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Polling questions can be slanted to produce any results you want. Witness FOX News polls showing Romney winning while all the other polls showed President Obama winning. Recent polls show that Americans overwhelming favor raising the marginal tax rate on the wealthy a few percent. In the US, a 60-40% split is considered a landslide for the 60%. Most polls now show support for the GOP position on the fiscal slope, a phony crisis, at under 40%, sometimes as low as 30%. I believe those polls are accurate and so does Barack. Only the GOP continue to deceive themselves and the viewers on FOX.
The Reagans meeting with then-President Richard Nixon and First Lady Pat Nixon in July 1970 (Photo credit: Wikipedia)
Surtax: a temporary tax on top of another tax. If your effective tax rate is 10%, and a 10% surtax is added to it, your effective tax rate is really 11%. If your effective tax rate is 30% and a 10% surtax is added to it, your effective rate is really 33%.
To help pay for the Vietnam war, LBJ had a 10% surtax enacted in 1968 on top of the Federal income tax. Since it only applied to 9 months of 1968, the actual tax rate was 7.5%. Congress renewed the temporary surtax for 1969 and the first half of 1970 at the reduced rate of 5%, and then let it expire. During Ronald Reagan’s governorship, temporary increases to the sales tax were enacted to help pay for flood damage in Northern California. Some say that there is no such thing as a temporary tax, but both LBJ and Reagan promised that the taxes were only temporary and both kept their word.
My first ever letter to a president was sent to Richard Nixon favoring an additional surtax to combat inflation of 2% in 1971. Someone in the Treasury Department responded with the word that a different solution had been selected. Nixon announced a wage-price freeze that ultimately did not work. I supported the surtax to protect people on fixed incomes from inflation. Inflation is a tax that affects everyone, while a surtax only affects those paying an income tax.
Once the fiscal cliff is behind us and we have enacted tax reform, I think that we should keep an income tax surtax in reserve for future emergencies. In times of war, natural disasters like Katrina and Sandy, or recession, we could enact a temporary surtax to provide revenue to pay for unusual expenses.
Mitt Romney has released his 2011 tax returns late on Friday afternoon when no one is supposed to be paying attention. He claims a tax rate of 14+%, but admits that he overpaid by not taking approximately $2 million in deductions. In the past, he has said that he paid all that was legally due and not a penny more. Why did he overpay his 2011 taxes? Because if he had taken all his legal deductions, his tax rate would have been less than 10%, spoiling his story that he has never paid less than 13.9%. After the election, Mitt can file an amended return and claim the additional deductions to which he is entitled. Then the IRS will refund his overpayment.
Taxes (Photo credit: Tax Credits)
Mitt has filed for an extension in filing his 2011 taxes. His campaign estimates that he will pay $6.2 million on an estimated $45 million income for the two years 2010 and 2011. That is an effective tax rate of 13.7%. Campaigning for president certainly beats working for a living. Many of us don’t have jobs and wish that we could earn a living wage and pay taxes at the same time s that we can keep our homes and feed our families. Mitt is going to say that campaigning for president is work.
Why are top executives in the US paid so much more than their companies’ lowest paid employees? There once was a rule of thumb (I have it written on my thumb) that the CEO’s salary was limited to a relatively small multiple of the janitor’s wages, such as 100 to 1 or 250 to 1. Now the sky is the limit. In Japan, I believe the old standard of 40 to 1 still holds true. In Europe, much smaller multiples than in the US are sufficient to attract and hold top talent to the CEO position. Only in the US are we told that outrageous salaries and bonuses are required to attract and retain top talent. And then those talented individuals earn their money for the company by increasing sales and profits, as Wall Street demonstrated during the onset of the Great Recession.
I think that the arguments put forth for CEO pay are specious. If US corporations will not rein in their CEO pay, I think that the marginal tax rates on outsized salaries and bonuses should be raised to the 90%+ level. The argument against higher personal taxes on CEOs and higher corporate taxes in general is that the consumer will be forced to pay higher prices. That argument is true in some cases, but not all. Consumers can resist higher prices if there are competitive products available. Then corporations are forced to accept a lower profit margin, stockholders receive lower profits and stock prices, and corporations have less money to pay outrageous salaries. Corporations have plenty of money now to pay their CEOs. If outsized salaries and bonuses were required to attract and keep top talent, then Japanese and European firms would not have any CEOs.