Deficits: The Battle Over Taxing The Rich

When Congress returns after the elections on Tuesday, it will face one of the most hotly debated issues in the campaign: raising taxes on the rich.

That's President Obama's position: to keep the Bush tax cuts in place, except for those on the wealthiest two percent as a way to reduce the dreaded deficit.

It's an idea already percolating among the governors: eight states have increased so-called "millionaire" income taxes so far, as a way of avoiding drastic budget cuts on health and education. And on Tuesday, voters could make Washington State the ninth.

But with our national debt in the trillions, budget experts will tell you that just taxing the rich isn't enough.

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60 Minutes Overtime: Tax Hikes
Think your taxes are too high? David Stockman thinks they're not high enough. And he's a Republican who once helped engineer the largest tax cut in history. Ronald Reagan's former budget director tells Lesley Stahl why he's changed his tune on taxes.

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Extra: Tough Spending Cuts Ahead?
Extra: Gov. Gregoire on Income Tax Debate
Extra: Will An Income Tax Hurt Startups?
Extra: Bill Gates Sr. on Taxes & Innovation

One Republican brave enough to go public is David Stockman, President Reagan's budget director. He says all the Bush tax cuts should be eliminated - even those on the middle class.

And he says his own Republican Party has gone too far with its anti-tax religion.

"Tax cutting is a religion. What do you mean by that?" correspondent Lesley Stahl asked Stockman.

"Well it's become in a sense an absolute. Something that can't be questioned, something that's gospel, something that's sort of embedded into the catechism and so scratch the average Republican today and he'll say 'Tax cuts, tax cuts, tax cuts,'" he explained.

"It's rank demagoguery," he added. "We should call it for what it is. If these people were all put into a room on penalty of death to come up with how much they could cut, they couldn't come up with $50 billion, when the problem is $1.3 trillion. So, to stand before the public and rub raw this anti-tax sentiment, the Republican Party, as much as it pains me to say this, should be ashamed of themselves."

These frank words come from Ronald Reagan's old budget director. Stockman was the architect of the largest tax cut in American history.

But he doesn't let the Democrats off the hook. He says he cringes when he hears President Obama say things like this: "I believe we ought to make the tax cuts for the middle class permanent."

"We have now got both parties essentially telling a big lie," he told Stahl. "With a capital 'B' and a capital 'L' to the public: and that is that we can have all this government, 24 percent of GDP, this huge entitlement program, all of the bailouts. And yet, we don't have to tax ourselves and pay our bills. That is delusional."

"Why isn't this statement correct? We cannot really deal with the deficit until we get our recovery underway?" Stahl asked.

"The recovery has already happened. It is weak, it is tepid," Stockman said.

Asked how he can say the recovery has happened considering there is a ten percent unemployment rate, Stockman said, "The unemployment rate is not going to drop by any material amount any time soon. And we're going to be in a period of austerity. We've had a 30-year spree of really phony prosperity in this country."

Now our national debt is growing by $100 billion a month. For those who say cutting spending is the answer, Stockman says both parties have thrown in the towel on that.

"Even Republicans have said there's nothing significant we want to cut. They don't want to cut Social Security entitlements; they don't want to cut Medicare reimbursements to doctors; farm subsidies; education loans for middle class students. Certainly not defense!" he said.

Many of the states are in the same boat, facing huge deficits and few prospects for cutting, which is why Washington State is joining the movement across the country to tax the rich.

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[ddnlj]

It's sad that the people having the most difficulty in this country, the middle class, are the ones who are most often overlooked. We don't have the power or money to make a stand nor are we poor enough to accept handouts. We just struggle along from day to day, losing our jobs and our quality of life while all around us the rich keep getting richer - at our expense.

[noloyalisti]

Why is this a debate? Tax the rich! Hard and often. Obviously the tax cuts for the rich and the tax giveaways to the giant corporations don't work. SO let's try something else.

The rich have seen their income increase almost 300% since Reagan. The average CEO has seen their income rise 1,000% compared to the minimum wage.

[landishanson]

Stahl failed to mention the high sales taxes paid by Washington State residents. Did she mean to imply that while Oregonians pay 10% income tax, all Washingtonians actually pay nothing? Obviously, taxes are being paid in Washington. How else would they fund the state government? For your information, the state's general sales tax is 6.5%, however county and local governments may add to that burden, with King County at 9.5% total sales tax. Real estate taxes are excessive, but the worst is Washington's punitive estate tax of 19% after a $2 million exemption.

[mhs57]

A very sad story, but Mr. Pelly neglected to ask how many residents of towns like Newton continue to shop at Wal-Mart. I don't think any single corporate entity is more responsible than Wal-mart for unemployment in America. Just look at the boom going on in China. And look at all the labels on Wal-mart merchandise that say "Made in China". Why do we support the Chinese economy instead of our own??? Made in America, people! Let Wal-mart know that old Sam Walton was right: Made in America or it's not in the stores!

[sectorseveng]

The plutocracy will do anything it can to keep everything the same. Top U.S. Incomes Grew Five-Fold in 2009, to a $519 Million Average: http://www.dailyfinance.com/story/taxes/top-us-incomes-grew-five-fold-in-2009-to-a-519-million-average/19688820/

"During the depths of the recession in 2009, as millions of Americans lost their jobs, homes and life savings, the highest-paid earners in the United States saw their average incomes increase more than five-fold from 2008, according to new data from the federal government.

The 74 people who earned more than $50 million last year -- the highest income category measured by the Social Security Administration -- saw their average incomes skyrocket from $91.8 million in 2008 to a mind-boggling $518.8 million in 2009.

These 74 people earned an average of $10 million -- per week. Meanwhile, half of all American wage-earners, or about 75 million people, earned less than $505 per week."

[endrepubs]

Thank you for your post. It is truly mind boggling that Americans keep voting against their own interest by voting for Republicans who want to keep the low taxes on the wealthy. It makes no sense. It is like pulling for the Yankees to win the World Series year after year after year and never wanting any ohter team to have a chance.

[JCDaugherty]

Shame on you, Leslie, and shame on you 60 Minutes for buying into, and promoting, the lie that all this tax money will go to children. We've been hearing that for years and all we've got to show for it is poorer education and at a higher cost. The reason this lie works is because "public servants" redirect money from education and send it elsewhere only to blackmail us into passing more and more taxes on the rich, the only people who actually create jobs and wealth in this country.

The real problem is in the Capitals where these decisions are made. You should know better, Leslie. Stop talking out of the Left side of your mouth.

And the "rich" (whatever that means) DO pay more in taxes. That's what a progressive tax system is all about.

[endrepubs]

The rich do NOT pay more as a percentage of income. They do spend a lot on their tax attorneys to keep them from paying taxes. Do you remember when the billionaire Ross Perot ran for president and declared his taxes paid? He ended up paying a paltry 6%. Most billionaires and multi-millionaires can, through loopholes and tax shelters, get their tax rate to below 6%. I say return the top tax rate to where it was in the 1950's under the Republican President Eisenhower at 90%. And Congress has GOT to close the shelters and loopholes. But we all know that won't happen because Congress is the club for the rich.

[wakeuphadenough]

Stability??? The top 1% went from owning 8% of all income to now 23.5%? While working wages have stayed stagnant? The top tax rates have gone DOWN WAY MORE than any other rates. Reagan DOUBLED payroll taxes...ON WORKING PEOPLE! 1/2 of all manufacturing jobs GONE.

Stability? Yeah, for the very rich.

[wakeuphadenough]

So it's ok with you that "free" trade is being used to move jobs to countries that pay ****** wages, have little or no safety and environmental regulations....for you, the race to the bottom of the wage scale is ok?

Do you think China is playing by the rules? Indonesia? Singapore? Everyday I read about China flaunting the WTO and GATT in favor of import tarriffs and buy Chinese legislation. They had there own $800 BILLION dollar stimulus that said specifically that the funds would go to CHINESE ONLY goods and services....Obama tried that with our stimulus and it got pulled out over huge pressure from the US Chamber!!!

It's got to be FAIR trade or I say tell the WTO to shove it.

[wakeuphadenough]

That's because education is an INVESTMENT!! It pays society back in DROVES!

Just from a tax position, every dollar spent on education comes back in taxes TEN FOLD!!

[mlpjlk]

People are so stupid to think that corporations pay taxes or fines from the government.... these are just line item expenses passed onto the consumer. Corporations could not care less about taxes.

It is like buying a box of copy paper.... an expense of doing business.

All it does is lowers you personal income tax by spreading it out to every purchase/service you make.

It makes most sense to 1) abolish corporate taxes (lowers prices across the board). 2) do away with personal income tax (raises your take home pay). 3) national sale tax that covers both (makes taxing fair to all consumers).