Back to Work - Bill Clinton [32]
B. More Tax Revenues
That means we can’t cut the debt substantially, much less balance the budget in a reasonable time frame, without raising more revenue. The Simpson-Bowles Commission recommended lowering the corporate tax rate and eliminating most of the deductions and credits that allow many very profitable companies to avoid a large percentage of the taxes they would otherwise pay, while others pay the legal maximum of 35 percent. The 35 percent rate is now second-highest among wealthy nations, but the actual amount paid on corporate income is 23 percent, ranking us in the middle. We can raise the same amount of money or more with lower rates applied more fairly to all corporations. For example, with oil prices so high and the oil companies making record profits, we could reduce the deficit $4 billion this year alone and an estimated $77 billion over the coming decade by eliminating their tax advantages. ExxonMobil, with a second-quarter profit of $10.7 billion, has an effective tax rate of 17.6 percent, well below both the average American’s rate of 20.4 percent12 and the average corporate tax “take” of 23 to 25 percent.
The simplest way to generate more revenue from personal income taxes is to let the Bush tax cuts on upper-income and wealthy Americans expire in 2013. They will do so automatically if not renewed. This would raise $700 billion over a decade, more than half of it from the wealthiest 10 percent of Americans, who reaped 90 percent of the income gains in the last decade and got the large tax cuts on top of that. This is not class warfare but a reflection of our values of fairness and shared responsibilities, asking those of us who benefited from an economy that left most Americans standing still or falling behind to help put our country back on the right track to the future.
If we wanted the economic independence and strength an earlier balanced budget would bring, and the economic benefits smart, targeted investments would generate, we could restore the tax rates of the 1990s to everyone. That would net about $3.5 trillion over a decade. Of course, the anti-taxers would howl that it would be the largest tax hike in history. But in the 1990s, with unemployment low, incomes rising, and poverty declining, most Americans seemed pretty happy with a budget surplus and increased investments to keep the economy growing.
The Simpson-Bowles Commission recommended that we also lower personal rates but collect more money by restructuring and limiting the availability of credits and deductions claimed by wealthier Americans. Under its plan, instead of six rates, there would be three, at 12 percent, 22 percent, and 28 percent, with tax breaks targeted more tightly to people who need them. For example, the mortgage-interest deduction would be capped at $500,000, not $1 million. The child tax credit, employer-provided health insurance deduction, provisions governing charitable gifts, retirement savings, and pensions, and the Earned Income Tax Credit for lower-income working families would be maintained. The commission plan would require that any new deductions, or additional breaks, like a lower capital-gains rate or the tax credit for research and development (which I favor), be paid for by higher rates.
There are many other variations on these proposals ripe for debate, but the arithmetic is inescapable: we can’t get the debt and interest payments on it down to a manageable level, much