Toward a progressive income tax

By Max J. Castro

The big question haunting Washington and the American people today is how we are going to pay for it all. Two wars, health reform, and an economic stimulus amount to a major challenge to the budget.

The answer is as simple to imagine as it will be difficult to implement: return to a progressive tax system. Adopt the tax brackets that prevailed during the presidency of that flaming radical, Dwight D. Eisenhower.

Over the last few decades, the U.S. tax system has become less and less progressive and income and wealth have become more and more unequally distributed. We have beggared the poor and the middle class and coddled the rich and the ultra-rich. The big bonuses on Wall Street have become emblematic of a much larger problem: an economy of colossal inequality

The solution can’t be limited to curtailing the excesses of Wall Street although that is a worthwhile pursuit. The answer needs to be more systemic, and not just to pay for things that are needed, like health care. In itself, economic inequality breeds political inequality. It distorts democracy.

In practical terms, a return to a truly progressive tax system would mean increasing marginal rates proportional to income, starting say at more than $250,000. At a certain point, say an income of more than $100 million a year, the marginal rate could be set at 90 percent. This means that every dollar earned over $100 million would be taxed at 90 percent.

For purposes of illustration, a progressive tax rate might look like this:

In this scheme, a person who earns $1.1 million a year, will have his income between $250,000 and $500,000 taxed at 35 percent, that between half a million and one million dollars at 40 percent, and that in excess of $1 million at 50 percent.

It won’t be easy to adopt such a system but it can be done. It’s not a new nor a particularly radical idea. Many countries have a tax system such as the one outlined here. The United States has had such a system in the past.

The main obstacle will be the fact that the U.S. Congress is, in the words of Woody Guthrie, “the best that money can buy.” Can you hear the howls of “socialism”? Never mind them.

More seriously, for such a tax system to be fair and effective, myriad loopholes would need to be closed. But the main obstacles will not be technical but rather political and ideological. Yet if the current anger now evident in American society can be funneled into a constructive direction, it’s possible to imagine a potent movement for the reconstitution of a progressive tax system in order to promote a fair society.

That would be change we can believe in. Inequality has been linked to a number of social problems, including crime and premature mortality. More equality would not only allow us to pay for vital human needs, such as health care for all.  It will make us a more just nation and reduce the stress and social isolation and antagonism that so often break out in the form of senseless crimes of violence.