Wednesday, May 4, 2011

Our view: If you're serious about the deficit, you can't spare the middle class

Wednesday, May 4, 2011

There's an old saying in politics that goes: "Don't tax you, don't tax me, tax that guy behind the tree."

The expression speaks to politicians' endless search for painless ways to fund government. But it might hold especially true if the guy behind the tree owns the tree, the land around it and a stately mansion as well.

To many Americans, the wealthy are a prime target for higher taxes. In numerous polls, majorities oppose virtually all ideas for addressing the deficit except hiking taxes on the rich. In a recent USA TODAY/Gallup survey, for example, three-fifths of respondents favored hiking taxes on people making $250,000 or more a year.

To some degree, that is appropriate. America is at levels of wealth concentration not seen since the roaring 1920s. The top 1% have accounted for more than 30% of the nation's wealth since the late 1990s. The wealthy should pay more taxes than they've been paying.


But the fact is, you can't eliminate a $1.5 trillion deficit simply by soaking the rich. Not only would that be unfair and economically destructive, there simply aren't enough of them to raise the kind of money that's needed.Yet the political unwillingness to acknowledge that the middle class can't be left off the hook is striking and disconcerting.

President Obama is the leading offender. He continues to insist that he can cut trillions of dollars of red ink over the next 10 years without hiking taxes for anyone but the wealthy and by eking out greater efficiencies in benefit programs such as Medicare.


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Republicans, for their part, might be willing to ask more from the middle class but do not appear inclined to admit it. The House-passed budget, authored by Rep. Paul Ryan, R-Wis., would make substantial cuts in Medicare. But Ryan cloaks these cuts in rhetoric about how competitive markets (virtually non-existent in health care) would hold down costs. And most Republicans continue to pretend that lack of revenue isn't part of the debt problem.

The painful truth is that tax hikes and spending cuts are both necessary to rein in the nation's runaway deficits. And if both need be on the table, then the middle class can't be spared. The wealthy are responsible for only a small portion of the costs for programs like Medicare and Social Security. And they already pay a large portion of the taxes.

The top 1% of wage earners pull in about 20% of the nation's household income and pay 38% of all individual income taxes, according to the National Taxpayers Union. (Doubling their taxes would raise about $350 billion, or less than one-fourth of this year's deficit.) The top 10% earn 46% of income and pay nearly 70% of income taxes.

Meanwhile, 47% of all households pay no federal income taxes at all, the IRS reported last year, a number so high that it undermines notions of shared sacrifice and mutual investment in the core functions of government.

At the very least, any budget deal should allow the so-called Bush tax cuts, passed in 2001 and 2003, to expire, and not just those that affect the wealthy. Doing so, preferably in concert with tax simplification, would account for much of the $4 trillion in debt reduction that budget experts say is the minimum needed to avert economic disaster.

None of this would be easy. But the best way to go about it is by telling the truth. Politicians can neither run nor hide from the issue. And they certainly can't count on the proverbial man behind the tree.

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