"Aftershock" By Robert Reich,The Economic Proposals

Robert Reich has grounded his argument in "Aftershock" for a just society in morality.It is simply unfair for a handful of Americans to take home such a large share of total income when so many others are struggling to make ends meet and survive where the "common good" has been supplanted by "self interest".His proposals are important steps to remedy our current economic problems.He claims the proposals will produce a budget surplus and bring back "the bargain"that lifted the U.S. into prosperity from 1947-1975.

The first proposal is a reverse income tax.Reich wants to expand the Earned Income Tax Credit to all Americans earning under $50,000.In 2009,EITC was the nation's largest anti-poverty program.Over 24 million households received wage supplements.Under his plan,workers earning $20,000 or less would receive a wage supplement of $15,000.This supplement would decline incrementally up the income scale to $10,000 for $30,000 earners to $5,000 for $40,000 earners.The tax rate for workers with incomes between $50,000-$90,000(capital gains included) would be 10 percent of earnings.Taxes for incomes between $90,000 and $160,000 would be 20 percent,whatever the income source.The annual cost would be $633 billion.The cost of the tax cuts for the middle-income families would be billions more.These lost revenues would be replaced by a carbon tax and higher taxes on the top 5 percent of incomes.

A carbon tax(coal,oil and gas) would be based on how many tons of carbon dioxide such fuels contain.The tax would be collected at the mine or port of entry for each fossil fuel and would gradually rise over time in order to push energy companies and users to spew less carbon into the atmosphere.Initially set at $35 per metric ton of carbon dioxide,such a tax would raise $210 billion in its first year alone.$115 per ton would yield about $600 billion per year.The public would indirectly pay this tax as prices of goods increase do to how much carbon was used in their production.Gas would go up $1 and an increase of .06/kilowatt hour to the price of electricity.

Higher marginal tax rates would increase on the wealthy to 55 percent for wage earners over$410,000(top1%).Those earning over $260,000 will pay 50 percent and finally earners over $160,000(top 5%) will pay 40 percent.These taxes,Reich's proposals,added to the modest amounts contributed by taxpayers who earned between $50,000 and $160,000,would raise $600 billion and more than our current tax system per year.Added to the $210 billion generated by the carbon tax,the total new revenues would be $810 billion initially and would increase as carbon tax revenues increased.

Under his proposals,income from capital gains would be treated no differently from wages and salaries.These tax rates are not out of line with most of our history over the century.From 1936 to 1980,the top marginal tax rate was 70% or more.During the three decades spanning 1951 to 1980,when the top rate was between 70% and 92%,average annual growth in the American economy was 3.7%.Between 1983 and 2008,when the top rate ranged between 35% and 39%,average growth was just 3%.(supply siders are wrong)

Reich's proposals are initiated to increase spending by the lower and middle class(who spend a much higher percentage of income than the rich) which would help move the economy to full capacity and sustained growth(something we don't have today).Consequently,companies would enjoy higher profits and the stock market would rise.The rich  would pay higher taxes and receive a somewhat smaller share of the economy's overall gains but those gains would be much larger than they would be otherwise.Hence,richer Americans are very likely to come out ahead as they did in the Great Prosperity(1947-1975).

More from "Aftershock" soon.