Category Archives: rich

Middle Class Would Find Higher Taxes Under Republican Plan

The Congressional Research Service released a report last month reviewing the Republicans proposed tax reform plan that would broaden the tax base, and what they found was that under their proposal the net result would be cutting taxes on the wealthiest Americans while raising taxes on the middle and lower class. The report was actually prepared by Democrats and they then sent their findings to be reviewed by nonpartisan tax experts including The Tax Policy Center. I have noticed this has received very little attention so I wanted to share some their findings.   

Under the GOP plan, they would replace the current tax structure with a two bracket system (otherwise known as a flat tax) — 25% and 10% — cutting the top tax rate from the current 35% to 25%. This would benefit everyone and result in a reduction of federal tax collection by $4.5 trillion dollars. Now on its face it sounds great, the middle class would pay a 10% flat tax rate. 

Here is the catch — Republicans including their golden boy Paul Ryan want to get rid of special interest tax loopholes and tax shelters. 

The Republicans have declined to specify the exact loopholes they would target, but what we do know is, based on their record, they are united in opposing ending any subsidies for industries such as oil and gas. 

The study found that the biggest loopholes that are currently in the system consist of tax breaks for employer-provided health insurance, mortgage interest, state and local taxes, and retirement savings, and these all disproportionately benefit the middle class. 

According to the Joint Economic Committee, “although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions.” 

This would result in married couples falling in that income range would pay an additional $2,700 annually to the IRS, on top of the tax increases Bush tax cuts that are set to expire at the end of the year. Households earning more than $1 million a year would get a tax cut of about $300,000 annually (multi-millionaires would receive a huge tax break) while people making under $200,000 will see their taxes rise

Roberton Williams of the Tax Policy Center has reviewed the Committee’s report and he says:

That even though the numbers are rough its conclusions are largely accurate. Even with eliminating fairly major tax preferences, the Ryan tax plan remains regressive. That’s the bottom line. Unless you go after the tax preferences that benefit the wealthy, i.e., capital gains, dividends, tax-free interest on municipal bonds, it’s really hard to undo the regressivity of the rate changes. You’ll be shifting the burden of the tax code toward the middle class

I guess there is a reason why whenever Mitt Romney and his fellow Republicans are asked to give specifics on their flat-tax plan, they refuse and then go to their usual talking points, i.e., we need to broaden the base, let everyone have skin in the game…my favorite….we can’t raise taxes on the job creators, etc. This is yet another example that shows who Republicans are working for…the rich.

New Republican Study — Millionaires Receiving Billions In Taxpayer Support

People who are protesting against the wealth inequality and a tax code that grossly favors the 1% now have a new ally, Tom Coburn, Republican Senator from Oklahoma. He has released what he describes as the “first-ever compilation of federal aid for the richest.”  

Let me be the first to say how very surprised I am by this study. Mr. Coburn is known to be a bedrock conservative who has strongly supported the no new taxes mantra, and when someone with his background starts to shine a light into the inequalities in our government I firmly believe he can do more to further the Occupy Wall Street cause than any encampment ever could. 

The study reveals some startling findings. For example, in 2009, $21 million in unemployment insurance was collected by people who earned more than a million dollars. Also, the U.S. Treasury pays out more than $30 billion a yearto people who make more than a million a year. Mr. Coburn says what the study “reveals is sheer Washington stupidity with government policies pampering the wealthy costing taxpayers billions of dollars every year.”   

In a letter that accompanied the study, Mr. Coburn wrote, “The income of the wealthiest 1 percent of Americans has risen dramatically over the last decade. Yet, the federal government lavishes these millionaires with billions of dollars in giveaways and tax breaks,” as noted in the recent Congressional Budget Officestudy that examined the growing income gap over the last 30 years.  

“From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous. Multimillionaires are even receiving government checks for not working. This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate.” 

“The government’s social safety net, which has long existed to catch those who are down and help them get back up, is now being used as a hammock by some millionaires, some who are paying less taxes than average middle class families.” 

The following list was compiled by Mr. Coburn showing federal money handed out to millionaires over several years: 

  • $18.15 million in child care tax credits 
  • $74 million in unemployment checks 
  • $89 million for preservation of ranches and estates 
  • $316 million in farm subsidies  
  • $608 million in business entertainment deductions 
  • $9 billion in retirement checks 
  • $21 billion in gambling losses 
  • $28 billion in mortgage breaks for mansions, vacation homes and yachts 

These are powerful findings and they are coming out at a crucial time during which we are debating cutting such vital programs like Medicare, Medicaid, Social Security, Education, etc.

CBO Findings Show Extent Of Wealth Inequality

I have been reading the non-partison CBO (Congressional Budget Office) study showing the trends in wealth distribution since 1979. After I read it, I thought to myself how could there be any question as to why the protesters of Occupy Wall Street took to the streets.

Since the Reagan Administration implemented the trickle-down-economics policies, giving large tax breaks to the wealthy in the belief that with more money in their pockets it will result in job growth, the income gap has reached a level that rivals 1928, a year before the Wall Street crash that marked the beginning of the Great Depression.

CBO findings  

Sources of Income — For Middle Class is Wages/Salaries. For Wealthy is Capital Gains 

Two factors accounted for the changing distribution of market income. One was an increase in the concentration of each source of market income, which consists of labor income (such as cash wages and salaries and employer-paid health insurance premiums), business income, capital gains, capital income, and other income. All of those sources of market income were less evenly distributed in 2007 than they were in 1979.  

The other factor was a shift in the composition of market income. Labor income has been more evenly distributed than capital and business income, and both capital income and business income have been more evenly distributed than capital gains. Between 1979 and 2007, the share of income coming from capital gains and business income increased, while the share coming from labor income and capital income decreased.  

More concentrated sources of income (such as business income and capital gains) grew faster than less concentrated sources (such as labor income). 

Between 1979 and 2007:  

    • For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent.  
    • For others in the 20 percent of the population with the highest income, average real after-tax household income grew by 65 percent. 
    • For the 60 percent of the population in the middle of the income scale, the growth in average real after-tax household income was just under 40 percent. 
    • For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.  

Growth in Real After-Tax Income from 1979 to 2007

The share of income going to higher-income households rose, while the share going to lower-income households fell. 

The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.  

Most of that growth went to the top 1 percent of the population.  

All other groups saw their shares decline by 2 to 3 percentage points. 

Shares of Market Income, 1979 and 2007

Trickle Down Economics – Economic Policy of Republicans

Republicans have said we cannot tax the “job creators” and in fact need to cut their taxes even further, and for the past decade they have made sure that the millionaires, billionaires and corporations pay as little to no taxes as possible. Over the past decade their income level and corporate profits have risen to historic levels. 

At the same time Republicans created 3 million jobs. The Wall Street Journal reported the total number of jobs at the start of the Bush presidency was 132.5 million and at the end was 135.5 million. Payroll expansion was just 2.3%. 

Their economic policy of trickle down economic hasn’t worked. The data coming from annual Statistics of Income tables on Wednesday shows this. This is a fact and the numbers reflect this. This cannot be debated. 

  • In 2009 total income was down 15.2 percent since 2007.  
  • Average income in 2009 fell to $54,283, down $3,516, or 6.1 percent in real terms compared with 2008, the first Internal Revenue Service analysis of 2009 tax returns showed. Compared with 2007, average income was down $8,588 or 13.7 percent.  
  • Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009.  
  • Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009. The data come from annual Statistics of Income tables that were updated Wednesday.  
  • No income tax was paid by 1,470 of the 235,413 taxpayers earning $1 million or more in 2009, compared with the 959 taxpayers with million-dollar-plus incomes who paid no income taxes in 2007. 
  • Average wages fell sliding $1,106 to $48,917 from $50,023 in 2007.

A person may choose to want to protect corporations and the wealthy from taxes shifting the burden to middle and low-income earners, but they cannot factually state that trickle down economics works in creating jobs. It is in black and white. Numbers do not lie.

The Precipice Of Economic Failure

Do Republicans really care if the economy takes a tumble? Do they care if families are unable to send their kids to college, if public schools are unable to adequately teach our children, if the shrinking middle class have wages that are stagnant on top of the fact that healthcare costs are increasing, college tuitions and food prices are sky rocketing and having an effect of lowering wages even more? 

No. Their stance on this debt ceiling debate is proof positive (not to mention Eric Cantor’s portfolio is increasing on the fact that the debt ceiling hasn’t passed). Washington Post columnist Eugene Robinson put it best.

There’s no dispute about where we need to go. The question is what path to take.

Clearly, the federal government cannot continue spending at a rate of 25 percent of GDP while taking in revenues that equal less than 15 percent of GDP, as is the case this year. We would reach the point where debt service crowds out health care, education and other priorities dear to progressives’ hearts. Major investments the nation desperately needs to make — for infrastructure and energy research, for example — would be impossible. Decline would be inevitable. 

The way to avoid this dystopian future is to bring spending and revenues more into balance. Yes, there will be some pain and sacrifice. But it is not necessary — nor is it wise — to heap a disproportionate share of the burden onto the backs of the poor, the elderly and the battered middle class.

Economists around the United States of both parties are all in agreement that the GOP’s stance of only cutting entitlements without raising revenue does nothing but hurt this economy. In order to turn this economy around, we need to employee people who are then able to spend money, which in turn will help businesses and help create more jobs.

Their plan for resolution to our financial crisis, cut as many government jobs as possible, cut our social safety net (Medicare, Medicaid, and Social Security) is not the right plan.  

The fact is, corporate tax rates that are being protected by GOP, and the loop holes used by the wealthiest in this country to skirt around the IRS and pay virtually no taxes is where we need to look. 

The nominal corporate tax rate of 35 percent is a joke, since big corporations don’t actually pay that much; those loopholes, too, could be eliminated. Then we could look at measures that would have broader impact — say, hiking or eliminating the income cap for Social Security payroll contributions. 

The point is that it doesn’t take much imagination to get within shouting distance of $2 trillion in deficit reduction over 10 years — looking at the revenue side alone. That’s half of the $4 trillion that both Republicans and Obama have set as a target. 

There would have to be an equal amount of spending cuts. But what sense does it make to begin with the small slice of the pie — less than 20 percent — that is being called “discretionary” spending? It’s just not possible to find enough savings there. 

Also, Eric Cantor’s plan for all cuts without revenue increase is counterintuitive. In Steven Benen of Washington Monthly’s latest op-ed he writes how this plan is wrong for our economy.

The more pressing problem with Cantor’s contention is that it’s largely Keynesian — and Cantor hates Keynesian economics. Jon Chait had a good item on this. 

[I]f you think the state of the business cycle should influence your fiscal policy, then you should oppose any spending cuts at all, and the tax cuts you support should be as progressive as possible. Alternatively, if you’re worried about the incentive effects of tax cuts on business and the rich, then you don’t care about whether unemployment is high or low at any particular moment. Cantor’s position, which is the universal Republican position, is pure nonsense by absolutely any standard, including the most conservative standard. 

That’s even aside from the fact that nobody is proposing an immediate tax hike. Democrats are perfectly happy to phase in any tax increase slowly. Cantor’s argument is nonsense economics piled on top of a factual misrepresentation.

Most of Cantor’s arguments are.

Regardless, Chait’s point is an important one. Why does Eric Cantor oppose any and all tax increases? Because, as he sees it, the economy is weak, and if there are tax increases, it would take money out of the economy and put into the Treasury. That would be wrong, Cantor believes, because we want that money in consumers’ hands, generating economic activity. 

In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury.

Do you see the disconnect? Well, you probably do, but the Majority Leader doesn’t.

Let’s put this another way: the policy reasoning that tells Eric Cantor that tax increases are a bad idea is the same policy reasoning that makes sweeping budget cuts a bad idea, too.

The fact is Republicans are sending us down a path of economic despariety. The median income of middle and lower classes have stagnated and with their proposed cuts will further reduce incomes and make things like college for our children an impossibility.

Only a select few are feeling the effects right now, but I hope it will not come for the majority of Americans to feel these repercussions before we realize the disastrous path our choices have taken us down.

Republican’s Corporate and Individual Tax Cuts, Job Creation and Wages

In order to raise the debt ceiling which will prevent America from defaulting on our debt, Republicans are insisting on cutting spending by slashing entitlement programs like Medicare and Medicaid while at the same time refusing any revenue increases like ending subsidies on gas and oil or tax increases on the wealthy and corporations. The blanket reason for this they say is raising taxes on the “job creators” will have a negative effect on our economy and will not create new jobs. 

Well, I am here to tell you that is simply wrong. If keeping the tax rate on the above mentioned people at the lowest levels in decades created jobs, the previous decade should have had a plethora of job creation. That would mean our jobless rate should be well below 5% (now it is maintaining at around 9%, however, in minority communities it is much higher). The fact is, under the Bush tax cuts, job creation has been at its lowest.  (click to enlarge graph below)

Also, the wages for the middle and lower classes have stagnated. Pat Garofalo reported:  Over the 2000 to 2009 period, workers experienced a “lost decade,” with incomes falling by nearly five percent and wages hardly growing at all. And according to Jed Graham, the last decade in terms of real wages was actually worse than the Great Depression: 

The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II, according to Commerce Department data. In fact, if the data are to be believed, economy wide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation). Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939, government data show. 

Compassion-Free Conservatism

I read an op-ed this morning by Charles Blow who perfectly described today’s Republican Party, “Compassion-Free Conservatism.”  In the past I have written on the GOP’s plan of turning government programs like Medicare and Social Security over to private companies or just ending them all together like Medicaid (although they won’t come out and say it), and they call it “Starve the Beast.” 

This is part of the modern doctrine of a compassion-free conservatism that’s using the fog of the fiscal crisis to push a program of perverse wealth inequality as sound economic policy: The only way to jump-start the economy is to slash taxes on the wealthy and on companies; the only way to compensate for the deficits that those tax cuts exacerbate is to slash benefits to the poor and vulnerable. It would be comical if it weren’t so callous.

Now that the budgets, both state and national, have been pushed to the brink caused by our last decade of Bush and Republican rule (but began under Reagan in the 80s), they have put themselves in a position to end all of these programs that help sustain and create lower and middle classes. 

At the same time, they are promoting the idea that the only way to do this is to implement even deeper tax cuts for the wealthy and continue corporate tax cuts and tax subsidies that are funded by our tax dollars. 

First, the tax burden of American companies is lower than that of other Organization for Economic Cooperation and Development countries, as economist Bruce Bartlett pointed out this week. Also, a report issued on Wednesday by Citizens for Tax Justice looked at 12 Fortune 500 companies from 2008-10 and found that on $171 billion in profits earned, their effective tax rate was negative-1.5 percent because of corporate loopholes, shelters and special tax breaks.

And, as Time magazine reported in its June 6 issue, In the 18 months since the Great Recession, which ended in June 2009, U.S. annualized corporate profits rose 42 percent, to a record $1.68 trillion in the fourth quarter of 2010.

Corporations aren’t hurting. They’re hoarding.

This is not what America is all about and is not the values this country was founded on.  Our country does not exist to be used by corporations, and American middle and lower classes are not here to serve them for their benefit.