An Idea for Mr. Summers: He could pay higher taxes—if he thought that was right

An Idea for Mr. Summers. WSJ Editorial
He could pay higher taxes—if he thought that was right.
WSJ, Apr 07, 2009

Larry Summers, the White House economic guru, is taking some hits from the left after his official disclosure forms revealed late last week that he got rich thanks to the financial industry he is now charged with reviving and reregulating.

The appearance-of-a-conflict-of-interest crowd isn't happy that Mr. Summers earned $5.2 million last year working for the beneficent hedge fund, D. E. Shaw & Co. He also made a bundle in speaking fees, including $135,000 for a single appearance for Goldman Sachs. That must have been some stemwinder, though we're confident Goldman figures it didn't overpay given Mr. Summers's later White House prominence.

We've got nothing against getting rich, though it is worth noting that Mr. Summers will pay Bush-era tax rates on his Wall Street windfall profit. So if the man who would still like to be Federal Reserve Chairman is looking to make a gesture of political solidarity with the middle-class masses, here's an idea: Honor your principles, and pay taxes on that income at Bill Clinton-Barack Obama rates.

Mr. Summers could simply calculate his taxes for 2008 based on what he'd pay if President Obama's tax proposals had been law. Thus his top marginal income tax rate would rise from 35% to 39.6%, plus the phase outs in deductions and exemptions, which would make the rate roughly 41.6%. Mr. Summers could write a check to the IRS for the difference. And of course he wouldn't forget to deduct any charitable giving at only 28 cents on the dollar, rather than 35 or 41.6 cents.

Mr. Obama likes to say it's the "era of responsibility," and if that's true then we assume Mr. Summers will want to lead by example.