Wednesday, December 8, 2010

Uncle Sam Wants You, Mr. & Mrs. Rich

In a pragmatic move that has offended many in his own party, President Obama has agreed to hold his nose and approve a measure that would ensure that the Bush tax cuts are to be extended for everyone for another two years, even to the group earning a quarter million a year and up. One would think these people could afford to pay a few taxes, since it is a fact that 70 percent of the wealth of this nation is concentrated in the hands of a mere ten percent of the population, and those making $250,000 and up are closely aligned with the richest three percent of the population who collectively control about forty percent of total wealth.

With the exception of Switzerland, no other industrialized nation on earth has a greater concentration of wealth in the hands of so few, or so says Professor William Domhoff in his exhaustive study, Who Rules America: Wealth, Income and Power. Domhoff’s website offers an exhaustive accounting of the wealth of our nation as compared with the rest of the world.

The richest people in America do collectively pull their weight where income tax is concerned, however. The top ten percent of Americans, about 1.2 million people, pay close to sixty percent of all federal taxes, while the bottom 50 percent of Americans pay around four percent. In the last decade, the upper tiers of middle class taxpayers have edged up in tax burdens, while the burden on the poor has been lightened.

From a practical standpoint, however, if you pass along a tax cut for the individuals who have been paying a chunk, then you raise the federal deficit, and it’s amazing that the Republicans who came into this latest congress, voted in on a platform of cutting the deficit, have now succeeded in raising it.

Republicans insist, however, that taxing the ultra wealthy is wrong. Wealthy people are the engineers of job creation, they insist, even though the evidence we do have suggests otherwise. In 2004, for example, where the economy was rocking along, overall income increased by 27 percent, although 33 percent of the increase went to the top one percent of the population.

When the economy crashed, by July 2009, the median wealth of the nation dropped by an astounding 37 percent, while the top one percent of households took a much smaller hit, about 11 percent.

In the battle to keep the economy from further deteriorating , the government gets two dollars back for every dollar passed along to the jobless, who must spend every dime just to keep going. The wealthy may choose to put their tax cut in a savings account. This is the mantra of the US Congressional Budget Office, which is said to be non-partisan.

Obama went along with the Republicans this time around because the tax cuts for wealthy are tied to the extension of unemployment benefits to the hard core jobless, and other measures designed to stimulate the economy, or at least prop it up. Obama is wily enough to realize that Republicans couldn’t very well hand tax cuts to the Sag Harbor set, while leaving some fifteen million people jobless in the Great Recession without a dollar to buy a doughnut.

Let’s not forget people were thrown out of work by the fiduciary recklessness of the Wall Street traders, over-leveraged hedge funds, and the lame brains in government—including those in elected offices, not the least Mr. Oracle at the Fed--who were supposed to be minding the economic store. Cut benefits to the jobless now, it’s revolution time. Suppose a few million jobless people start a march on Washington? On TV this would definitely not look good.

This tax cut extension will last for another two years, which I believe is enough time for the wealthy to prove their mettle. Rather than handing money carte blanche to the Gucci bags, tax cuts for the wealthy should be done in the form of tax credits contingent on the creation of a new business or by putting someone to work.

Extending tax benefits in the form of credits to the rich would create a statistically valid paper trail. That way voters could make rational decisions about the trickle down theory of wealth, which has its vehement detractors.

Let the wealthy have their tax cuts, so long as they prove they are spending them. Hiring is hiring, whether it’s money spent on an additional trainer for the horse farm, a captain for the yacht that’s been put in mothballs, or a personal trainer to work off the anxiety created when one’s hedge fund collapsed. Uncle Sam Needs You, Mr. & Mrs. Rich, to get out on the front lines and put America back to work.