In France, the new Social President Francois Hollande is proposing a tax of 75% on all income earned over a million euros a year. This is roughly one and a quarter million U.S. dollars. Among France’s rich elite, this has prompted a discussion of whether or not it would be better to flee the country rather than pay the taxes.
In the United States, the very rich do not flee the country they simply send their money abroad, like Mitt Romney, to avoid their taxes. While that is a specific example of Romney’s tone-deafness, the issue of tax avoidance is a big problem in the United States and other countries wishing to reduce deficit and debt.
How does a country reduce its liabilities when its high earners have no shame in hiding their money to avoid paying their share? This is an important question given the common estimate that “tax evasion cheats the IRS of over $300 billion each year.” Just think of how many teachers and public sector investments we could pay for with an additional $300 billion a year, or how beneficial it would be to put that money toward the debt. But we cannot because of the culture of tax avoidance fostered by and mastered by the super-rich.
Complaints from the wealthy that the top marginal rate is too high, that it stifles their ability to create jobs and that it squashes creativity are just not so. Today’s top marginal rate is 35%, which is half that marginal rate of 70% that it was in 1980 when Reagan assumed the White Office. His single-minded mission to save money for the rich, while taxing the middle-class to pay for an engorged Pentagon budget is the single-biggest contributor to our nation’s ill-fiscal health today and leading to the U.S.’s “deficit-spending addiction.”
Even more absurd is the fact that the effective tax rate, which is what people actually pay, is just 19% for the Top 1%. All their bellyaching about their onerous tax burdens is a canard because their taxes simply are not that high. They just complain louder.
Worse yet is that while Reagan inherited a top marginal tax rate of 70% it had been over 90% from 1950-1963. Yet, since the Depression, Americans were imbued with an esprit de corps to come together to solve America’s challenges. Throughout World War II and the early parts of the Cold War Americans recognized and sacrificed for the common good. That spirit is gone. The economy flourished in the 50s and American creativity and ingenuity was at an all-time high.
I wonder if Romney thinks about that each time he parks his money in an off-shore account?