Opinion » Ted Rall

Phony Budget Crisis

Forget austerity. Tax the rich.


NEW YORK--Everywhere you look, from the federal government to the states to your hometown, budget crises abound. Politicians and pundits from both parties tell us that the good times are over and that we've got to start living within our means. It's a lie.

Two case studies have made news lately: California, where new/old Gov. Jerry Brown is trying to close a $25 billion shortfall with a combination of draconian cuts in public services and a series of regressive tax increases, and Wisconsin, where right-winger Gov. Scott Walker says getting rid of unions would eliminate the state's $137 million deficit.

Never mind the economists, most of whom say an economic death spiral is exactly the worst possible time for government to cut spending. Pro-austerity propaganda has won the day with the American public. A new Rasmussen poll found that 58 percent of likely voters would approve of a shutdown until Democrats and Republicans can agree on what spending to cut.

The budget "crisis" is a phony construction, the result of right-wing "starve the beast" ideology. There is plenty of money out there, but the pols don't want it.

There is no need to lay off a single teacher, close a single library for an extra hour or raise a single fee by one red cent.

Every government can not only balance its budget but have a surplus. The solution is simple: tax the rich.

Over the last 50 years tax rates for the bottom 80 percent of wage earners have remained almost static. Meanwhile the rich have received tax cut after tax cut. For example, the rate paid by the top .01 percent--people who currently earn more than $6.5 million a year--fell by half.

Europe has one of the fairest ways to generate revenue for government: a wealth tax. In Norway, for example, you pay 1 percent of your net worth in addition to income tax.

What if we imposed a Norwegian-style wealth tax on the top 1 percent of U.S. households? The poorest among them is worth a mere $8.3 million. This top 1 percent owns 35 percent of all wealth in the United States.

"Such a wealth tax ... would raise $191.1 billion each year (1 percent of $19.1 trillion), a significant attack on the deficit," Leon Friedman writes in The Nation. "If we extended the tax to the top 5 percent, we could raise $338.5 billion a year (1 percent of 62 percent of $54.6 trillion)."

Business shills whine that America's corporate tax rate--35 percent--is one of the world's highest. Our real corporate rateĀ­--the rate companies actually pay after taking advantage of loopholes and deductions--is among the world's lowest. According to The New York Times, Boeing paid a total tax rate of 4.5 percent over the last five years. Yahoo paid 7 percent. GE paid 14.3 percent. Southwest Airlines paid 6.3 percent.

America's low effective corporate tax rates have left big business swimming in cash while the country goes bust. As of March 2010 non-financial corporations in the United States had $26.2 trillion in assets; 7 percent of that was in cash.

The national debt is $14.1 trillion.

Which is a lot. And, you see, entirely by choice.