If millionaires paid their fair share, state budget gaps would disappear

by: Paul Rosenberg

Thu Jan 06, 2011 at 12:00

There's a whole new wave of talk about attacking public sector unions as part of the state-level budget battles shaping up for the coming year.   Obviously, this is yet more fallout from the Wall Street meltdown caused by the wealthiest Americans.  Consider Rober Reich's new piece in Salon, which begins:

In 1968, 1,300 sanitation workers in Memphis went on strike. The Rev. Martin Luther King, Jr. came to support them. That was where he lost his life. Eventually Memphis heard the grievances of its sanitation workers. And in subsequent years millions of public employees across the nation have benefited from the job protections they've earned.

But now the right is going after public employees.

Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers.

But that's not the only way in which ordinary working Americans are being asked to shoulder the burden of the rich.

My last diary, "Texas hold'em--NOT!" included a look at the unequal tax rates in Texas, which has one of the most regressive tax systems in the country.  But virtually all states have regressive taxes, the only difference is how regressive they are. From "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", the average tax distribution of all states (as of 2007) is as follows:

If we were simply to raise the tax rate on the top 1% to the same level as that paid by the bottom 20%, that alone would virtually wipe out all the state budget shortfalls.

According to Emmanuel Saez (I'm actually using the previous version through 2007 here), the average income of the top 1%--including capital gains--in 2007 was $1,364,494.  Multiply this by 5%, and you get $68,224.71, roughly the amount that the average person in the top 1% underpays in state and local taxes, compared to those in the bottom 10%.  According the IRS, via Wikipedia, there were approximately 138 million taxpayers in 2007, which would mean a total of $94,150,100,674.47.

Now, compare that figure to the following chart of total budget shortfalls from 2002 through 2013, from the National Counference of State Legislatures' "State Budget Update: November 2010":

Obviously, the worst of the gaps surpassed the $94 billion figure, but the average gaps are well below it. And remember, we're only talking about the tax shortfall for people making $1.36 million in 2007.  The rest of the top 10% were significantly undertaxed as well.  A true flat tax at the state and local level pegged to the tax rates paid by the bottom 20% would produce substantial surpluses.

In short, the problem isn't lack of money.  It's lack of fairness.  Just as it was in 1968, when Martin Luther King lost his life, marching for economic justice.

Paul Rosenberg :: If millionaires paid their fair share, state budget gaps would disappear

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this is also an issue at the municipal level in big cities (4.00 / 3)
New York is an obvious example, but here in Baltimore I hear lots of talk about the "need for cuts and fee increases" yet not a peep about taxing the wealthy or corporations

Absolutely. (4.00 / 1)
But with the caveat that it's more of a state issue, so far as execution is concerned, since local taxes are rarely more than a small fraction of the total, and local entities don't have that much independent capacity to tax.

Of course, it's entirely appropriate to raise the issue at the local level, and bring pressure to bear on the state government to do something about it.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
in big cities local taxes tend to pack much more of a punch (0.00 / 0)
in New York someone making $45k a year can expect to pay $1,500 a year so the mayor can give land away to developers while people take sleds to the ER

[ Parent ]
This should be repeated (4.00 / 3)
over and over.

In short, the problem isn't lack of money.  It's lack of fairness.  Just as it was in 1968, when Martin Luther King lost his life, marching for economic justice.

Hopefully, it will get repeated while people plant flowers, which seems to be our annual approach to honoring King's legacy.

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.


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