“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” - Warren Buffett, 2006The Sheriff of Nottingham is winning, driving Robin Hood deeper into the woods.
This is the era to “take from the poor and give to the rich.” Under attack are nutrition programs for infants and pregnant women, community health centers for the poor, school meals and teachers.
But as the Bush tax cuts were expiring, it seemed unthinkable to the new congressional majority that we raise the marginal tax rate a mere 4.6 percent on the extra money the wealthy make above their first $250,000. Even though the Bush tax cuts are the largest long-term contributor to our federal deficit.
Now in Arkansas comes House Bill 1002 aimed at giving even more relief to the struggling top 1 percent of wage earners. The bill proposes to eliminate income tax on capital gains.
Good news for maybe 10,000 of our nearly 3 million Arkansans. Take around $64 million away from the general fund - and the education, health and safety services it supports - and give it to the wealthy so they can invest in booming economies in China and India.
Why is income from capital gains so privileged that it can’t be taxed like other income? Capital gains is the profit from the sale of an asset, such as stocks, bonds, investments, vacation homes, art and other items when they are sold or liquidated. It’s mostly rich folks’ money. Current law already gives a big break to these transactions, exempting 30 percent of capital gains from taxes.
Our top income tax rate in Arkansas is 7 percent. With the current tax exemption, the effective tax rate on capital gains is a mere 3.3 percent. But HB 1002 wants to drop that to zero.
As if the wealthy needed more tax breaks. The big Reagan tax cuts of 1981 and the George W. Bush tax cuts of 2001 and 2003 went mostly to the top 4 percent of taxpayers. Some lowincome families actually had to pay more under Reagan. That’s when the big deficits were born. Our grandchildren will be paying for the Reagan-Bush tax cuts.
On Bill Clinton’s last day, the nonpartisan Congressional Budgetary Office estimated an annualsurplus of more than $800 billion a year between 2009 and 2012. But George Bush came to town like a teenager with a credit card with no maximum. His tax cuts and unfinanced wars created a $2.6 trillion deficit by the end of 2008. Then an unregulated speculative financial system spun us into recession.
One day we’ll have to pay for Mr. Bush’s credit card.
Going back to more historic tax levels would help.
During the Eisenhower years, if you made over $400,000, your income above that amount was taxed at 91 percent. The economy didn’t seem to suffer too much from that. Democrats lowered it to 70 percent on income above $200,000 in 1964, and there it stayed until Mr. Reagan in 1982. He dropped the top marginal tax rate from 70 percent to 50 percent and eventually to 28 percent. Voila. The Deficit.
George H.W. Bush faced a growing deficit and did what a grown-up should do, he raised taxes, though modestly. The top rate went to 31 percent. Mr. Clinton brought the rate back up to 39.6 percent, and balanced the federal budget. Then the younger Bush came to town.
He cut taxes, especially for the wealthy, and raised spending. He went to war, and didn’t raise a single dollar of special appropriations to pay for it.
Just put it all on the credit card. When Mr. Bush added needed prescription drug benefits for seniors, he supported the expensive version written by the pharmaceutical industry, and then he didn’t pass any money to pay for it. Put it on the credit card.
Finally the subprime mortgage crisis and the Wall Street bailout, signed by Mr. Bush, supported by Mr.
Obama. It’s a deep hole. But a hole we could get out of if the people who benefited the most had their tax levels restored closer to where they used to be. Sooner or later we’ll have to pay for Mr. Reagan and Mr. Bush. The tax breaks they gave the rich didn’t trickle down. It just dammed up.
LOWELL GRISHAM IS AN EPISCOPAL PRIEST WHO LIVES IN FAYETTEVILLE.
Opinion, Pages 13 on 03/13/2011