Raise Taxes on the top 1 percent of income earners

First, I would like to lay out the criteria by which I will fulfill my burden. I will articulate the facts of my case and demonstrate how it fulfills these three criteria in the later rounds due to space constraints. 1. Utilitarianism Utilitarianism is "the belief that a morally good action is one that helps the greatest number of people" (1). I will be arguing that raising taxes on the top 1 percent of Americans will provide the maximal good to the vast majority of the country. 2. Fairness I will be making the case that it simply isn"t fair that so much wealth and influence has been amassed by the top 1 percent of Americans, and a more equitable distribution of wealth, as we had in the 40s, 50s, and 60s, would be preferable. 3. Economic Sense This criterion will be the crux of my case. I will argue that not only is income and wealth inequality both unfair and immoral, but economically toxic. Therefore, it is in our economic interest to reduce it, one way of which is to raise taxes. C1) The Tax Cut Deception We"ve been told that we must cut taxes for the "most productive" because they are the ones who create the jobs. This, however, is a bold-faced lie. There is a wide body of academic research demonstrating that this is false. S1) Tax Cuts Don"t Work I will first point out a paper from the Congressional Research Service, examining tax rates since 1945,which proves my point. Note the conclusion: "The results of the analysis in this report suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top statutory tax rates appears to be uncorrelated with saving, investment, and productivity growth. " (2) The conclusion has been echoed in several other papers. Note this paper from Andrew Fieldhouse: "Analysis of top tax rate changes since World War II show that higher rates have no statistically significant impact on factors driving economic growth"private saving, investment levels, labor participation rates, and labor productivity"nor on overall economic growth rates. " (3) Fieldhouse provided some further insight, giving us an idea of what the tax rates would need to be for there to be any negative ramifications for economic growth: "Recent research implies a revenue-maximizing top effective federal income tax rate of roughly 68.7 percent. This is nearly twice the top 35 percent effective ordinary income tax rate that prevailed at the end of 2012, and 27.5 percentage points higher than the 41.2 percent rate in 2012. This would mean a top statutory income tax rate of 66.1 percent, 26.5 percentage points above the prevailing 39.6 percent top statutory rate. " (3) As he explains, tax rates could be much higher then they are today, and the economy would continue to grow. Fieldhouse draws largely on Diamond and Says, who weigh in on what the optimal tax rates would be: "[T]he optimal top tax rate using the current taxable income base. .would be `4;* = 1/(1 1.5. " 0.57). = 54 percent, while the optimal tax rate using a broader income base with no deductions would be `4; * = 1/(1 1.5. " 0.17). = 80 percent. Taking as fixed state and payroll tax rates, such rates correspond to top federal income tax rates equal to 48 percent and 76 percent, respectively. " (4) Former Labor Secretary Robert Reich has also weighed: "During periods when the very rich took home a larger proportion " as between 1918 and 1933, and in the Great Regression from 1981 to the present day " growth slowed, median wages stagnated and we suffered giant downturns. It"s no mere coincidence that over the last century the top earners" share of the nation"s total income peaked in 1928 and 2007 " the two years just preceding the biggest downturns. " (5) As we can see, there is no reason to believe that cutting taxes is at all economically beneficial. S2) Historical Precedent Let's review this graph from Business Insider shedding light on what the historical precedent of statutory tax rates in this country (6): Of course, it would be remiss to not to key on, also, on effective tax rates: As we can see, effective as well as marginal tax rates on the affluent have been falling. In fact, they have never been as low as they are now at any time in the post-WWII era. Why, then, must we have more tax cuts? If they haven't worked before, and aren't working now, why must we buy into the myth that we must again pursue them? In fact, tax rates from 1945 to 1980 never fell below 70 percent, and were in fact as high as 92 percent, and yet the economy boomed. How can that be the case if we are to slash tax rates in order to generate prosperity? The claim is a flat-out lie. S3) Impact on Economic Inequality Now that we understand the precedent of tax rates, let's review these rates in context: How about we examine relative changes in wealth distribution from about the 1980s onward? This is a graph from the Stanford Center on Poverty and inequality: As we can see, right around the Reagan revolution, the very affluent began to do extremely well, whereas others began to do progressively worse. For instance, productivity has increased 80 percent from 1979 to 2009, but median wages have been nearly flat and in fact have fallen since the crisis according the U. S. Census Bureau. Since the recovery of 2009, 95 of income gains went to the top 1 percent. The Fieldhouse paper, the paper by Diamond and Saez, the paper by the CRS and much more attribute tax cuts to inequality. A large reason for this, as Thomas Pikkety has written about, is that capital income has been concentrated at the top, allowing the very affluent not only to escape taxation -- since capital gains are taxed at a lower rate than annual income -- and accumulate wealth much faster than people who spend almost everything they earn (i. e. , poor people). Examine the following graph (8): What this shows us it that in recent years capital income -- rates for which have been slashes significantly over the past 15 years, and which has long been taxed at lower rates than earned income (why, for instance, Mitt Romney only paid about a 14 percent tax rate) -- has been increasingly concentrated at the top of the income spectrum. Pressman elucidates Pikketty's case as to why this is a problem and why we should care (9): "Piketty makes the case that inequality tends to rise in developed capitalist economies as a result of three empirical facts. First, a slow annual growth rate (1 percent, maybe close to 2 percent). Second, returns on wealth of around 5 percent per year (as has existed over long stretches of history). And third, the fact that the distribution of wealth is more concentrated than the distribution of income. This being the case, it follows that those with lots of wealth will see (on average) their annual gains (or their income) rise around 5 percent each year, while those without much wealth will see their incomes (on average) grow only 1 percent or so annually (the growth rate of the economy). Income inequality rises as does wealth inequality. " There's much more to the argument, however. Income inequality is the United States is far worse than the vast majority of developed countries, worse only than Chile, Mexico, and Turkey, according to a 2013 report by the OECD (10). Examine the following graph: Let's examine these figures in context, though. How does this relate to tax rates? Simple. Examine the following graph (11), also from the OECD: The only two countries with lower tax burdens -- note that these are a representation of tax revenues as a percentage of GDP than the US are Chile and Mexico; note that that Turkey's tax burden is only half a percentage point above the United States. Andrea Louise Campbell writes the following: "Compared with other developed countries, the United States has very low taxes, little redistribution of income, and an extraordinarily complex tax code" (11). Now, why should we care about this? There certainly are moral arguments, and appeal to Rawlsian ethics or utilitarianism could conceivably balance out my case. However, there are broader problems: we're all worse off collectively due to income inequality. As the following graph demonstrates, there is a negative correlation between income inequality and GDP per capita (12): Why is this so? Nobel Laureate Joe Stiglitz explains (13). He argues that it hinders tax receipts, the middle class's ability to spend to restore economic recovery, stifles innovation by promoting asymmetries as it pertains to educational attainment, and it is consistent with more frequent boom-and-bust cycles. For the final point, he noted that income inequality wasn't as bad as it is today since the 1920s, which culminated in the Great Depression. I'm now out of character space. Back to CON. Sources: (1) . http://tinyurl.com... (2) . http://tinyurl.com... (3) . http://tinyurl.com... (4) . http://tinyurl.com... (5) . http://tinyurl.com... (6) . http://tinyurl.com... (7) . http://tinyurl.com... (8) . http://tinyurl.com... (9) . http://tinyurl.com... (10) . http://tinyurl.com... (11) . http://tinyurl.com... (12) . http://tinyurl.com... (13) . http://tinyurl.com...