Robert Reich on Tax Reform

Former Secretary of Labor; Democratic Challenger MA Governor


CEO pay is tax deductible, unlike corporate investments

The share of corporate income devoted to compensating the five highest-paid executives of large public firms went from an average of 5% in 1993 to more than 15% in 2013. Not incidentally, this was money corporations could have invested in research and development, additional jobs, or higher wages for average workers. In addition, almost all of it was deducted from corporate income taxes, which means the rest of us paid more taxes proportionally in order to make up the shortfall.

One justification is that CEOs and top executives are worth their soaring pay because the stock market has also soared during these years. But, the stock market surge has had a great deal to do with changes in the rules that have favored big companies and major banks--platforms and networks (and declining market power for average workers, who no longer have strong unions negotiating on their behalf).

Source: Saving Capitalism, by Robert Reich, p. 98-100 , May 3, 2016

Estate tax prevent aristocracy of wealth populated by heirs

In Bernie Sanders' view, estate taxes are fair--and necessary--to prevent what former Labor Secretary Robert Reich calls, "an aristocracy of wealth populated by heirs who don't have to work for a living yet have great influence over how the nation's productive assets are deployed."

Both Bernie and Secretary Reich believe that if the richest families accrue massive fortunes over time, they will control more and more of the economy--even if they aren't working.

Source: 2016 grassroots campaign website FeelTheBern.org, "Issues" , Sep 5, 2015

Raise tax on inherited wealth for the very rich

At a time of historic economic inequality, it should be a no-brainer to raise a tax on inherited wealth for the very rich. Yet there's a move among some members of Congress to abolish it altogether.

Today the estate tax reaches only the richest 2/10 of 1%, and applies only to dollars in excess of $10.86 million for married couples or $5.43 million for individuals. That means if a couple leaves to their heirs $10,860,001, they now pay the estate tax on $1. The current estate tax rate is 40%, so that would be 40 cents. Yet according to these members of Congress, that's still too much.

Our democracy's Founding Fathers did not want a privileged aristocracy. Yet that's the direction we're going in. The tax on inherited wealth is one of the major bulwarks against it. That tax should be increased and strengthened.

It's time to rein in America's surging inequality. It's time to raise the estate tax.

Source: RobertReich.org 2015-16 voting recommendation on HR1105 , Jun 4, 2015

Raising estate tax to 1990s level means $448B in new revenue

Abolishing the estate tax would give each of the wealthiest 2/10 of 1%of American households an average tax cut of $3 million, and the 318 largest estates would get an average tax cut of $20 million. It would also reduce tax revenues by $269 billion over ten years. The result would be either larger federal deficits or higher taxes on the rest of us to fill the gap.

This is nuts. The richest 1% of Americans now have 42% of the nation's entire wealth, while the bottom 90% has just 23%. That's the greatest concentration of wealth at the top than at any time since the Gilded Age of the 1890s.

Instead of eliminating the tax on inherited wealth, we should increase it--back to the level it was in the late 1990s. Adjusted for inflation, the estate tax restored to its level in 1998 would begin to touch estates valued at $1,748,000 per couple. That would yield approximately $448 billion over the next ten years.

Source: RobertReich.org 2015-16 voting recommendation on HR1105 , Jun 4, 2015

Taxing the rich does not slow the economy

Robert Reich [says we should not] listen to Wall Street--taxing the rich is good for the economy. Reich skewers the oft-repeated idea that raising taxes on so-called job creators will hurt the economy: "The reality is this: There is no correlation at all between raising taxes on the rich and slowing the economy," Reich says. He cites the period between World War II and 1981, when taxes were higher and the economy grew, as well as the economy's growth under President Clinton, who raised taxes.

Of the Wall Street CEOs who are lobbying Congress to lower corporate taxes, Reich comments: "The idea that somehow they need more cash is absurd."

Source: CommonDreams.org "Current TV" interview of Reich , Nov 29, 2012

Estate tax pushes tax policy in regressive direction

The distressed middle class is likely to take more notice of the regressive direction of tax policy. Although Democrats raise taxes on the rich more readily than Republicans do, they provide generous exceptions. In 2001, Pres. Bush gutted the estate tax by dramatically increasing the amount of money that could be passed on to heirs tax free (from $1 million in 2001 to $3.5 million in 2007, or $7 million per couple), and then scheduling its repeal in 2010. But rather than restore the tax and return the exemption to $1 million, the Obama administration, abetted by congressional Democrats, agreed to allow wealthy couples to transfer to their children up to $10 million tax free. Only the richest 2,000 American families benefit from this change, but it is expensive. Between 2012 and 2021, if extended, it will drain $544 billion from the federal treasury. If federal expenditures don't drop, that $544 billion will have to come from the rest of us.
Source: Aftershock, by Robert Reich, p.112 , Apr 5, 2011

Property tax & sales tax shouldn't replace income tax

Meanwhile, starved of revenues, state and local governments have been increasing sales taxes. Such taxes fall disproportionately on the middle class and the poor, who devote a larger portion of their incomes to purchases than do the wealthy. (Astonishingly, some Washington politicians and pundits are pushing what amounts to a national sales tax to replace the federal income tax.) At the same time, local governments are relying to an ever greater extent of property taxes, which fall disproportionately on middle-class taxpayers, who have most of their assets in their homes, rather than on the wealthy, whose assets are mainly in financial instruments.
Source: Aftershock, by Robert Reich, p.113 , Apr 5, 2011

Bush tax cuts for rich are bad for the economy

Q: Is it a good idea to increase taxes during rough economic times?

A: It is a good idea to cut taxes on the people who are going to spend the additional tax revenues and those are people in the middle class. You have to have some revenues to keep the government going and the Bush tax cuts for the very wealthy, people over $750,000 a year, are not great for the economy because the wealthy already have as much money as they need, you know. That’s the definition of being very wealthy. You’re not going to spend your additional tax cuts. Look, what you want to do is get the tax cuts where they will have a big impact. That’s what Senator Obama wants to do. That is on the middle class and, again, every independent analysis shows that his tax cuts for the middle class and his overall tax cuts are bigger than John McCain. What John McCain wants to do is continue supply-side economics. Continue to give big tax cuts for the rich. That’s the last thing we need now.

Source: CNN Late Edition: 2008 presidential series with Wolf Blitzer , Jun 22, 2008

Postpone state tax cut

Reich said that he has “made a career out of cleaning up Republican messes” and would apply those skills if he is elected governor. He called for postponement of a state tax cut and increased support for public higher education in Massachusetts.
Source: D.R. Bahlman, Berkshire Eagle , Apr 22, 2002

Avoid raising taxes, but a pledge is irresponsible

Reich has been very cagey about his views on taxes. At times, he has advocated increases in cigarette and capital-gains taxes. But on Fox News’ “Hannity & Colmes’ show,’ Reich-who has said he would consider raising certain tax levies-promised he would not raise taxes if elected governor. ”I’m not going to raise taxes,“ Reich said. ”I promise you.“

Reich has said that he would consider raising the gas tax to pay for the Big Dig, and reinstating the state’s capital-gains tax as a way to make up for lost tax revenues.

Reich insisted yesterday his position has not changed. He said his statement on Fox TV was a quick response to a rapid-fire debate. Indeed, although pushed by Hannity, Reich refused to take a no-new taxes pledge. “In context, I would do everything in my power not to raise taxes,” Reich explained. “But it is irresponsible to take a pledge. I don’t want to send out a mixed message.” Reich said that taking a pledge not to raise taxes is “playing games with the public.”

Source: Yvonne Abraham and Frank Phillips, Boston Globe, p. B3 , Feb 8, 2002

Tax system must be fair without big breaks for business

Massachusetts’ businesses can thrive only if they have productive and healthy workers, and an excellent infrastructure linking them together. We have a long way to go. We can’t afford special tax breaks and subsidies for particular companies. We can’t afford patronage, cronyism, and incompetence in state government. Taxes must be fair and equitable.
Source: Campaign web site, RobertReich.org , Jan 25, 2002

Ask rich to bear the burden before cutting education

Does this make me a liberal or a paleoliberal or a neoliberal? If the state is absolutely up against the wall and the choice is between cutting education or asking the rich to bear a little bit more of the burden, you don’t have to be a rocket scientist to want to at least examine it.
Source: Boston Phoenix article by Seth Gitell , Jan 17, 2002

No tax cut. Period.

Democrats should draw a bright line: No tax cut. Period. The surplus should be used instead for the three things regular working families need most: affordable health care (including prescription drugs), child care, and better schools.
Source: The American Prospect, vol.12, no.9, “No Tax Cut. Period.” , May 21, 2001

Expand EITC & raise bottom of SSI tax, as tax cut to poor

Democrats should be saying loudly and clearly: We agree that a tax cut may be warranted next year. But not the kind Bush is proposing. We want a tax cut that primarily benefits poor and working families. A tax cut to our families is a more effective spur to the economy, because our families will spend more of every dollar they get back.

So here’s our plan: First, expand the Earned Income Tax Credit by $20 billion a year (retroactive to January 1, 2001). That means an additional $1,800 of income for a working family at the bottom and $500 for one in the lower middle. Second, eliminate all Social Security payroll taxes on the first $7,000 of personal income. One of the best-kept secrets in America is that most lower-income taxpayers pay more in payroll taxes than they do in federal income taxes. Shielding the first $7,000 of income would reduce their tax burden $500 to $1,000 a year. Remove the ceiling on Social Security payroll taxes and the net payroll tax cut is about $15 billion a year.

Source: The American Prospect, vol.12, no.1, “Why the Democrats” , Jan 15, 2001

Opposes marriage penalty bill: It’s a tax cut to the wealthy

I’m in favor of marriage. But the House bill to eliminate the so-called marriage penalty makes absolutely no sense.

First of all, look at all married taxpayers and you find that the marriage penalty is a myth. About the same number of couples pay less tax because they’re married as pay more.

Second, the total cost of eliminating the extra tax on those couples who now pay more is estimated to be $182 billion over the next ten years. It would be one thing if this money went to relatively poor married couples, but most of it will go to wealthy couples. That’s because well-educated people who are most likely to have higher incomes tend to marry other well-educated people who are also likely to have higher incomes [and that category are the largest beneficiaries of the House bill].

Passing a bill in an election year that cuts taxes on wealthy married couples takes no great courage. The real courage comes in exercising common sense and voting against it.

Source: PBS radio, “Marketplace” broadcast, “The Marriage Penalty” , Feb 17, 2000

Consider tax breaks for hiring & retaining workers

Q: You suggested that maybe corporations should be given tax breaks for hiring workers, retaining workers. Is that the role government should play?

A: The first role of government in terms of corporate responsibility is to act as a kind of cheerleader. Using the bully pulpit. Using jawboning. Bringing the spotlight of public opinion to bear on the companies that are doing it right, and occasionally the companies that are doing it wrong. Now, beyond that, should there be tax breaks? Well, you know, we have tax breaks for companies to come into disadvantaged areas, enterprise zones, empowerment zones, we have tax breaks for research and development and for investments in equipment and machinery, should there be tax breaks for more and better investments in employees? I think it’s an important question. We have not fully evaluated it. But the first step, clearly, is to use the bully pulpit, which the President has been doing.

Source: Interview on PBS Frontline, WGBH Boston , Jul 2, 1998

Deficit reduction must include investments and growth

[The newspapers make Clinton] "sound like Calvin Coolidge. Your plan isn't a deficit plan; it's an investment and growth plan, whose purpose is to create better jobs. The American economy won't grow unless the private sector uses the resources freed by deficit cuts to invest in the future productivity of all Americans."
    Reich wrote, "American business must NOT use the added resources to
  1. speculate as they did in the 1980s,
  2. pad their executives' salaries,
  3. improve productivity by buying new machines merely to replace their workers,
  4. hire platoons of lawyers to sue one another,
  5. hire consultants to bust unions, or
  6. build new factories abroad.
"Clinton should stress the positive ways for business to use the resources: worker training, apprenticeship programs, R&D, and so on. Deficit cuts won't improve the lives of average Americans unless American business chooses that path. The goal is to shift our sights from the present to the future, and to do so fairly."
Source: The Agenda, by Bob Woodward, p.132-133 , Jun 6, 1994

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