Here are two opinions by well-respected economists on the tax increases proposed by U.S. President Obama:
ROBERT D. REISCHAUER
President of the Urban Institute; former director of the Congressional Budget Office
Is "afflicting the comfortable," as John Kenneth Galbraith liked to quip, fair, economically sensible and practical? In this case, yes! Unlike average Americans, those on the income ladder's top rungs have enjoyed very healthy income gains over the past decade. And, even more than those lower down, they have profited handsomely from lowered effective tax rates. To make the education, health and environmental investments that our society and economy need for the long run, why shouldn't those who have reaped most from society's past investments bear most of the burden of seeding tomorrow's opportunities?
Some fear that increased taxes on the top 5 percent will wreak economic havoc -- crimping entrepreneurial spirits and stanching charitable giving. But the overwhelming body of economic evidence suggests these effects are small.
Over the longer run, as the nation grapples with its entitlement promises, educational needs and infrastructure deficiencies, Americans at all income levels will have to accept somewhat higher levels of taxation.
N. GREGORY MANKIW
Economics professor at Harvard University; chairman of the President's Council of Economic Advisers from 2003 to 2005
The best data on the distribution of the tax burden show that the tax code, including all federal taxes, is already highly progressive. In 2005, the most recent year for which numbers are available, a household in the [bottom 20%] paid 4.3 percent of its income in federal taxes and one in the [next 20%] paid 9.9 percent. A household in the top 1 percent of income distribution paid 31.2 percent of its income in taxes.
The tax rate that top income earners face is not historically anomalous. It was higher during the Clinton years but lower during the Reagan years. In contrast, the tax rates now faced by the [bottom 80%] are unusual by historical standards. They were higher from 1979...until the passage of the Bush tax cuts in 2001.
President Obama's proposal to raise taxes at the top to further cut taxes at the bottom has one rationale: using the coercive power of the state to "spread the wealth around." In addition to the obvious disincentive effects, the policy raises deep philosophical questions. If one citizen of a nation can lay claim to the wealth of his more productive neighbor, shouldn't poor nations have the right to lay claim to the resources of richer nations such as the United States?
What do you think? Whose opinion do you agree with more, and why? Refer to the things we're learning in class. Post your comments below, or respond to someone else's comments.
