A little less than two weeks ago, I said:
This trick is used again and again to oppose raising taxes on one interest group or another, but the fact that raising taxes on a particular group won't fully solve the debt problem does not imply that the change in taxes for that group should be zero."
Here's Paul Krugman making the same point -- more forcefully with numbers -- and he shows that raising taxes on the wealthy makes a contribution to deficit reduction that is far from trivial. But even if the numbers were smaller, it still wouldn't imply that the change in these taxes should be zero. Even then, the wealthy "should be bearing a share of the burden" whatever that share might be:
Where The Money Is, by Paul Krugman: I’ve been getting the predictable hysterical reactions to today’s column. And it’s true — I’m a Sharia Jewish atheist Marxist who hates America! Bwahahaha!
But one thing actually worth reacting to is the assertion I keep getting that this is all a distraction, that even if we seized all the money of the top 0.1% it would make no difference to the fiscal outlook. Here’s a piece of advice nobody will take: before you make assertions about numbers, look at the numbers.
So, what we learn from IRS data is that in 2007, before the Great Recession depressed everyone’s income, the top 0.1% had around $1 trillion in taxable income. Now, even confiscating that whole sum wouldn’t eliminate our current deficit, especially since the top 0.1% already paid something like a third of that total in taxes. But then, no single action would close our current budget gap — not even the complete elimination of Social Security or Medicare.
What you want to ask is how much higher taxes on the super-elite might contribute to deficit reduction, as compared with the kinds of things politicians are actually proposing.
So let’s suppose that it was possible to collect an additional 10 percent of that super-elite’s income in taxes, to the tune of $100 billion a year. How would this stack up against the kinds of things on the table right now?
Well, consider the idea of raising the Medicare eligibility age — a move that would create vast hardship. According to the Congressional Budget Office (big pdf), when fully phased in this would save … $42 billion a year.
I could multiply comparisons, but the point is that higher taxes on the very rich could make a significant contribution to deficit reduction. They couldn’t eliminate the deficit on their own, but what could? There’s real money up there, and those making it should be bearing a share of the burden.