New York Times op-ed: You Want Progressive Policies? You Need Progressive Taxes, by Kitty Richards (Roosevelt Institute) & Joseph E. Stiglitz (Columbia):
As the coronavirus pandemic — and Congress’s undersize response — wreaks havoc throughout the economy, tax receipts are cratering. This means that state and local governments are facing enormous revenue shortfalls at the exact time they are dealing with large additional demands. So far, states and localities have responded by slashing spending and jobs, with 1.5 million public-sector workers laid off by the end of June.
The federal government, which unlike most states does not have to balance its budget every year, could solve the problem tomorrow by providing fiscal relief to states and localities, like the $1 trillion provided by the HEROES Act that passed the House in May.
But regardless of whether Congress acts, states and localities can bolster their local economies and support their residents by raising taxes on those who have not been hard hit by the recession. This is not only the right thing to do from a humanitarian standpoint, it is sound economics. ...
Some worry that state residents and businesses can’t afford a tax increase during the pandemic, but the truth is that many can, and it’s easy to target them through progressive taxation. Tens of millions of workers have lost their jobs since the beginning of the Covid-19 crisis, but almost half of Americans report that their household has not lost any employment income at all, according to Census Bureau data. That figure jumps to two-thirds for households bringing home more than $200,000 per year.
The current situation is stacked on top of enormous existing inequality, with state and local tax policies that frequently ask the most of those least able to pay. The bottom 20 percent of earners pay, on average, a state and local effective tax rate more than 50 percent higher than that paid by the top one percent.
Some will argue that states can’t raise taxes by themselves because of interstate competition, but economic evidence shows that even in boom times progressive state tax increases don’t harm state economies or lead rich people to flee. Now, with education and public health on the chopping block without higher taxes, moving to a low-tax, low-services state is likely to be still less appealing, even for the wealthy: States that institute ruthless cutbacks will prove to be far less attractive places to live. ...
The economic impact of the pandemic is daunting, and it would be better for the federal government to step in. But Americans are living through a catastrophe. They cannot afford for their state and local leaders to abdicate responsibility. States, cities and school districts must require their wealthiest residents to pay higher taxes right now.
The alternative is unacceptable: cutbacks in basic services that will weaken our social fabric and harm our potential for years to come, and a grinding recession that may last for years after the pandemic is brought under control.