Taxes: Should the rich—and the middle class—pay more?

Even though Standard & Poor’s has warned investors to be wary of U.S. Treasury bonds, the rancorous arguments in Washington over taxes and spending continue.

“Let’s take a hike,” said Paul Krugman in The New York Times. The ongoing, rancorous debate in Washington about our deepening fiscal crisis has omitted one very obvious reality: To be serious about balancing the federal budget, we have to raise taxes—and not just on the rich. Conservatives have made dogma of the notion that taxes must never, ever go up. But let’s look at some hard facts. The Bush tax cuts are largely responsible for the trillion-dollar deficits the U.S. has been running. If we simply let those tax cuts expire for everyone in 2012, the deficit would fall dramatically right away, and over 10 years, that would trim $3.3 trillion from the national debt.

Sadly, “the American ruling class” is bitterly fighting any tax increase, said E.J. Dionne Jr. in The Washington Post. In 1980 the wealthy paid an average of 34.5 percent of their incomes in taxes; by 2008, that figure had dropped to 23.3 percent. With the nation in dire fiscal straits, “the wealthiest people in society have a duty to pony up more for the very government whose police power and military protect them, their property, and their wealth.”

“Taxes aren’t the answer,” said the New York Post in an editorial. Contrary to the liberal myth that the wealthiest Americans aren’t paying “their fair share,” the richest 1 percent of Americans currently contribute a whopping 32 percent of total tax revenue, up from 27.5 percent in 2007. The bottom 45 percent in terms of income pay no income tax whatsoever. Making “the rich” shoulder an ever-greater share of the tax burden would be morally repugnant, as well as counterproductive, because it would act as a drag on the economic recovery. America spent its way into the current crisis, and only radical, long-term cuts in our spending—particularly on health care—are going to “rescue the nation from flooding red ink.”

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We can’t possibly cut our way out of this crisis, said David Stockman in The New York Times. Unless voters accept 20 percent cuts in services, defense, and benefits, which they won’t, we need far more revenue. President Obama has limited his call for tax increases to those making more than $250,000 a year—just 2 percent of wage earners. Under his plan, the U.S. would run deficits of hundreds of billions every year, indefinitely. Rep. Paul Ryan’s Republican alternative permanently extends the Bush tax cuts while savagely cutting benefits for the poor and the elderly—and yet he, too, still doesn’t come close to balancing the budget. With Standard & Poor’s already warning investors to be wary of U.S. Treasury bonds, this is no time for a “class war” between the rich and the middle class. Most of us must pay higher taxes, and soon, or face “a fiscal conflagration.”

Benefit cuts must be part of the solution, said Ross Douthat, also in The New York Times. The way Medicare is now structured, seniors receive far more care than they paid for during their working years—and that gap will continue to grow. It’s simply not fair to burden struggling working families, entrepreneurs, and other job-creators with the entire medical costs of aging baby boomers. As Ryan has suggested, the elderly must pay more for their own health care, and all social benefits must be cut. It will be painful, to be sure, but the alternative is ruinous taxes on work and success, destroying “the fundamental promise of America itself.”

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