WASHINGTON, D.C. — Tax Analysts, the non-profit publisher of Tax Notes magazine and other print and online tax-related publications, held a tax policy conference today at the National Press Club that focused on the issue of how much wealthy citizens should pay in taxes and why.
Moderated by Tax Analysts president and publisher Christopher E. Bergin, the conference featured presentations by Leonard E. Burman, the Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School of Syracuse; Robert Carroll, principal of the National Tax Department of Ernst & Young LLP; and Joseph Thorndike, director of Tax Analysts' Tax History Project and a contributing editor at Tax Analysts.
How much to tax the rich is among the issues at center stage in the emerging tax debate in Washington. With all of President Bush's tax cuts from 2001 and 2003 set to expire at year end, the parties are battling over which ones to extend — with Republicans pushing to extend them all, President Obama pushing to extend them only for incomes up to $250,000 and such leading Democrats as House Minority Leader Nancy Pelosi suggesting an extension for incomes up to $1 million. The Democrats want wealthier Americans to pay more to reduce the deficit and income inequality, while Republicans argue that tax hikes at the top will reduce savings, investment, and job creation.
"Democrats are frantically looking for rich people to tax, and Republicans are adamantly refusing to tax anyone — especially the rich," Bergin said in his opening remarks. "With the parties largely gridlocked over tax policy, unable to set a long-term course for taxes, we now have a tax code that is increasingly temporary, with major provisions due to expire at the end of the year and other provisions that expire on a regular basis. That makes it impossible for practitioners to advise their clients, and for businesses and individuals to plan for the future. All of that hurts our economy over the long term."
"Historically, Americans are fundamentally comfortable taxing the rich," noted Thorndike. "As a nation, we rely more on progressive taxes — and less on regressive ones — than any other developed country. But in the long run, progressive taxation is really about balance and fairness rather than wealth redistribution."
"The coming demands on the federal government with the aging of the baby boomers will be unprecedented," said Burman. "It's absurd to suggest the wealthy shouldn't pay more. It's not about punishing the wealthy. Rather, it's about mitigating the effects of extreme income inequality, which evidence shows has a negative impact on economic growth. Despite this, we've seen the share of taxes being paid by the top 1% steadily decrease."
"When we have a discussion about income inequality, it's important that we focus not only on the tax side of the discussion, but also on the spending side," added Carroll. "It may be that fiscal imbalance is a bigger issue than tax reform. The distributional effect of federal government spending needs to be factored into the overall discussion. Additionally, we should consider how higher tax rates for the rich will impact entrepreneurship, hiring, investment and growth of small business."
"Raising marginal rates on the wealthy will have little effect on the work effort of millionaires," countered Burman. "LeBron James wouldn't sit out the NBA finals just because we raised his taxes."
Much of the discussion focused on the definition of "fairness" in the tax code. "Perhaps we should embrace the ambiguity of the concept of fairness," noted Thorndike. "After all, it's a concept on which our democracy was founded and one that has served us well in the past."
Media Notes: An audio feed and transcript of the conference is available here. Follow Tax Analysts on Twitter @TaxAnalysts.
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