While debate rages in the United States on whether to allow George W. Bush’s tax breaks for the wealthiest Americans to expire, Hillary Clinton spoke Thursday in Brussels before a planned Friday meeting of "Friends of Democratic Pakistan", calling for Pakistan to expand its tax base. Clinton’s call for Pakistan to force the rich to bear their fair share of the tax burden seems to be a message that the US should heed, as well.
“It’s absolutely unacceptable for those with means in Pakistan not to be doing their fair share to help their own people while taxpayers in Europe, the United States and other contributing countries are all chipping in,” Clinton said.
“The most important step Pakistan can take is to pass meaningful reforms to expand its tax base,” Clinton said in a public statement as she joined the European Union’s foreign policy chief Catherine Ashton in pledging continued assistance.
“The government must require that the economically affluent and elite support the government and people of Pakistan,” she added.
This seems to be a really strange call to be originating out of Washington at a time when Republicans have managed to frame the debate over the expiration of George W. Bush’s tax cuts as a "culture war" that is aimed at redistribution of wealth. A Wednesday Washington Post article rehashes this framing, but for those with the wherewithal to read far into the article, there is a section that places current tax rates on the rich into perspective (even while continuing the "redistribution of wealth" framing):
Redistributing wealth is a primary function of the U.S. tax code. Until the early 1960s, the top income tax rate hovered around 90 percent. It has since fallen fairly steadily, dipping to a low of 28 percent during the Reagan administration.
Soaring deficits prompted presidents George H.W. Bush and Bill Clinton to reverse the trend, pushing the top rate to 39.6 percent. But in 2001, George W. Bush pushed it back down to its current level of 35 percent.
So, even though the middle class in the US was arguably at its most affluent and its most upwardly mobile in the early 1960′s, we are fighting over very small changes in tax rates for the rich that are only a little over a third of the rate that allowed such a prosperous time for the middle class. Now, with the middle class only downwardly mobile, one would think that more attention would be paid to getting back to the conditions that allow upward mobility. With this background on tax rates then and now, it is very informative to watch the Austan Goolsbee whiteboard video above. Imagine the size of the circle that would be involved if we were debating more realistic tax rates for the rich. Doubling the tax rates at the highest brackets, instead of merely increasing them about four percent, would lead to huge revenue increases for the government and make deficits a distant memory.
Sadly, though, the Post relies on "some influential economists" and "many analysts" to predict the most likely short-term outcome of this debate:
With the recovery flagging and some influential economists urging lawmakers not to raise anyone’s taxes, many analysts expect lawmakers to extend all the cuts, if only temporarily. One potential compromise: Democrats could offer a one-year extension of tax cuts for the rich in exchange for GOP support for additional measures to spur hiring, such as a payroll tax holiday or a package of business tax breaks that Obama recently proposed.
And, of course, the "only temporarily" part of extending the Bush tax cuts for the rich will somehow keep getting extended if the Obama administration continues along its current course. Even though Obama is capable of making the same excellent case as Goolsbee does for why it is important for the rich in the United States to pay their fair share of taxes, when push comes to shove, Obama will back down in the face of Republican criticism and give the rich everything they demand.