20-per­centers will ul­ti­mately have to pay their fair share

Austin American-Statesman - - BALANCED VIEWS - Fs­tock­man@globe.com


has been the Year of Per­cent­ages. It started off with the Oc­cupy move­ment, which de­clared “we are the 99 per­cent,” as they railed against the 1 per­cent. Then, at a pri­vate fundraiser, Mitt Rom­ney bad-mouthed the 47 per­cent who don’t pay fed­eral in­come taxes. Then Rom­ney lost to Pres­i­dent Barack Obama, who cam­paigned on a pledge to raise taxes on the top 2 per­cent — in­di­vid­u­als earn­ing more than $200,000 a year or cou­ples earn­ing more than $250,000 — while leav­ing the rest of us alone.

As the year draws to a close, Repub­li­cans are fight­ing that plan. Obama is at an im­passe. If they fail to reach a deal, taxes will au­to­mat­i­cally go up for ev­ery­one. Which brings me to per­haps the most im­por­tant — and least talked about — group of all: the 20 per­cent.

I hadn’t thought much about 20-per­centers un­til a tax-guru friend ex­plained Obama’s predica­ment to me a few months ago. Obama was cam­paign­ing on a plat­form of tax­ing the ul­tra-rich, which sounded great to 98 per­cent of vot­ers.

“But there’s a prob­lem,” my friend said. “Most of the money in the coun­try is still, thank­fully, in hands of the peo­ple mak­ing be­tween $100,000 to $300,000. To really ad­dress our longterm fi­nan­cial is­sues, you ei­ther have to raise taxes on them — the top 20 per­cent — or ad­dress en­ti­tle­ments in a se­ri­ous way. Or both.”

Darn. I wish squeez­ing more money out of the very rich would solve all our fis­cal woes, but it turns out that there just aren’t enough of them. Fewer than 3 mil­lion tax­pay­ers re­side in their lofty ranks. Rais­ing taxes on them would help a lot. But in the long run, we’d still come up short. Maybe half a tril­lion dol­lars short. Mean­while, 28 mil­lion tax­pay­ers ex­ist in the top 20 per­cent. You could call this group the up­per-up­per-mid­dle class. The quasi-rich. Or the low­er­wealthy. (You 20-per­centers out there prob­a­bly don’t feel like fat cats, but in a coun­try with a me­dian house­hold in­come of $50,000, you are.)

Tax­ing the very rich can work for now. But in the long term, it is im­pos­si­ble to en­vi­sion a so­lu­tion that does not in­clude 20-per­centers paying more taxes, work­ing more years, or tak­ing less in Medi­care or So­cial Se­cu­rity. “We can’t solve all our fis­cal prob­lems just from the top 2 per­cent,” said Marc Gold­wein, se­nior pol­icy di­rec­tor at the non­par­ti­san Com­mit­tee for a Re­spon­si­ble Fed­eral Bud­get. I sus­pect bud­get trolls at the White House know this. But no­body in Washington really wants to ad­mit it.

Maybe that’s the beauty of the po­si­tion that Obama is in now. He doesn’t have to touch the 20 per­cent, the group that will groan the loud­est. If the Repub­li­cans con­tinue to re­ject his plan to tax the very rich, all he has to do is sit back and watch the rates rise mag­i­cally on their own.

Repub­li­cans, many of whom have signed no-new­tax pledges, have their own per­verse in­cen­tive to let tax rates go up. If they strike a deal with Obama to raise taxes now, the might suf­fer some Grover Norquist curse. But if they let the au­to­matic tax hike ma­chine kick in on Jan. 1, they could strike a deal the next day to lower the rates.

Who knows whether our lead­ers will make a grand bargain on taxes and spend­ing be­fore the Jan. 1 dead­line? It would be far bet­ter to strike a deal now, be­fore the mar­kets lose faith in us and our econ­omy heads down Ni­a­gara Falls in a bar­rel. But it will be eas­ier to get a deal later.

Maybe, just maybe, the plunge would be good for us. Maybe it would sober our lead­ers up enough to for­get their cam­paign prom­ises and come up with a deal that is good for the coun­try, not just their own po­lit­i­cal fu­tures.

Most an­a­lysts say the ideal plan would min­i­mize the eco­nomic pain in the short run while the econ­omy is still weak, but crank up shared sac­ri­fice later, af­ter the econ­omy re­cov­ers.

And when I say shared sac­ri­fice, I do mean shared. Not just by the very rich, or the very poor, but you, too, 20-per­centers.

The mil­i­tary’s high­est court ousted the judge in the Fort Hood shoot­ing case this week and threw out his or­der to have Maj. Ni­dal Hasan’s beard forcibly shaved be­fore his court-mar­tial. Fort Hood of­fi­cials said pro­ceed­ings in the case will re­sume af­ter a new judge is ap­pointed by the Army’s high­est le­gal branch.

Abril Dav­ila: This is shame­ful for the honor of our mil­i­tary and for the fam­i­lies af­fected.

Michelle Hen­der­son: That is ridicu­lous! The gen­tle­man is still (how­ever dis­graced) a mil­i­tary mem­ber and should be held to the same stan­dards!

Abril Dav­ila: Yes! He should be tried as a mem­ber of the mil­i­tary, not as a civil­ian. He acted well within the scope of his mil­i­tary du­ties in ev­ery as­pect con­nected to the case.

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