Would a Democratic president be insane to propose such a thing? Not at all. In fact, polls show an increasing portion of the electorate angry with an insider “establishment” – on Wall Street, in corporate suites, and in Washington – that’s been feathering its nest at the public’s expense. The Tea Party is but one manifestation of a widening perception that the game is rigged in favor of the rich and powerful.
More importantly, it will soon become evident to most Americans that the only way to reduce the budget deficit, preserve programs deemed essential by the middle class, and not raise taxes on the middle, is to tax the top.
In fact, a Democratic president should propose a major permanent tax reduction on the middle class and working class. I suspect most of the public would find this attractive. But here again, the only way to accomplish this without busting the bank is to raise taxes on the rich.
Republicans have done a masterful job over the last thirty years convincing the public that any tax increase on the top is equivalent to a tax increase on everyone — selling the snake oil of “trickle down economics” and the patent lie that most middle-class people will eventually become millionaires. A Democratic president would do well to rebut these falsehoods by proposing a truly progressive tax.
Will the rich avoid it? Other critics of my proposal say there’s no way to have a truly progressive tax because the rich will always find ways to avoid it by means of clever accountants and tax attorneys. But this argument proves too much. Regardless of where the highest marginal tax rate is set, the rich will always manage to reduce what they owe. During the 1950s, when it was 91 percent, they exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent. Yet that’s still substantial by today’s standards. The lesson is government should aim high, expecting that well-paid accountants will reduce whatever the rich owe.