The Case For Raising Top Tax Rates?

The Article: The Case for Raising Top Tax Rates by Eduardo Porter in The New York Times.

The Text: The wealthy are feeling defensive about their taxes. Most Americans may think the rich pay too little but, not surprisingly, only 30 percent of the rich agree. More than two-thirds of families earning a quarter of a million dollars a year or more tell Gallup’s pollsters that their taxes are too high.

It is true that high-income Americans carry the biggest tax burden. While fewer than 1 in 20 families make more than $200,000, they pay almost half of all federal taxes.

However they feel about the tax man, there is a case to be made that they can pay much more. The reason has nothing to do with fairness, justice or ideology. It is about economics and math.

The math is easy: the federal budget over the next decade cannot be made to square without raising a lot more money. The nonpartisan Congressional Budget Office estimates that if we stay on our current path, federal debt held by the public will grow from about two-thirds of gross domestic product today to roughly 100 percent in a decade and twice that much by 2040. It is unlikely that even the most committed Republicans could reverse the trend without higher taxes.

But an equally compelling reason relies on a new understanding of the economics of taxation. For 30 years, any proposal to raise taxes had to overcome an unshakable belief that higher taxes inevitably led to less growth. The belief survived the Clinton administration, when taxes rose and the economy surged. It survived George W. Bush’s administration, when taxes were cut yet growth sagged.

But now, a growing body of research suggests not only that the government could raise much more revenue by sharply raising the top tax rates paid by the richest Americans, but it could do so without slowing economic growth. Top tax rates could go as high as 80 percent or more.

Admittedly, it seems inconceivable that our political system could stomach a tax increase that big. Today, the richest 1 percent of Americans pay a top federal rate of 29 percent, according to Emmanuel Saez, an economist at the University of California, Berkeley. That’s because almost a third of their income derives from capital gains and dividends — which are taxed at a 15 percent rate — while the rest is ordinary income taxed at a top marginal rate of 35 percent.

Nonetheless, the research suggests there is much more money available to close the budget deficit than we previously thought, if only we were willing to raise tax rates to where they were back in the early ’70s, in the administration of Richard M. Nixon.

Taxpayers always want to pay less to the tax man. Still, there’s nothing inevitable about low taxes. In the early 1950s, coming out of World War II, the top federal income tax rate exceeded 90 percent. In 1980, the top marginal rate was 70 percent for families making more than $215,400 — about $587,000 in current dollars. And these families pocketed a much smaller share of the nation’s income than they do now. Today, people earning over $200,000 a year capture more than a third of national income.

How we got from that country to this one — where President Obama’s attempt to raise the top federal rate to 39.6 percent from 36 percent sets off partisan warfare — had less to do with changing beliefs about fairness than with politics. By the mid-1970s, the Republican Party concluded it was probably more effective to counter Democrats’ Big Government platform as the party of low taxes than as the party of budget discipline.

Economics helped them make their case. The sharp fall in tax rates that brought us to where we are today was buttressed by an economic proposition that has guided policy ever since: that raising taxes could backfire and harm the economy along the way.

Legend has it the idea entered the political mainstream during a meeting in Washington in 1974 in which the economist Arthur Laffer demonstrated the principle to Donald Rumsfeld, chief of staff to then-President Gerald Ford, and Dick Cheney, an assistant to the president. He drew a curve on a cocktail napkin — now known as the Laffer curve — to illustrate how tax revenues would increase less and less as tax rates rose until they reached a point where any future increase reduced the amount of money raised.

If taxes were too high, Mr. Laffer argued, people would come up with ways to avoid or evade them. They might postpone or cancel investments if the government were to tax away a large share of the rewards. They might work less, or put less effort into it. In this way, high taxes could reduce the total tax haul. More worryingly, this behavior would ultimately slow economic growth.

Economists today broadly accept this understanding of people’s actions. This belief has supported big declines in tax rates around the developed world, from Japan to Britain and the United States to Sweden.

But something got lost in the rush to cut: the proposition does not support low taxes all the time, for everybody and at all costs. While raising tax rates beyond a certain threshold can reduce tax revenue, we don’t know where the peak is. After decades of tax cuts, it is not unreasonable to think we are way below it. And though raising taxes will change taxpayers’ behaviors in a way that could reduce economic growth, we don’t know precisely how much. It turns out the impact of raising tax rates on the rich may be smaller than we thought.

The British went out of their way to shield income from the taxes after the Labour government raised the top income tax rate to 50 percent from 40 percent in 2010. High fliers asked for accelerated bonuses to get the money before the new tax rate went into effect. Then, they postponed income, hoping Labour would be kicked out of office. More than a thousand people moved to Switzerland.

This month, the new Liberal-Conservative government concluded that the tax increase had brought in too little new money and cut the top rate to 45 percent. Yet while the experience confirmed that taxpayers will do their best to avoid taxes, many of these tactics work only in the short term. Eventually, they’ll have to pay what they owe.

There are several studies that suggest top rates paid by high-income taxpayers above a certain threshold of earnings could be substantially higher. A study published last November by Mr. Saez and Peter Diamond, the economics Nobel laureate from M.I.T., made the biggest splash.

Their study suggested the federal government could raise the top marginal rate to 76 percent without losing revenue if it closed all the loopholes to prevent taxpayers from reclassifying income on their tax returns just to pay less. The top tax rate could rise to 48 percent even if we kept the loopholes we have today, they found.

Perhaps the most controversial conclusion, made by Mr. Saez and two colleagues in another study published last December, is that while the rich would respond to a big tax increase by shielding income from the tax man and maybe working less, this would not slow the economy at all. That’s because a lot of what the rich do does not, in fact, generate economic growth. So if they reduced their effort in response to higher taxes, the economy wouldn’t suffer.

These arguments are not the mainstream view. Some economists really dislike them. And they are not absolutely airtight. The calculations rely on estimates about how higher tax rates would discourage the rich from working or investing over a couple of years at most. But we know little about how they might affect long-term decisions, like whether to become a brain surgeon or a hedge fund manager. We do know that in countries with higher tax rates, like France, people work fewer hours than in the United States.

But the new line of research has the potential to overturn contemporary thinking about government finances. And in one respect, it seems indisputable: three decades of tax cuts may have gilded the pockets of the rich, but they didn’t provide much economic juice. Among developed nations, incomes per person grew no faster in countries like the United States and Britain that slashed their top tax rates than in countries like Spain, Germany or Denmark, which did not. If taxes didn’t juice the engine of growth on the way down, there is little reason to fear they will stall it on the way back up.

American tax politics have not changed. Republicans act as if cutting is the only legitimate thing to do with taxes. Their proposals to address the budget deficit thus rely on a mix of ambiguous commitments to close unspecified loopholes and the fairly radical assumption that voters won’t mind losing a big chunk of what the government does. And Republican arguments to the contrary, President Obama’s plan to raise $2.1 trillion in new taxes over the coming decade — mostly from high-income taxpayers — is comparatively modest.

Raising the top tax rates on the richest Americans could go a long way toward balancing the federal budget. Mr. Saez estimated that raising the top tax rate on the top 1 percent of earners to 67 percent would raise about $4 trillion over a decade. That’s a start.



2012: Time For A New Political Party?

The Article: Is it time for a new political party? by Christopher Moloney in CNN News.

The Text: The Whigs were a major political party of the United States from the 1830s to the 1850s.

Two of the party’s candidates – William Henry Harrison and Zachary Taylor – were elected president, though both died during their terms.

The party eventually splintered over the issue of slavery in 1852 and, four years later, the Whig Party disappeared for good.

Or did it?

In 2008, a group of Iraq and Afghanistan veterans began meeting to discuss what they saw as the “bickering and divisive nature of the American political system” and the need for a group that was focused on “public service before self.”

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A Syrian Executioner Tells His Story

The Article: An Executioner for Syria’s Rebels Tells His Story by Ulrike Putz in Der Spiegel.

The Text: Hussein can barely remember the first time he executed someone. It was probably in a cemetery in the evening, or at night; he can’t recall exactly. It was definitely mid-October of last year, and the man was Shiite, for sure. He had confessed to killing women — decent women, whose husbands and sons had protested against Syrian President Bashar Assad’s regime. So the rebels had decided that the man, a soldier in the Syrian army, deserved to die, too.

Hussein didn’t care if the man had been beaten into a confession, or that he was terrified of death and had begun to stammer prayers. It was his tough luck that the rebels had caught him. Hussein took out his army knife and sliced the kneeling man’s neck. His comrades from the so-called “burial brigade” quickly interred the blood-stained corpse in the sand of the graveyard west of the Baba Amr area of the rebel stronghold of Homs. At the time, the neighborhood was in the hands of the insurgents.
That first execution was a rite of passage for Hussein. He now became a member of the Homs burial brigade. The men, of which there are only a handful, kill in the name of the Syrian revolution. They leave torture to others; that’s what the so-called interrogation brigade is for. “They do the ugly work,” says Hussein, who is currently being treated in a hospital in the Lebanese city of Tripoli. He was injured when a piece of shrapnel became lodged in his back during the army’s ground invasion of Baba Amr in early March.

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Why Exploring Space Still Matters

The Article: Why Exploring Space Still Matters in NPR Online.

The Text: After decades of global dominance, America’s space shuttle program ended last summer while countries like Russia, China and India continue to advance their programs. But astrophysicist Neil deGrasse Tyson, author of the new book Space Chronicles: Facing the Ultimate Frontier, says America’s space program is at a critical moment. He thinks it’s time for America to invest heavily in space exploration and research.

“Space exploration is a force of nature unto itself that no other force in society can rival,” Tyson tells NPR’s David Greene. “Not only does that get people interested in sciences and all the related fields, [but] it transforms the culture into one that values science and technology, and that’s the culture that innovates,” Tyson says. “And in the 21st century, innovations in science and technology are the foundations of tomorrow’s economy.”

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The Policy That Keeps Prostitutes From Carrying And Using Condoms

The Article: The Policy That Keeps Prostitutes From Carrying and Using Condoms by Julie Turkewitz in The Atlantic.

The Text: Among New York’s most contradictory sets of policies is this: Since 1971, the city has pushed aggressively for condom use, distributing more than 200 million free condoms, turning the NYC condom into an icon with its own tag line (NYC Condom: Get some!), even creating an iPhone application that helps users locate the nearest distribution site. In the same time frame, however, city police have destroyed or confiscated thousands of condoms found in the possession of suspected sex workers, using condom possession to justify arrest.

Sex workers and their advocates say this practice has had a dangerous, chilling effect, causing many who engage in prostitution to stop carrying and using condoms. A bill written by State Senator Velmanette Montgomery would change that, barring the use of condoms as evidence of prostitution in criminal cases. Since the bill’s introduction in 1999, it is has languished, orphan-like, in the state legislature. Recently, though, it has received a wave of media attention — and advocates like Sienna Baskin think this could be the year it passes.

“There are organizations that may not on a daily basis think about sex workers that are now putting their lobbying machines into motion for it,” said Baskin, co-director of the Sex Workers Project at the New York City-based Urban Justice Center.

What few realize, however, is that New York is not the only state where condom possession is used to target and arrest people suspected of engaging in prostitution. If passed, the New York bill would be a first-of-its-kind law, according to bill sponsors and sex worker advocates across the nation, perhaps paving the way for similar policies in other places.

“Prostitution is a scary issue for politicians to take up,” said Stephany Ashley, programs director at St. James Infirmary, a San Francisco non-profit that helps about 6,000 former and current sex workers a year. “I think this would open up the doors for a lot of other cities and states to do the same.”

A former sex worker herself, Ashley oversees all of St. James’ services and frequently counsels the men and women who come through its doors. Over and over, she speaks with clients who say they limit the number of condoms they’ll carry, for fear of arrest. Others hide condoms in sanitarily questionable places — think used bleach bottles — to conceal them from cops. “Nobody should ever have to make a choice to put themselves at that kind of risk,” she said.

In 1994, in the midst of the AIDS crisis, San Francisco’s legislative body passed a non-binding resolution that urged the police to stop confiscating condoms, and the district attorney to stop using them as evidence of prostitution. Both parties initially implemented the policy, but over time they have stopped honoring it, according to Naomi Akers, the executive director at St. James. “We need to have our own legislation,” said Ashley. “We need to follow the lead of New York.”

Robert Childs runs the North Carolina Harm Reduction Coalition, which assists groups that include sex workers, drug users, and undocumented immigrants. On weekly walking trips through East Durham’s subsidized housing projects, Childs and his team spoke regularly with out-of-work moms engaged in sex work who were afraid that carrying multiple condoms would lead to arrest. So his team devised an alternate delivery route: They drop condoms in bushes so that individuals don’t have to carry them all at once.

The irony does not escape him: “It’s very strange, in order to promote something that would be beneficial to the greater society, we have to be sneaky,” Childs said. “As a fiscal conservative, you should be really worried about that, because [limiting condom use] leads to HIV, Hep C, and then we spend a lot of money paying for these diseases.”

To be clear: Condom possession in itself is not illegal in New York, nor in any other state. Rather, the fact that condoms can be used in court as evidence of prostitution means that police will sometimes confiscate condoms, interrogate those carrying several, and use them as part of the basis for arrest. A law like the one in New York would clarify that possession is permitted, quelling fears among those who want to use them. “If there is no way an item will ever be used as evidence, then there’s no excuse to ever take it or put it in an arrest sheet,” said Baskin.

In New York, few have actually come out against the bill. Last week, Brooklyn district attorney Charles J. Hynes told The New York Times that he opposed “any law that would restrict our use of evidence.” But Manhattan district attorney Cy Vance has not publicly opposed the law. A spokeswoman in his office declined to share his stance on the bill.

The problem for the bill’s advocates haven’t been its enemies, but rather a paucity of out-and-out backers. “Most politicians … they’re afraid that ‘sex worker rights’ anything is going to make it look like they are enabling exploitation,” said Ashley. “And there is just a really unfortunate disconnect there.”

Human Rights Watch is compiling a report that examines condom possession policies in several cities. The organization will release it in July.

The Urban Justice Center recently conducted its own survey on the issue in New York City. Preliminary results released to the media show that 16 of 35 participating sex workers said they have not carried condoms when working because they feared they would get in trouble with the police. Fifteen of those respondents said that police had confiscated or damaged condoms the individuals were carrying.

The center will officially release that survey and a larger report in April, when it leads a crew to the capitol to lobby for passage of the condom-carrying bill. “We think people’s health and abilities to protect themselves from really serious illness and serious health risks is more important than making some arrests for prostitution,” said Baskin. “So we think we have a really good argument. But it’s an ongoing campaign.”


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