Inquirer Editorial: Can't continue tax breaks

Republicans who insist that millionaires shouldn't pay a single penny more in taxes to help the nation cope with the worst economic crisis since the Depression are defending an indefensible proposition.

When the deficit-cutting supercommittee started work, House Speaker John Boehner ruled out any plan that involves new revenues. When President Obama said tax breaks for millionaires should be cut, Republicans howled as if CEOs were being hauled off to the guillotine.

Everyone must sacrifice if this country is going to pull out of this economy. Millions of Americans have already lost their jobs and their homes, and the safety net for them is about to collapse from the strain. For those lucky enough to still have a job, hours are being cut, wages are stagnant, pensions have been slashed, and retirement funds have shrunk.

Local taxes are going up, school classrooms are more crowded, police and fire protection has been cut back, parks are closed, and roads are going without needed maintenance.

In that climate, it's insulting and selfish to say that people making more than $1 million a year must keep their treasured 15 percent tax rate on dividends, investments, and hedge-fund profits. A family with two incomes will typically face a marginal tax rate of 25 or 28 percent.

President George W. Bush's big tax cuts for the wealthy, pushed through in 2001, show the fallacy of trickle-down economics. The country has had a decade of low taxes, much of it accompanied by hands-off government regulation. It brought record riches for a select few, not prosperity to all.

The tax breaks for millionaires and corporations that Republicans are defending do not "incentivize" job creators; they reward job crushers. Thanks to the steady outsourcing of jobs overseas and laying off of workers, cash is piling up on corporate balance sheets, and CEOs are still collecting huge payouts. Those cash-rich companies go shopping for investments on Wall Street while millions of Americans can't afford to shop on Main Street.

Meanwhile, those tax breaks are helping starve the government of the money needed to run a modern nation. Federal revenues amount to less than 15 percent of the overall economy, the lowest level in 50 years. The annual federal deficit would shrink by roughly half if revenues returned to historically more typical levels.

The point where a rising economic tide was strong enough to lift all boats has passed. A very fortunate few are still cruising in luxury, while millions of Americans are paddling leaky rowboats through stormy seas. Were it not for the social safety net begun during the New Deal, and expanded during the 1960s, who knows what unrest this economy might birth?

Some responsible members of the investor class, like billionaire Warren Buffett, realize their self-interest is at stake and are willing to do their part by paying higher taxes. Knee-jerk defenders of tax breaks for millionaires should heed Buffett's advice. As former Labor Secretary Robert Reich has warned, if today's economic tide keeps ebbing, even the yachts may be stranded.