Taxes on the affluent should be increased.

Amid the worst financial cataclysm since the Great Depression, one factor remains constant: discussions in the Beltway are centered around deficit reduction and what can be "slashed" from the budget. They speak of short-term pain in order to prevent long-term pain. But who bears the brunt of that pain? The answer is simple: the poor, the middle class, and those struggling to make it. The wealthy, who have done better than ever -- with corporate profits at all-time highs, with the stock market continuing to rise, with taxes lower than they've been since 1950 -- are not asked to bear any of this pain. And why is that? Because many of them -- the Koch brothers, Exxon executives, et al -- are lobbying politicians for breaks and preferences, leading many to claim that we cannot engage in a meaningful discussion on whether to increase taxes for the affluent because, in so doing, we would "be creating too much uncertainty in the marketplace" and "strangling job creators." I'll be making the case that neither of those are so. First, taxes are at historic lows as of now, and many wealthy individuals pay significantly lower than do middle-income and poor individuals. Take Mitt Romney, for instance: his income comes from investments, and thus he can pay a rate as low as 14% on millions of dollars in earnings. Is that fair when a family earning $50,000 is paying a rate of roughly 23%? But this is fair, says Mitt and friends, because the low rate provides for them an "incentive to invest." Let me pose the obvious question to you, though: if we took the advice of Ronald Reagan and Art Laffer -- yes, I went there -- and taxed capital gains as regular income, would you hold your money? Would you funnel more of it to the Cayman Islands or Switzerland? Doubtful. As Warren Buffet pointed out, increases in the capital gains rate pose no deterrent to the willingness to invest. The chief factor is -- as business surveys even point out -- is demand. And right now, demand is struggling because the economy is struggling. The engine of the economy is the demand function -- consumers of modest incomes who spend roughly 100% of what they earn because they have to in order to survive, as opposed to their affluent counterparts who are more apt to save any increase in what they earn. But, say conservatives, saving is a good thing: a dollar saved is a dollar invested, so goes Say's Law. This is also a fallacy, rooted in an assumption. Investment decisions, as I stressed, are rooted in the demand for the product. Without demand, it doesn't matter how many resources companies and investors have -- they're simply going to horde them until the economy improves (or invest them overseas). In fact, executives are sitting on roughly $2 trillion in capital that they're not investing. Tax rates are at all-time lows. Why aren't they investing that money? Because doing so will create a "glut" of capital. With zero-bound interest rates, it is actually a good investment now to simply hold cash. Finally -- since I would like to leave a number of topics fairly open at this point in the discussion -- I would like to tackle the most commonplace arguments for tax cuts: the notion that they have created jobs. Here's the truth: rates were as high as 91% in the three decades following World War II, and yet we saw the most prosperous economy in American history. But wait, conservatives say: No one paid 91%! While they're partially correct, effective rates were as high as 56-58% -- significantly higher than they are now. Bill Clinton, again, raised taxes, and oversaw a booming economy. But as Ronald Reagan, George W. Bush, and even Barack Obama cut taxes, the U.S. economy stagnated; in the case of Reagan and Bush, deficits spiraled out of control, and Reagan even raised taxes 11 times. I thought the point of the Laffer curve was that, if taxes are cut, the federal government would take in more revenue. Why didn't that happen? Because the rate would need to be as high as 70-80% to find ourselves on the downward-sloping portion of the Laffer curve. Now, rates are nowhere close to that point. So, let me make my position clear: I do not believe that marginal rates should be returned to what they were under Einsenhower. Simply, I'd like tax rates that allow the federal government enough revenue to invest in roads, bridges, highways, education, health care, job training, research, green energy, etc -- all the things that in which we collectively invest in order to create a better society -- in order to create jobs and prop up a deeply depressed economy. What the actual rate ought to be is not of much concern to me, and I can't say I have a figure offhand. The fact of the matter is, we know from the data and from history that the wealthy are not going to take their businesses elsewhere; that the economy will not shed jobs; that there will be no calamity. With that said, I welcome any challengers, and eagerly await a vigorous discussion.