On Monday, the Senate is set to vote on whether to begin debate on the Paying a Fair Share Act (S. 2232) sponsored by Sen. Whitehouse (D-RI). By requiring that all households with incomes above $1 million pay at least a 30 percent tax rate (with a phase-in for incomes between $1 million and $2 million), this bill would implement the tax policy often referred to as the “Buffett Rule” (after Warren Buffett, the billionaire who famously pays a lower effective income tax rate than his secretary). The details of the bill are rather complex, but the principle behind it is simple – and true: millionaires and billionaires shouldn’t be paying a lower tax rate than many middle-income families pay.
So why do I think millionaires aren’t already paying their fair share? And why should women care? I’m glad you asked:
The rich are getting richer, while the poor are getting poorer.
I’m sure you’ve heard this maxim before, but it’s especially true today. Since the 1970s, incomes at the very top have grown much faster than incomes for the rest of us; a recent CBO study found that for the highest-income one percent, average after-tax household income grew by 275 percent between 1979 and 2007. 275 percent! That dwarfs the 37 percent income growth experienced by the middle-income 60 percent of households over the same period. And for the poorest 20 percent of the population, income was only about 18 percent higher in 2007 than in 1979.
During the recession (December 2007 – June 2009), average household incomes dropped across the board, including high-income households. But guess who bounced back first? Yep: the one percent. To be more precise, during the first full year of the recovery in 2010, 93 percent of income gains went to the top one percent. And no one in the bottom 90 percent saw any income gains at all; in fact, their average adjusted gross income of $29,840 in 2010 was $127 less than in 2009 and nearly $5,000 less than in 2000 (adjusted for inflation). Record numbers of women were living in poverty in 2010, and the percentage of women living in extreme poverty – with incomes below half the poverty line – was the highest ever reported.