According to a new study released by Oxfam, the rich have made tremendous gains in the past several years — to the point where, analysts predict, by 2016 the world’s wealthiest 1% will control more than 50% of the world’s wealth. The 80 wealthiest people in the world, alone, own $1.9 trillion.
In the United States, the top 1% control more than one third of the nation’s resources. Two out of three Americans disapprove of the current distribution of income and wealth. They believe that our economy and government unfairly favor the rich.
One of the major contributors to rising inequality is our tax system. Raising taxes on the very wealthy is an idea that appeals to many Americans, including the middle class and poor.
In his State of the Union Address on Tuesday night, President Barack Obama will attempt to address this serious issue. He will propose a set of policies to increase taxes paid by big business and the wealthiest Americans and provide tax cuts and credits for America’s middle class. Prominent economists think that the government needs to raise taxes on corporations and top earners to benefit the nation as a whole.
Republicans, meanwhile, are already apoplectic about President Obama’s plan. One of the more curious phenomena about Republicans is that their economic agenda is entirely independent of the facts of the moment. So when the economy is strong, Republicans demand tax cuts for the rich. When the economy is weak, Republicans demand tax cuts for the rich. When the economy is recovering, Republicans demand tax cuts for the rich.
But the massive tax cuts for the wealthy under President George W. Bush didn’t stave off the recession and arguably precipitated or worsened the fall. Moreover, the nonpartisan Congressional Research Service has conclusively determined that tax cuts for the rich do not spur economic growth. To the contrary, there’s evidence that tax cuts hurt growth. In fact, the only thing tax cuts unequivocally do, according to the study? Tax cuts increase economic inequality.
President Obama is also proposing fees to make it more costly for the biggest financial companies to excessively borrow money. Post-recession, corporate profits have soared, but wages for Americans workers have not. Once upon a time, corporate profits used to correlate more closely with economic growth and wage prosperity for average Americans. In other words, we used to do well all together.
But increasingly, especially in the past decade thanks to Republican tax cuts and deregulations, corporations have succeeded while ordinary Americans have fallen behind. How else do we explain the stock market hitting record highs while many Americans are still out of work? This runaway train of inequality won’t solve itself. We need government action — action the majority of Americans strongly support.
In his State of the Union address, President Obama will argue for closing the “trust fund loophole,” which, according to the White House, is one of the biggest tax loopholes plaguing our economy and lets the wealthiest Americans avoid hundreds of billions in taxes every year, money that should be helping build roads and schools that help us all.
President Obama will also propose raising the top capital gains and dividend rates back to what they were under President Ronald Reagan, which clearly Republicans once agreed was a sufficient level. And to hedge the sort of gambling that puts our entire economy at risk, President Obama will propose a fee on the nation’s largest financial firms in proportion to how heavily they borrow and leverage.
These modest measures will help us reinvest in America’s middle class and strengthen our economy for everyone’s benefit. Among the President’s proposals is a $500 tax credit for second earners in families where both spouses work, a proposal that will benefit 24 million American families. The President will endorse tripling the child care tax benefit, to help 5.1 million American families cover the cost of child care. President Obama will provide students with up to $2,500 a year toward the cost of college and make the first two years of community college free. And President Obama’s plan includes giving 30 million more workers the opportunity to easily and automatically save for retirement through their employers.
While American voters across the board think that Democrats help the poor, middle class and rich fairly equally, 69% think Republican Party policies favor the rich. Even conservative voters are concerned about rising inequality.
The political pressure is on the GOP to prove they’re not just the party of the 1%. There are some encouraging signs that Republicans believe tax reform should include increasing the share paid by the wealthiest Americans. President Obama’s plan is a modest and effective set of policies that sensible Republicans can support.
The definition of insanity is doing the same thing over and over again and expecting different results. We’ve cut taxes on big businesses and the rich to near historic lows. Those tax cuts have only helped corporate profits and yacht sales. It’s time that our economic policy helps all Americans. In this economic and political climate, not supporting basic tax fairness is insane.