As Congress begins to turn towards 2010 and the tax issues that accompany it, I have a short opinion piece on why I believe that the highest earning Americans should face higher taxes:

The economy is still in dire straits and 2010 is around the corner marking time for the debate over income taxes to be rejuvenated.  In the 1940s the highest marginal tax bracket on those making over 5 million dollars (75 million 2009 dollars) was over 90%.  Today, after a wave of fiscal conservatism, the highest bracket applies to those making over 373,000 dollars a year and is at 35%.  .  The question today is what must be done with taxes to reinvigorate spending, lessen the deficit, and increase GDP.  The answer lies in higher taxes for the richest Americans.

The moral arguments dealing with economic inequity are commonplace in today’s world so I’d like to focus on the economic benefits of higher taxes on the rich.

With respect to spending, many believe that a lower tax rate for the rich implies that they’d spend more money.  But the fact of the matter is that any money above a certain threshold is simply kept in bonds and sat on, rather than spent as capital.  The difference between the spending of the top one percent and the top 10 percent of Americans is primarily in how much more the former spends in business equities and how much less it spends in economically stimulating sectors.  Therefore, lower taxes on the very rich do nothing to spur spending; only movement toward income equality can cause rejuvenation as the masses have more to spend.

The second point is far more self-explanatory, since it is obvious that tax increases give the government more money to cover the deficit.  When looking to decrease the deficit, one should not look to cutting welfare programs that give the poor spending power; rather one should look to raising taxes on those that don’t spend: the richest Americans.  With the escalation of the War in Afghanistan, a new Jobs Bill, the Health Care Bill, the Stimulus and Cap and Trade, it would seem reasonable to tax the very richest more to prevent excess inflation.

Finally, with respect to GDP growth, there is a near direct correlation between GDP growth decreases and highest bracket tax decreases with a small time shift accounting for the time taken for the taxes to take effect.  Whenever taxes on the wealthiest have increased, the GDP has in fact also increased while lower taxes have generally led to future recessions.

Ultimately, there are moral reasons harkening to social justice and economic equity that I look at, when considering why the highest income taxes should be raised.  But if those do not appeal to you, just look at the economic repercussions of such tax increases and you will see that the poor economic times we are faced with, simply make raising taxes on the wealthiest Americans all the more imperative.