MSN Money asked me to contribute to a series on fixing the middle class crunch. Here’s one of my columns, about our current tax problem.
In the 1950s, often regarded as the highwater mark of American prosperity and productivity, the top tax rate for the wealthiest Americans was an astonishing 91 percent. Things are saner now, or at least they sound that way, with the maximum tax rate down to just 35 percent of earned income. But here’s the problem: With the income this brings in, our government can’t pay its bills or provide basic services—things like educating our children, defending against outside attack, and keeping our roads and bridges from falling down.
Loss of tax revenue has also led to a crippling burden of hidden cost increases elsewhere in all our lives—for instance, in the form of higher property taxes and spiking tuition bills, as state and local governments scramble to replace vanishing federal support. The national debt has also doubled over the past six years, to $9 trillion. That’s one reason the dollar has lost a third of its value against the Euro and the British pound in the same period. If further declines cause China and other foreign lenders to lose their appetite for U.S. debt, it could eventually limit the government’s ability to finance its operations and force a hike in interest rates—meaning costlier mortgages, car loans, and credit cards for the middle class.
Here are some of the proposed reforms for working our way back to fiscal health: Read the rest of this entry »