TAX THE RICH NOW!

[Joanne98]

The Economist has produced the clearest explanation of the necessity of raising taxes on the rich that I have seen. It starts with the increasing deficits run by the governments of the big economies, those in the OECD. Both households and businesses have increased their savings rates dramatically over the past two years. In the US, the household savings rate has risen to more than 6% of household income from about 2.7% in the years before the Great Crash. The OECD predicts that in the aggregate, the expenditures of households and businesses across the economies of the OECD this year will be $2.6 trillion less than incomes.

In developed countries, people don’t put that money in a mattress. They accumulate financial claims against other people, in the form of bonds, stocks, bank accounts and so on. With all this saving going on, who is going to borrow that money? On a net basis, businesses and households won’t borrow. Foreign countries could be on the other side. China, and maybe other Asian economies could borrow from the US by running a trade deficit, but that isn’t going to happen.

Who else is there? The Economist tells us:

The only other possibility is governments. That is why the rich world’s private surpluses have been mirrored by equally vast public deficits. Last year the OECD’s governments ran a combined deficit of 7.9% of GDP, and this year it is likely to be only marginally less. Among the big economies, Britain’s deficit will be the largest, at 11.5%, with America not far behind. In an accounting sense, these eye-popping deficits are simply the counterpart of private surpluses. In an economic sense, their remarkable increase is less the outcome of government profligacy than private thrift.

This is pure Keynesian economics, as I explained in detail here. When savings increase and are not used for productive enterprises, they go to other countries, or wealthy people gamble them away on financial markets, enriching the partners at Goldman Sachs and the traders at JPMorgan Chase, but no one else.

http://firedoglake.com/2010/10/17/tax-the-rich-now/

[billlll]

1. important article

Thanks for posting it

[stray cat]

2. Rich: Anyone over the poverty level? or anyone who makes more than you or I?

[Lucky Luciano]

3. Rich is often defined as someone making 10x (or more) more than you do. nt

[bread_and_roses]

4. oh, please. try the top 1% with 33.8% of US wealth

While the bottom 50% owns 2.5% of the wealth in the nation. Let's not pretend we can't figure out what "rich" is for tax purposes:
http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1

[laughingliberal]

5. K & R nt

[billlll]

6. "the middle class has less than ZERO wealth

...after debt is subtracted from all assets. Of course, the lower class has no wealth.

The middle class family ends up on average OWEING $26,000. It has no wealth at all."

Heard on the radio ...NPR?..about two years ago.

[dkf]

8. Because they overspent on their house perhaps?

Buying too much house is the most financially devastating mistake a person can make.

[laughingliberal]

10. How about because when Wall Street & the Banksters crashed the economy, our businesses failed & our

jobs were lost?

Please keep defending them and blaming us working class folks who were destroyed by this as opposed to the rulers who are living it up on the bailout we provided for them. Makes it so much clearer who we are dealing with, here.

[dkf]

7. Is funding the federal government considered unproductive?

[Joe Chi Minh]

9. Fascinating information from a member of the audience in a UK TV show, the

other night.

He said if a wealth tax were to be levied on the richest 10% in the country of one fifth of their wealth, not only would the fabled deficit be eliminated, so would the whole of the national debt.

And here's a surprise that will knock everyone over (not): they'd still be rich beyond the dreams of avarice! But of course, you knew that, when that was put to the politicians on the panel, they wouldn't say the blindingly obvious:

"What a good idea! Why on earth didn't anybody think of it before. Who'd have guessed, just one fifth? And such a JUST solution, particualrly in the light of the remorselessly increasing depredations on the income levels of the working public. Not to speak of so many others being thrown on the mercies of public welfare, as a result of their jobs being exported to Asia"

[kelly1mm]

14. Interesting idea. Was this to be a one time wealth tax? Further,

how would the top 10% be calculated (wealth or income)? Does real estate count? Farms? Art? Or just cash or cash equivilents?Would the numbers work in the US as well?

[Joe Chi Minh]

19. I briefly wonder about the details, but since it's unlikely to occur, thought the

concept was interesting enough in itself.

Actually, I can't really see a problem in gauging it on the total worth of all their assets. That seemed to be what he had in mind. They might have had to sell some of their non-liquid assets, other than securities, in order to meet the amount of the levy.

[Fly by night]

11. Tax 'em ... or eat 'em.

[handmade34]

12. would have to be

marinated for a long time :)

[laughingliberal]

13. +1 nt

[diane in sf]

18. definitely rather tax 'em!

[Yeshuah Ben Joseph]

15. Ending the Bush tax cuts isn't nearly enough

At the very least, the Reagan tax cuts need to go as well. Better yet would be the JFK tax cuts. The Eisenhower era tax rate of 91% on the obscenely rich was just about right.

[hay rick]

16. +1000000

Meanwhile, the media frames the debate on tax policy as a contest in which the viable range of policy options extends from tax cuts for everyone as espoused by "Tea Party activists" to allowing the top marginal income tax rate to revert from 35% back to 39.6% by letting the Bush tax cuts expire for those in the top bracket. Someone will be sure to characterize the latter "extreme" as "socialist." The obvious middle-of-the-road position then becomes not cutting taxes and not allowing the Bush tax cuts to expire, at least, not yet.

[laurel46]

17. Higher taxes can support new jobs

This is a really great analysis of what is causing the current economic crisis to continue. It should be a no-brainer that the Bush tax cuts on the rich expire at the end of 2010. Yet, remarkably, many are arguing that the higher taxes on those families earning more than $250K per year would destroy jobs. In fact, those taxes would simply decrease the savings rate, because consumers and corporations at all levels are afraid of the future and saving like mad. The government could turn around and use tax revenues to build high-speed rail connecting major cities for example, thereby increasing the number of construction jobs. Or it could use the additional revenues to hire more teachers, so that the US is more competitive a decade from now.

Too bad Obama doesn't push this more vigorously! Democrats are losing the midterm elections because Obama seems to be out of touch with the pain of construction workers who have seen jobs vanish over the last three years. Obama needs to be making the connection between raising taxes and producing additional government jobs.