The most intense debate in Washington today revolves, not surprisingly, around higher taxes. Both parties seek to evade the impending "fiscal cliff" that would result in January from the scheduled expiration of Bush-era tax cuts and the last-resort automatic spending cuts agreed to as part of the budget-balancing effort last year. Both have now agreed that new revenues will be a part of the solution. But they differ on how much revenue to raise and how to raise it.
President Obama is seeking $1.6 trillion over ten years in new tax revenue on high-income households as part of a package of revenue increases and spending cuts. The top two rates would return to Clinton-era levels of 36 and 39.6 percent. House of Representatives Speaker John Boehner has proposed a revenue package of $800 billion secured by closing loopholes and eliminating or reducing deductions. Both sides are negotiating in good faith. But the deficit reduction math is clear -- less revenue means deeper cuts in spending.
We favor a strategy that is based on equitable burden sharing and ways to strengthen our communities in a time of prolonged economic dislocation. Nonprofit organizations that do just that are bracing for cuts they expect from the deal that lawmakers and the President make. They know these cuts are inevitable and they will do their utmost to meet a wide variety of needs in their communities even with less federal support.
But leaders in the nonprofit sector, including the two of us, will continue to advocate for a fair balance between necessary cuts in spending and the need for additional revenues. A fair approach requires more new revenues than eliminating deductions and closing loopholes will generate. Tax rates should be adjusted for those who can most afford it.
As a new study from the Urban-Brookings Tax Policy Center makes plain, there are at least four good reasons for making rate increases a part of any fiscal solution:
• The size of the gap suggests that a spending-only solution would necessitate deep cuts that would not prove equitable.
• For "political equilibrium," a solution must draw from both sides of the ledger accounts.
• For wealthy households to share the burden of erasing the deficit there must be tax increases; cuts in federal programs are not much felt by high-income households.
• Last, it is more effective to control spending by requiring that it be paid for up front with taxes rather than to allow deficits to grow.
Since 2007, the median net worth of the American family has plunged nearly 40 percent while the wealth of the top ten percent of families grew 16 percent. A deficit reduction plan that includes a modest tax increase on the two percent who can most afford it is our best hope for moving ahead in a fair and balanced way.
The American people have shown time and again that they want solutions to the nation's problems and support policies that are measured and reasonable. In the recent series of meetings between the President and business leaders, many indicated a willingness to see a rate increase as part of a comprehensive package.
Our President and Members of Congress are laboring under intense pressures and we must encourage them as they strive to chart the right course. But this is why our public officials hold office in the first place -- to do what needs doing and make the very hard, but correct, decisions that see our nation through to a better day.
This is one of those times. A large amount of money needs to be raised, and that calls for the perennially unpopular, but still necessary, higher tax rates on those most able to afford them.
Stephen Heintz is president of the Rockefeller Brothers Fund and chairman of Independent Sector. Rev. Larry Snyder is president of Catholic Charities USA.