Bush tax cuts to expire. If you just did that, our fiscal problems go away. But see, the problem is that Dan — and people like him, want their cake and eat it too. They want the Bush tax cuts extended, they want more tax cuts on top of those tax cuts–

DAN MITCHELL:
I don’t want all the spending. You know that if I was in charge, we would solve the problem. At least–

BRUCE BARTLETT:
That’s fine. But–

DAN MITCHELL:
If you defined the problem as deficits–

BRUCE BARTLETT:
That’s fine. But it’s — but do you believe that in the long run, spending and revenues have to more or less equal each other?

DAN MITCHELL:
Yes. And the goal is–

BRUCE BARTLETT:
Well just–

DAN MITCHELL:
Do we let the revenue line go up or do we bring the spending line down?

BRUCE BARTLETT:
But what if the spending line doesn’t come down? Then what do you do?

DAN MITCHELL:
Then we become Greece.

RAY SUAREZ:
Let me jump in there, because it’s been suggested that do nothing or do little is actually a plausible scenario. If Congress does nothing this year, every tax rate will go up. The highest individual tax rate will rise from 35 to- 39.6 percent, the lowest rate from 10 percent to 15 percent. In addition, the tax rate on long-term capital gains would rise from 15 percent to 20 percent. Is that a good idea? At least short-term, given the financial hole we’re in?

DOROTHY BROWN:
I’d say it’s better than nothing. But it certainly isn’t my ideal. Because my ideal would be to tax wage income at the same rate as capital gains income. So doing nothing might be politically feasible. But I think in the long run, the reasonable response is we have to cut spending. We also have to raise revenues. And this notion that, you know, all tax increases are bad just isn’t viable anymore.

RAY SUAREZ:
As a practical matter, we have one party that says, “raise revenues,” largely, one party that says, “lower spending” largely. And instead of doing both, we do neither.

DAN MITCHELL:
Well, that’s because we have one party, Republicans, who say, “Lower spending,” but they don’t mean it. When they were in charge under Bush, they increased spending faster than Obama’s been increasing spending. So my frustration working at a libertarian think tank is that you send people down to the feverish swamps of Washington D.C., that — they say Washington’s a cesspool. After they’re there for a year or two, they decide it’s a hot tub. And they make government bigger. And– and that’s why I do not want to increase the allowance of children who are misspending their money.

BRUCE BARTLETT:
Look, the expiration of the Bush tax cuts is one of these things that — that we call an action-forcing event in Washington. And people like Dan are gonna be saying, “Oh, this is terrible,” that “We’re gonna — the economy’s gonna crash.” Well, people like Dan said we were gonna crash after the 1993 tax increase.

DAN MITCHELL:
I didn’t say that.

BRUCE BARTLETT:
They — well, a lot of people on your side of the aisle did –

DAN MITCHELL:
Yeah, that’s true.

BRUCE BARTLETT:
And also the people — if you accept Dan’s theory, we should’ve had massive increase in growth after the 2003 tax cut. Everything that his philosophy believes in says, “Cut the tax on capital. Cut the capital gains rate. Cut the dividend rate, and you’ll get massive growth.” Well, I don’t remember any growth after 2003. There was nothing –

DAN MITCHELL:
Well, actually, that — that was our best period last decade –

BRUCE BARTLETT:
We had—

DAN MITCHELL:
– But it wasn’t that great–

BRUCE BARTLETT:
We had a terrible — a terrible economy. And that — if they didn’t do any good, then they probably won’t do that much harm if we get rid of ‘em.

RAY SUAREZ:
One of the specific plans that’s on the table in this political season is Governor Mitt Romney’s. Governor Romney has proposed reducing all individual tax rates by 20 percent, eliminating taxes on investments for those who earn under $200,000 a year, and eliminating the estate tax. Can America pay its bills if it’s restructuring the receipts end in that way, Governor?

ELIOT SPITZER:
I don’t see how it works. I think it sounds good. I’d love to be running for office again saying, “Hey, I’m just gonna cut your marginal rate by 20 percent.” But unless he pairs that with extraordinary cuts in spending, he simply will never balance the budget. And I think that is not a matter of ideology, that’s arithmetic.

DAN MITCHELL:
I actually fully agree with that statement– other than he doesn’t need to cut spending, just he needs to slow the growth. But Republicans have shown when they’re in power, they are very, very weak when it actually comes to putting some discipline on the spending side of the budget. Now you can’t just promise lower tax rates if you’re not gonna try to control the federal behemoth.

DOROTHY BROWN:
I would like to point out that under Mitt Romney’s plan, his tax rate probably goes close to zero. And one of the ideas I have is I’d like to see members of Congress disclose their tax returns. Because right now, we have no way of knowing which tax laws benefit them. So for example, I did a study of the — stock ownership of — all hundred senators to find out how many own stock in the way that allows them to be eligible for the 15 percent rate. Nine in ten — nine in ten. Whereas across America, it’s less than one in five.

RAY SUAREZ:
That’s a pretty broad caucus in the United States Senate.

BRUCE BARTLETT:
Well, the thing about Romney is that he — he says that he’s gonna– as many conservatives do, they will pay for rate reductions with base broadening. Now, this is a very good idea in theory. The problem is, they will never ever name one single solitary tax loophole or tax expenditure that they are willing to put on the table and say, “Okay, let’s get rid of mortgage interest. Let’s get rid of the deduction for state and local taxes.” Which, of course, is very popular or anything else. They just wave their hands, “Well– we’ll just wipe the slate clean,” or something like that, and they never do it.

RAY SUAREZ:
Let’s let’s talk a little bit more about that. The federal government loses — or foregoes collecting more than a trillion dollars a year by offering 250 different deals that lower tax payments: excluding employer contributions for health care, not taxing Medicare benefits, offering the child tax credit, excluding contributions to retirement plans. If we got rid of all of these, would we end up with a fairer system?

DAN MITCHELL:
Get the government out of the business of picking winners and losers, industrial policy, get rid of the loopholes that we all agree are loopholes, bring the rates down, you’re gonna have a more efficient tax system, the system will be less corrupt, less complex — it’s just a win/win situation.

ELIOT SPITZER:
You’re right. If we could wipe the slate clean, there’d be enormous dislocation to many people. And understand, so — homeowners across the nation who have a mortgage who deduct that interest and don’t — and therefore don’t have to pay– tax on a fair bit of their income, will suddenly say, “Wait a minute, I have more taxable income.” If we paired it with the theoretical argument we could then lower rates, it would be healthier, there would be fewer disincentives, fewer dislocations so yes it would be the right thing to do.

DOROTHY BROWN:
Economists generally agree that the mortgage interest deduction does not cause anyone to buy a home. We are rewarding people for doing what they’d already do. Put aside the fact that renters get nothing. Talk about craziness, we not only allow you a mortgage interest deduction for your first home, we allow you a mortgage interest deduction for your second home, up to a million dollars total.

ELIOT SPITZER:
The problem is at this moment, with the housing market still at the very bottom of the trough, some people think we’ve hit the bottom, who knows, let’s hope we have. If you were to take away the mortgage deduction, everybody who owns a home would see the price drop as a consequence. Because it is capitalized in. And so therefore–

DOROTHY BROWN:
But– but the–

ELIOT SPITZER:
–there’d be enormous push–

DOROTHY BROWN:
But the issue is–

ELIOT SPITZER:
–not to do it–

BRUCE BARTLETT:
So could you phase it out? Could you put it–

DOROTHY BROWN:
Exactly.

BRUCE BARTLETT:
–into place—

ELIOT SPITZER:
Sure, you could. Sure.

BRUCE BARTLETT:
– A five year–

DOROTHY BROWN:
Right.

BRUCE BARTLETT:
– Ten-year schedule and start–

BRUCE BARTLETT:
– Chipping away at it–

DAN MITCHELL:
Yeah, you could phase it out–

DAN MITCHELL:
One thing that’s very important to look at, there are countries like Australia, like Canada, like the U.K. that have either no or much lower tax preferences for housing. And they still have homeownership rates –

DOROTHY BROWN:
Comparable to ours.

DAN MITCHELL:
– That are equivalent –

BRUCE BARTLETT:
Yeah, the price — the prices increased even faster in some of those countries than they did here.

RAY SUAREZ:
The highest tax rate ever reached: 92 percent in the early 1950s. Now it’s 35 percent. But given our huge deficit, should that rate go much higher, at least temporarily, until we’re no longer financing a third of our central government’s spending with borrowing?

DOROTHY BROWN:
I would say no, no, no, no, no.

RAY SUAREZ:
Why?

DOROTHY BROWN:
The answer in my opinion isn’t raising tax rates. It’s eliminating loopholes. It’s eliminating exclusions. The 35 percent’s already high. To me, it makes no sense to allow — privileges to certain groups, for example homeowners over renters, when they both have housing costs. So– and therefore tax other people. It doesn’t make sense.

RAY SUAREZ:
So keep the current rate schedule, get rid of the loopholes, Governor–

ELIOT SPITZER:
Well — well look, I think what the professor says is right. If you had to create a hierarchy, you would say first thing you do is close the loopholes, broaden the base. That may not be sufficient and it may not happen. Practically, if you cannot, get people to agree on what’s a loophole and what’s a legitimate incentive. That is often an ideological debate. If we had to go from 35 percent to 39.6 percent, that’s fine with me as a matter of philosophy, as a matter, because not that many people are paying the 35 percent, the 39 percent at the upper reaches. If we could reach some level where people who were earning over two million bucks a year, over a million bucks a year have to pay 39 percent, that’s fine. That does not in any way offend my sense of fairness.

DAN MITCHELL:
One thing that’s very important to understand is there’s a difference between tax rates and tax revenue. And the 1980s are a good example. In 1980, when we had a top break all the way up at 70 percent, people making over $200,000 a year paid $19 billion to Uncle Sam. Reagan brought the top rate all the way down to 28 percent, those people making over $200,000 a year, they suddenly paid $99 billion. You got five times as much revenue at a lower rate. But there’s no question that people respond to changes in tax rates. There is a very high economic cost when you impose these higher tax rates, because people just decide, “I’m not gonna work, save, and invest as much.”

RAY SUAREZ:
So if we go all the way back to those days, those dimly remembered days of 1996, 1997, 1998, weren’t rich people still trying to earn more money and be even richer?

ELIOT SPITZER:
There is surprisingly little economic study of this. But you asked the question, at what point does the marginal rate actually dissuade somebody from working. I have not seen anything that suggests that you cannot tax people — let me say it affirmatively. You can tax people up to 40 percent, 45 percent –

BRUCE BARTLETT:
Oh, much more than that.

ELIOT SPITZER:
I said there’s nothing that suggests in the 40s, you dissuade people. You can probably get into the 60s. Because as you pointed out, people still wanna get wealthier.

RAY SUAREZ:
Last month, President Obama proposed lowering the corporate tax rate from 35 percent to 28 percent while eliminating loopholes and establishing a minimum tax on foreign earnings. Now, the corporate taxation’s gotten a lot of attention during this political season. Isn’t that combination of lower rates and fewer loopholes getting us part of the way to a grand bargain, if a grand bargain is even possible, Bruce?

BRUCE BARTLETT:
Well, it’s a move in the right direction. But I think he moved in the wrong direction by saying, “Let’s have– an extra special low tax rate just for manufacturing.” And I think he’s kind of, you know, going in one direction and in the other simultaneously. I think you need to have some basic element of principles here of we’re gonna tax everybody the same or we’re not.

RAY SUAREZ:
But professor, when people talk about that 35 percent rate, is it like sticker price on an auto? Is anybody really paying 35 percent?

DOROTHY BROWN:
Well, some are. But it’s the exception as opposed to the — to the rule. I think– 2008, the GAO did a study that talked about two-thirds of American companies weren’t paying the maximum tax rate. So, no. Every time I hear, “We have to cut the corporate tax rate because the U.S. tax rate is so out of whack with respect to other countries.” But the effective tax rate of the U.S. corporate rate is nowhere near 35 percent. So –

ELIOT SPITZER:
But that’s — I think part of the answer though is that the wrong people are paying 35 percent. In other words, if you view this as a matter of fairness, G.E. didn’t pay any taxes. And I’m not trying to vilify G.E., great company, does amazing things. But they are sophisticated enough to take advantage of the code. They — I think they have a bigger tax department than most law firms put together in major cities.

DOROTHY BROWN:
And a better tax department than most law firms –

ELIOT SPITZER:
And certainly– well, certainly better from their shareholders perspective. But so the problem is that the small companies that don’t have the capacity to understand all this are the ones who are paying the 35percent. And that doesn’t make sense.

RAY SUAREZ:
We’ve been talking all about how the federal government gets the necessary money for its operations. There’s a big tax cut in the last decade. We gathered less money, and continued to spend more money is that kinda the crux of the problem?

DOROTHY BROWN:
It’s certainly a big part of the problem. But who got the tax cuts? It goes back to the fairness issue. Those with capital gains and corporate dividends got a huge tax cut, down to 15 percent. Those of us with wage income, our rate’s at 35 percent. So who got the tax cut? The highest income tax payers — it’s not the same as who’s bearing the burden, or who will bear the burden if our tax laws continue, which is gonna be the middle income taxpayers.

RAY SUAREZ:
I’m gonna stop it there. Guests thank you all for a great conversation. Eliot Spitzer, Dorothy Brown, Bruce Bartlett, Dan Mitchell, thank you all.

DAN MITCHELL:
Thank you.

ELIOT SPITZER:
Thank you.

DOROTHY BROWN:
Thank you.

BRUCE BARTLETT:
Thank you.

RAY SUAREZ:
This week online…participate in our weekly poll… do you think our tax code favors the rich? Tell us what you think and why. Visit PBS.org/needtoknow.

RAY SUAREZ:
That’s it for our broadcast this week. Next week, Scott Simon returns to Baltimore’s inner city and talks with young men who say every day is a recession, with no signs of letting up.

In the meantime, you can join us anytime online for more features, opinion pieces, and of course, our weekly poll at PBS dot org slash need to know. For all of us at Need to Know. Thanks for joining us. I’m Ray Suarez.

 

Comments

  • guest

    Eliot Spitzer?  What, is this Fox 5?

  • Joelbar

    Can’t you find a liberal Democrat to defend higher taxes who was NOT very publically involved wih hiring a prostitute?

  • Gharley95

    RAy, the idea of a flat tax originated as based on consumption. To consider it otherwise loses/aborts the well thought out con cept.

  • Unfair

    I just finished my tax return for 2011. My income was solely from dividends. I paid a rate of 2% on my taxable income(line 43). If my income had come from wages, I would have paid over five times the taxes. These poor suckers who are working for a living are getting screwed big time. It is completely unfair.

  • Edie

    Excellent panel discussion tonight. Knowledgeable experts comments and good job by Ray Suerez guiding the discussion. I wish it could  have been an hour longer with viewer interaction with the panelists. Need to Know is one of the most educational and timely programs on TV.

  • Rj

    I think you made that up.

  • Rj

    A family of 4 who earns 50k a  year, pays nothing in fed tax.

  • Financialadvisorstl

    I think you made that up. A family of 4 who earns 50k a year pays nothing. In fact they receive a refund. In addition to this, your income would not be large to have a 2% effective tax. 

  • Anonymous

    If you believe it is completely unfair because you pay so little tax then put your money where your mouth is and pay more in taxes.  Something tells me you won’t.

  • http://redcounty.com/giuseppe-robalino Giuseppe Robalino

    A few things I’ve researched and written about taxation: I appreciate the thoughts and comments.

    http://redcounty.com/content/tax-plans-galore-case-jon-huntsman
    http://redcounty.com/content/teens-idea-taxation

  • Arthur Wimberly

    it is obvious that taxing the higher income people, would be a  tremendus help with government defict, its just a matter of congress, senate, presidents, to have the gutts, to do it.

  • http://redcounty.com/giuseppe-robalino Giuseppe Robalino

    Actually, experts have said that the government deficit is so large that doing that won’t even help. Forgive me for lack of specificity and numbers and statistics, but this comes from another show on PBS.

  • Anonymous

    Federal Income Tax Brackets for 2012

    Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 2012:
    Tax Bracket Married Filing Jointly Single 10% Bracket $0 – $17,400 $0 – $8,700 15% Bracket $17,400 – $70,700 $8,700 – $35,350 25% Bracket $70,700 – $142,700 $35,350 – $85,650 28% Bracket $142,700 – $217,450 $85,650 – $178,650 33% Bracket $217,450 – $388,350 $178,650 – $388,350 35% Bracket Over $388,350 Over $388,350

    #############>>>>>>>>>>>>>>>>>>
    I must premise that I know little about all the deductions rich people get other than capital gains allowing them a 15% Federal tax on investment income. I think that is ridiculous! They should be paying much more! At least as much as someone making enough to pay 35% they earn with their sweat!

    For the reasons of the rich getting rich investing in other countries instead of America, benefiting from poorer people borrowing money force by high costs of living and low wages, running virtual monopolies, destroying jobs, and opportunity for others to get rich is small having to compete with them, owning 90% of wealth and means of production, twisting the arm of political leaders for lower taxes, corrupting government so there really is no democracy left, of course rich people should be taxed a lot more. Tax them until no more people are sleeping in the street, every American has a decent job, the aged and disabled are well taken care of, the national debt becomes zero, and no country think it’s OK to be a treat to America or genocide in any land! We can do all of that if we return to taxes on the rich under President Eisenhower of 91% top rate! Our country is obviously under threat from within more than without! It’s businesses too big to fail and people with so much money they effectively call the shots on how we are governed by greasing the palms of politicians with campaign contributions and offers of cushy jobs after their term is done. You can’t create enough jobs if people don’t have money to buy and their credit is destroyed from trying to keep up! Yet the rich rail saying in effect that if you destroy the wealthy you’ll never be rich. It tells me they are comfortable with the poor being disposable for the benefit for the rich. It’s OK  for them to get bailed out but hold us to debt run up because of unfair prices pushing us to credit cards and then running inflations so we couldn’t pay them off before our credit is destroyed. The rich deserve to pay through the nose for what they did to this country! It won’t happen until the people wake up and reclaim America for all the people! You don’t have to descry capitalism to do it! The problem is too much capitalism and too little socialism working for the less fortunate! The rich want to provide socialism for themselves exclusively!
    We need to return to taxes on the rich at rates under President Eisenhower of 91% top rate! It never stoped anyone from getting rich or investing in creating American jobs. Suddenly we arguing Social programs are unsustainable while the rich continue to benefit from social programs and getting bailed out! The government needs to have the funds to fill the gaps where capitalism fails to create jobs paying decent wages and stop running people into debt!

    Social programs are the devil destroying America unless it’s benefiting the rich! Kick the aged, disabled, and jobless into the street instead of taxing the rich able to pay enough without much even missing the money to provide a decent life for all Americans? That’s when you know the representative democracy has to be over ruled by the people when it doesn’t work for the people! When Representatives vote something in that does work fairly for all of the people, the people should be able to vote it out by popular vote! We’ll just get more of the same old crap until we come to that conclusion!

    America is better off with people making above a million a year getting taxed at 90% of their income after subtracting a million that’s taxed at a lower rate! I suggest $200,000 to a million pay 50% after $200,000 is deducted and taxed at a lower rate. 25-30% will probably work! It’s the glut at the top that’s hurting America! A lot of that money is earned by running overpriced goods and service at those with small incomes. Many are forced to borrow money to keep up and keep a roof over their heads! It’s one way how the rich get richer! Were better off going back to easy bankruptcy laws we had before Bush made it possible run up prices, forcing millions into credit card debt, then run inflation with easy credit so they can’t pay off the card! It’s just a scam! It’s still a scam because Obama didn’t cap the credit card rates at 15% and provide a hardship classification for a low unemployment rates that run up people’s rates and fees! Easy bankruptcy and easy credit repair stops the scams by Wall Street! It’s tyranny by the rich! Total exploitation and destruction of lives! There should be a charge for making lives worse to reap wealth! It’s the ugly side of job creation no one wants to talk about! It’s the terror of capitalism that exist and people simply conclude it’s the victim’s fault because they don’t manage their money well even when the jobs pay too little or no jobs to be found, and thus, no money to manage!
    It’s only fair the rich pay much higher taxes and decrease them only when the burden of all Americans are lifted! If not a 91% tax rate, then 70% on incomes above a million a year, and decrease it 5% for every 2% drop in the unemployment rate below 10%, coupled with a decrease of four trillion in National Debt! Otherwise, the greedy bastards are just trying to tip the boat over! I’m surprised they made it this far with the stupid arguments! Trickle down economics and free trade! It’s freedom alright! For the rich to continue the exploitation! Americans are kept ignorant on how economics work, so they trust and elect the highly educated to do the right things for us, and they stab us in the back and blame the other political party when they are both stabbing us in the back! It’s the age of treason, hypocrisy, and gross capitalist exploitation! It’s the real America! Like Rome, we’re headed for a big fall if the people don’t wake up and take control! The enemy within is our major threat! It’s a cancer eating us alive! Parasites feasting on us and we’re scared that if we remove them we’ll suddenly die! We don’t seem to understand the economist leading us down primrose path were hired by the rich to increase exploitation for them and we won’t die if we change course for the right path but be glorious greater that ever!
    Here we are with a huge need for jobs and over 14 Trillion dollars in debt and we’re still arguing about whether we should tax rich people more! Of course we should!!! They are the reasons we don’t have enough jobs but will argue we shouldn’t tax the job creators while they invest in job creation in India, China, and other cheap labor countries and keep the big profits to themselves! They argue our social programs are unsustainable while they rob the funds by causing less jobs in America and thus less taxes to afford social programs! It’s pure treason!
    We’ve evolved beyond what the original founders practiced which was a contradiction to what the Constitution says. They had slaves but freedom was why there was a revolution against English taxes! They talk freedom today but like back then, it was with the rich in mind! The founders were rich or well-off! No one was hurting much because of all the land and hunting opportunities to provide for oneself! Somehow we have people thinking that hypocrisy will work for what we now face! Circumstances have changed! The Tea Party idea of freedom means death by the millions because they have to solution for sustaining all Americans! It’s a survival of the fittest approach! You don’t survive if you don’t have the opportunity or health to work! That’s not freedom for all but for some! It’s the unimaginatively stupid way forward that ends in calamity and the destruction of America or a return to slavery as our country started out. We’ve made advance to bring us farther out of the hypocrisy we started with because our words didn’t match our actions and others are trying to take us back by reinterpreting the Constitution. The greatness of capitalism has brought us could not have happened without socialism. Capitalism gives us progress through slavery or near slavery by exploiting millions of workers for big profits! Socialism made it bearable so as not to cause wars and create a more livable environment that is more profitable for capitalism!
    It’s lunacy when our problems can be solved by increasing taxes on those who have the privilege to earn great sums of money by exploiting others! That’s what capitalism really is. The problem is over exploitation and bringing desperation for many instead of providing a decent living for all! They are allowed to jerk our lives around for their good, not ours or America for the cheapest labor and biggest profits! I have no problem in charging the rich for the privilege of exploitation to create a better life for all! That’s when you know you’re bringing capitalism and socialism together in the right way! Any other view is just a load of crap! No one should be allowed to have nearly all of the ownership of wealth, resources, and means of production to the point of leaving other American criminally destitute, having to sleep in the street, or forced to commit crimes to survive!!! PERIOD!!!
    This whole FREE MARKET ARGUMENT for being the way to insure job creation is a LOAD OF CRAP! It doesn’t build developed countries but build 3rd world and developing countries. It tears down developed countries as we are now experiencing! They removed the fees to make it easier to bring in products and services produced from cheap labor in developing countries! Therefore, America doesn’t have enough jobs from that alone! Proofs in the pudding! The rich are calling the shots in government and willing to tear us down for bigger profits! They don’t have an off switch and too many Americans are soo dumb they buy less taxes and cutting spending on social programs as the way out instead of cutting war expenses and raising taxes on the wealthy! We’re not counting the fact that technology destroys a lot of jobs along with virtual monopolies and allowing companies to move offshore. Every time there is a corporate takeover of one company by another, thousands of jobs are lost! That’s not job creation but job destruction! Yet, they cry they are job creators when they are really job destroyers!
    WE’RE NOT FACING THE REALITY, THAT BECAUSE OF TECHNOLOGY THERE ARE GOING TO BE LESS AND LESS JOBS! WE NEED TO ORGANIZE LIFE ALL TOGETHER DIFFERENTLY TO FIT THE PROBLEM! EVERYONE DON’T NEED TO WORK FULL TIME FOR AMERICA TO BE PROSPEROUS! THE WEALTHY HAVE TO BE TAXED MORE BY THE NATURE OF THE BEAST THAT TECHNOLOGY AND VIRTUAL MONOPOLIES PRODUCE IN A CAPITALISTIC SYSTEM! IT’S JOB DESTRUCTION! THERE IS NO GETTING AROUND IT!
    The only way America is going to be a greater place to live and work is to charge more for other countries to access our market with their products and services made with cheaper labor so we can keep our jobs by being able to compete on a fair basis! We have plenty of mathematicians than can fairly work that out. Free Markets is a loser now and always will be for a developed country! Americans should not be counted as disposable for the benefit of the rich! We all deserve a decent paying job! The government must be regulated to provide jobs, education, and all other social needs with that money from taxes so no one is having a hard life in America! Business is posing as having that covered and they don’t! Government has to be the one to make it all work together for the common good! It doesn’t destroy the capitalistic system but set a bottom on the standard of living that leaves no one living on the street who are able and willing to work or educate themselves! The aged and disabled should continue to be taken care of! We’re talking civilization! Not allowing the rich to totally go cannibal as they are now doing!
    In order to get there we need to take money out of campaigns to be elected! Campaigns should be paid with tax money and that’s all! No one should be able to spend their way to an elected position! If 10,000,000 Americans are unhappy with decisions government officials make, we should be able to vote to change it with a popular vote! Tax funds should pay for it! Otherwise it’s a broken democracy, false freedom, able to be bargained away by those in power! It’s being done now for campaign contributions and the mere prospect of a great job after a political term is over. All they have to do is not step on the toes of those they wish to be hired by after their term is over. THIS IS MORE A RACKET THAN A DEMOCRACY!

  • Lionhawk2

    I have an idea on how we can simplify the tax code and make
    it farer for everybody. The first thing is to combine income and capital gains
    tax and put them together. So if a person makes $50,00 in income and $150,000
    in capital gains, then that person will be tax on $200,000 instead of 25% of
    the $50,000 and 15% on the $150,000. but instead be taxed on an income of
    $200,000. Then we institute a progressive flat tax. here is how it would work,
    you take the poverty rate and double it, lets say for the sake of argument that
    is $40,000 so the first $40,000  of that $200,000
    is not tax. no one will be taxed on the first $40,000 of there income. that
    will turn that $200,000  into
    $160,000that he/she will pay on. then for the next $35,000 dollars (that would
    be up to $75,000) he/she would pay 10% ($3,500). then from $75,000 to $125,000
    he/she will pay 15% for that (person making $200,000 it would be $7,500 +
    $3,500) then from the rate would increase to 20% up to $250,000 so he/she would
    pay 20% on the remaining $75,000 ($15,000) so his and hers total taxes for
    $200,000 would be $26,000 or 13% (0% on the first $40,000, 10% on the next
    $35,000, 20% on the next $75,000 and 20% on the remaining $75,000) then from
    $250,000 to $1,000,000 ($750,000) you would be taxed 25% from $1,000,000
    to$50,0000 it will be 30% from $50,000,000 to $100,000,000 35%,  $100,000,000 to $1,000,000,000 40% and over
    $1,000,000,000 the rate would be 45%. there would be no deductions or loop
    holes. and since corporation are people (ha, ha, ha) then there profits should
    be treated as income and be taxed accordingly. what do you think of this plan?      

  • Wohl1917

    Comentator Dorothy Brown doesn’t understand what the Flat Tax is! She stated to the effect that ‘Capital Gains’ would’nt be taxed under a Flat Tax system, WRONG!!! A Flat Tax would/should tax ALL income “…from whatever source derived…” period! And yes, so-called ‘poor’ would pay taxes for a change but EVERYONE would pay equally. It’s as simple as this: YOU MAKE THIS MUCH, YOU PAY THIS MUCH. No deductions, period.

  • Wohl1917

    A progressive flat tax? That is a contradiction in terms! A ‘progressive tax’ punishes the sucessful and rewards the worthless, lazy and weak. On the other hand a Flat Tax is absolutly fair: Let’s say the tax is 10% and you make $100,000 a year then you pay $10,000 in tax. If you made $30,000 you’d pay $3,000. Doing your taxes would be as simple as moving a decimal point…

  • BrianInChicago

    One of the biggest problems is the special capital gains rate.  I think that it should be treated the same as “ordinary income,” but I do wish that people would frame this more properly to emphasize how the very wealthy are taking ordinary people for a ride.

    Currently capital gains are taxed at a special 15% rate, no matter what your income.  If there is to be any special treatment for capital gains, the rate should be indexed to the top marginal rate of the individual so that if he or she pays a 15% capital gains rate if their top marginal rate is 20% but pays a 25% capital gains rate if their top marginal rate is 30%.

    Regarding the flat tax, the idea that this simplifies the tax code is ridiculous.  Having 10 or more marginal rates is very simple if you bother to understand it.  The complexity comes from defining what taxable income is; you must subtract exemptions and deductions and identify all the rules that help increase the differential between you actual income and your taxable income.  Subjecting everyone to one rate does very nearly nothing to make the tax code simple and does very much to help the very rich keep a whole lot of money.  

    As for the highest marginal tax rate, Emanuel Saez of Berkeley has concluded that the best setting is the one that maximizes government revenue, about 70%.  Please note that a big part of the arguement has to do with marginal value.  A billionaire gains less marginal value from an additional $5,000 while someone with an annual income of $20,000 gains much more marginal value from the same amount.  The wealthy’s overall happiness is not impacted by higher marginal tax rates.  By contrast, many other citizens can be made much happier with the support and programs that these additional funds could  buy.

    In closing I will offer for consideration the average annual growth rates of some former US presidents [you can get GDP data from Federal Reserve Economic Data]; please notice who does well and who does not:

    Bush II
    1.606%

    Bush I
    1.947%

    Eisenhower
    2.300%

    Nixon
    2.699%

    Reagan
    3.333%

    Carter
    3.411%

    Clinton
    3.723%

    LBJ
    4.816%

    Truman
    4.819%

    Kennedy
    5.678%

    We actually did better with higher taxes.

  • BrianInChicago

    What we could really use is a good discussion of changing away from an income tax and toward a progressive consumption tax:
    http://www.democracyjournal.org/8/6591.php 

    Matt Yglesias makes some good points too:
    http://thinkprogress.org/yglesias/2010/08/07/198143/progressive-consumption-taxes/ 

    I think a VAT would be good so long as certain exemptions existed in combination with government services and insurance programs that would make the regressive nature of the VAT a good deal.  I would welcome a VAT in the context of adopting a more Denmark-like system.

  • Phsato

    To answer complaints that half of taxpayers do not pay any federal taxes at all, surely the fix is valuing actual work more fairly by raising wages that could then be taxed.  With the top 1% having increased their compensation at such an extraordinary rate, if the workers were compensated more for producing that top 1%, the inequity would be lowered.  I wouldn’t mind paying my fair share of taxes if I had left overs after bare bones daily living expenses were covered and I had some money to invest.

  • Anonymous

    I can’t agree more.  The problem is that Republicans want to adopt strategies that they themselves repeatedly undermine.  Case in point:  Repulicans say we should privatize social security.Ignore for the moment that purely on the merits it is a horrible idea to replace an insurance product like social security (i.e. a life annuity) with a 401(k) savings plan that is not at all an insurance product.  Just read Bloomberg[http://www.bloomberg.com/news/2012-02-22/stocks-return-more-with-dem-in-white-house-bgov-barometer.html]:The annualized return for 23 years of Democratic administrations is 11 percent, or four times the 2.7 percent annualized return during 28 years of Republican presidencies … Investing $1,000 in funds that mirror the Dow Jones Industrial Average under the same conditions, Democratic investors would have had $7,550, versus $2,716 under Republicans. 

  • http://www.facebook.com/profile.php?id=1682820338 Bob Thompson

    Excellent discussion. Thanks Ray. Balanced and focused. Panelists respected each other and let each other finish a thought. More, please!

  • AJ617

    The show was a very good preliminary discussion of of important tax issues featuring questions that are rarely
    asked in the public sphere, yet there were quite a few dubious propositions that went unchallenged, and
    quite a few pertinent ideas that went unmentioned. One of the panelist thought that taxation should be equal
    regardless of income level and seemed to be presupposing that the rich somehow earned or deserved a
    cornucopia of compensation for the benefits they bestow on society. This is simply untrue because the
    majority of the rich are neither talented nor benevolent but merely well-positioned to direct the migration of
    money upward from the poor and middle class to their pockets. The most lazy, worthless, and weak people
    in America are not the poor. At one time the money shifting upward was recycled through investment, and
    tax breaks for the rich could be justified because they benefited everyone with significant growth of the
    economic pie. It is quite likely though that we have already entered a permanent stasis where any man’s
    gain is another man’s loss – the zero sum game predicted long ago when the limits of planetary growth
    were approached and the Capitalist Gravy Train ground to a halt! Do not let the temporary tepid bounce
    here in the US be soporific, because it will soon end. The basic problem is that there is little to invest
    in profitably, because Demand, already weak, will weaken further as the pool of workers is diminished
    by Automation. Any thoughts that a tax simplification scheme will save us the long denouement of decline
    are both naive and severely underestimate the the clout of the CPA lobby and their Plutocrat clientele.

  • S_dorcin

    I think it’s good to know about taxes, and that can also help someome understand thing he or she do not know before. So, is very good to hear it.

  • Private Private

    Great show. The tax problem wasn’t solved by the end, but all in all it was a productive conversation in my opinion. I would support more conversations like this on this and all other pbs shows.

    I do think taxes favor the rich, as well as government commerce and financial policies. The evidence for me is the income disparity between the top income earners and lower income earners. The disparity has skyrocketed over the last 30 years.One might think it was capitalism alone, but the body of proof shows the legislature has facilitated the broadening disparity rather than narrowed it.

  • Private Private

    While a bit dramatic, I agree with your long view of what potential pit falls await our society. Automation and the decline of the working wage is sort of the ten ton rainbow colored bus sided hippopotamus in the room. We can fix things temporarily and get the economic engine back on the road again and balance the tires out, but there is a leak in the radiator (automation) and a hole in the tire (low stagnant average wages). Eventually this economic vehical is destined to be on the side of the road again. One day, cannot be sure when, the vehical (the economy) will reach a point of disrepair. We will either need to revolutionize the way we travel (how we obtain resources) or potential many of us might parish on the roadside.

  • Static

    Great discussion! I think it’s important to find the consensus among experts with differing political views and use that consensus as a basis for compromise. For example, everyone here is for eliminating loopholes, which will improve our tax system’s vertical and horizontal equity. There are disagreements over how much of the increased revenue should be returned in the form of lower taxes and how exactly the base should be broadened, but combining eliminating loopholes with a broader base and lower rates seems like a good idea.