VIDEO: Reagan Called For An End To ‘Crazy’ Tax Loopholes That Let Millionaires Pay Less Than Bus Drivers
By Pat Garofalo on Oct 3, 2011 at 9:05 am
When President Obama released his plan for “the Buffett rule,” which involves closing tax loopholes and ensuring that millionaires pay their fair share in taxes, he explained that “middle-class families shouldn’t be paying higher taxes than millionaires and billionaires.” “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett,” he said.
However, if calling for an end to millionaires having lower tax rates than their secretaries is class warfare, Obama is only the latest class warrior to occupy the Oval Office. In a June 6, 1985 speech at Northside High School in Atlanta, Georgia, then President Ronald Reagan explained that tax loopholes allowing a millionaire to pay lower taxes that a bus driver were “crazy,” because they allowed the “truly wealthy to avoid paying their fair share”:
We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying ten percent of his salary, and that’s crazy. [...] Do you think the millionaire ought to pay more in taxes than the bus driver or less?
When Reagan asked the crowd whether millionaires should be paying more or less in taxes than a bus driver, the crowd resoundingly responded “more!” Reagan also told an Illinois crowd about a letter he had received from a man who said that tax loopholes allowed him to pay a lower tax rate than his secretary. “He wrote me the letter to tell me he’d like to come to Washington and testify before Congress as to how that’s possible for him to do and why it is wrong [ http://www.americanprogress.org/issues/2011/09/reagan_buffett_rule.html ],” Reagan said.
As the Center for American Progress’ Seth Hanlon and Michael Linden put it, “in calling for the ‘Buffett Rule,’ Obama is merely calling for a return to basic fairness. He is echoing the very same call that Ronald Reagan made 25 years ago. Given the history, maybe we should be calling it the ‘Reagan Rule [ http://www.americanprogress.org/issues/2011/09/reagan_buffett_rule.html ].’”
Just how much Romney pays in taxes is, for the moment, a private matter. But his income is public knowledge. In August, Romney disclosed that in 2010 he and his wife made between $1.1 million and $2.8 million in royalties, salary, speaking fees and interest, most of which was likely taxed at a marginal rate of 35%, after accounting for deductions. The Romneys made an additional $5.5 million to $37.3 million from dividends and capital gains, which is generally taxed at a much lower rate of 15%.
Calculating the Romneys’ exact tax burden is not possible from the public records because of a number of factors, like the amount of money that Romney deducted from his taxes and the length of time that he owned investments, are unknown. But ballpark estimates are possible. Assuming that Romney declared roughly the same number of deductions as others in his income level and that his dividend and capital gains income qualified for the 15% bracket, Romney would have paid roughly 14% of his gross income in taxes to the federal government in 2010 according to Bob McIntyre, who crafts tax policy at the left-leaning Citizens for Tax Justice.
The Buffett Rule is meant to prevent exactly this sort of circumstance [ http://thinkprogress.org/economy/2011/09/30/333034/note-buffett-rule/ ], wherein a super wealthy individual, due to the preferential tax treatment of investment income, is able to dramatically lower his or her tax rate. If Romney’s income had been wages or salary instead of from investments, his tax rate would have been closer to 30 percent.
In 2009, “1,470 households reported income of more than $1 million in 2009 but paid zero federal income tax on it [ http://www.americanprogress.org/issues/2011/09/millionaire_tax_rates.html ].” In 2008, the average federal income tax rate of the richest 400 people in the country was 18.11 percent [id.]. And Romney, by arguing against the Buffett Rule, will be saying that this sort of tax system, from which he directly benefits in a big way, should stay in place.
It may shock you exactly how wealthy this top 1 percent of Americans is. ThinkProgress has assembled five facts about this class of super-rich Americans:
2. The Top 1 Percent Of Americans Take Home 24 Percent Of National Income: While the richest 1 percent of Americans take home almost a quarter of national income today, in 1976 they took home just 9 percent [ http://www.nytimes.com/2010/11/07/opinion/07kristof.html ] — meaning their share of the national income pool has nearly tripled in roughly three decades.
3. The Top 1 Percent Of Americans Own Half Of The Country’s Stocks, Bonds, And Mutual Funds: The Institute for Policy Studies illustrates [ http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4 ] this massive disparity in financial investment ownership, noting that the bottom 50 percent of Americans own only .5 percent of these investments:
4. The Top 1 Percent Of Americans Have Only 5 Percent Of The Nation’s Personal Debt: Using 2007 figures, sociologist William Domhoff points out [ http://sociology.ucsc.edu/whorulesamerica/power/wealth.html ] that the top 1 percent have 5 percent of the nation’s personal debt while the bottom 90 percent have 73 percent of total debt:
5. The Top 1 Percent Are Taking In More Of The Nation’s Income Than At Any Other Time Since The 1920s: Not only are the wealthiest 1 percent of Americans taking home a tremendous portion of the national income, but their share of this income is greater than at any other time since the Great Depression, as the Center for Budget and Policy Priorities illustrates in this chart [ http://www.cbpp.org/cms/index.cfm?fa=view&id=2908 ] using 2007 data:
As Professor Elizabeth Warren has explained, “there is nobody in this country [ http://www.dailykos.com/story/2011/09/22/1019249/-MA-Sen:-Elizabeth-Warren-video-on-class-warfare-goes-viral ] who got rich on his own. Nobody…Part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” More and more often, that is not occurring, giving the protesters ample reason to take to the streets.
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