ataxingmatter

Graphs Show It Clearly--the richest are much richer and most of us are poorer

David Cay Johnston has employed a couple of key graphic images that tell a significant story about the way that US laws have favored the rich--including tax administrative procedures that have reduced real audits of the rich and tax laws that have cut the top rates significantly and cut the rates on the "favorite" form of income of the rich to extraordinarily low rates.  See David Cay Johnston, The rich get richer, reuters (Mar. 15, 2012) (noting that the figures he uses here, in 2010 dollars, are from an analysis of IRS data by Emmanuel Saez and Thomas Piketty). [hat tip Francine Lipmann and Tax Prof]

The 1934 economic rebound was widely shared, with strong income gains for the vast majority, the bottom 90 percent.

In 2010, we saw the opposite as the vast majority lost ground. National income gained overall in 2010, but all of the gains were among the top 10 percent. Even within those 15.6 million households, the gains were extraordinarily concentrated among the super-rich, the top one percent of the top one percent.

So while the Great Depression acted as a leveler, the cascading impact of tax and other fiscal policies that are extraordinarily favorable to the rich was little influenced by the Great Recession.  Here're the two telling graphs from the article.

Johnston notes that the story in numbers for adjusted gross income is discouraging: 

Saez and Piketty show that the vast majority’s average adjusted gross income, of which wages are just a part, was $29,840 in 2010. That was down $127 from 2009 and down $4,842 from 2000.

Most shocking? The average income of the vast majority of taxpayers in 2010 was just a smidgen more than the $29,448 average way back in 1966.

At the top, the super-rich saw their 2010 average income grow by $4.2 million over 2009 to $23.8 million. Compared to 1966 their income was up on average by $18.7 million per taxpayer.

The graphic illustration shows just how much the inequality we see today is from the richest of the rich getting an indecent proportion of income growth. 

Is this a problem that needs fixing?  Yes, it clearly is.  We have long recognized the importance of a society where everyone takes part and everyone has at least the minimum essentials for a decent life and a chance for improvement. 

A society where a very few "elite" at the top garner all the benefits of the system and more and more of the income for themselves is not a sustainable society--the top becomes predatory, willing to take gains no matter what the cost to everyone else.  It is the kind of attitude that many who are familiar with Wall Street banks have criticized as endemic to Wall Street culture--and one that was revealed even more starkly by the resignation from Goldman of a star banker who publicly criticized the current culture at Goldman that believes in profits for the firm at the sacrifice of the good of the customer.  See Greg Smith, Why I am Leaving Goldman Sachs, New York Times Op-Ed (Mar. 14, 2012).  Shareholders obviously agree with Smith that the "profit for the firm above care of the client" mentality is wrong.  See Christine Harper, Goldman Roiled by OpEd Loses 2.2 Billion for Shareholders, Bloomberg (Mar. 15, 2012). 

[Goldman is worried--I got a release from a PR firm suggesting that Goldman's profit-making is a boon to the economy and gives its clients great trust in the firm.  I read it and thought--hmm, misses the point.  Smith isn't condemning profit-making per se.  He is condemning profit-making at all costs, and in particular the "greed is good" type of profit-making that creates conflicts of interest with the client that is purportedly being served but would as soon eat a client as eat a steak, if money could be made for the firm (and the trader's bonus) that way.]

If we want the kind of society that gives everyone a chance to have a decent education, we have to quit running down public schools and diverting public monies to support private religious schools.   Hold schools accountable, but quit the wasteful focus on testing and assessment.  Do a little assessment and a lot more teaching.

If we want a more equal society, then we have to change our tax laws so that they don't favor the rich over everybody else.  Reduce the interest deduction, so that leveraged buyouts aren't a way to take a stable working company, make a huge profit by borrowing, and then dump it (either in bankruptcy or out of it, but nonetheless yoked with the debt that got the private equity firm rich).  Get rid of provisions that are primarily beneficial to the wealthy--reinstate a hefty estate tax, eliminate the preferential rate on capital gains, reinstate the phase out of deductions at high income levels, increase the top income tax rate (let the Bush tax cuts lapse in toto or at least for the top earners), phase out the accelerated depreciation schedules, bonus depreciation and expensing provisions, and otherwise return our tax system to a saner progressive model that can support the important basic research at universities and basic public infrastructure development that are the real keys to economic growth.

The right has bamboozled the public with its tiresome but endless class warfare rhetoric pushing corporatist policies that claim that tax cuts for wealthy corporations and wealthy individuals are the way to boost growth and help the majority of Americans have good jobs and decent wages.  It's a lie.  The way to do that is by moving to a more progressive tax system and providing more government funding for basic research (NIH, NSF, etc.) and for public infrastructure (mass transportation, rails throughout America and its inner cities, urban development).  
 

Ross Douthat Excuses the Manager/Owner Class

As the Occupy WallStreet movement has revealed, the United States is a country with growing disparity between an "overclass" of elite rich who have garnered most of the gains of productivity and the vast majority of the rest, who teeter on the verge of poverty if there is an illness, a death, a job loss or any of the other normal human catastrophes that beset us.

Many of those on the right--particularly economists who follow the Chicago School "unfettered markets" theory of the way capitalism works--suggest that there's nothing that can or should be done about these problems other than relying on the unfettering of the market system that created them to resolve them.

For example, take Ross Douthat's opinion piece in the New York Times on Sunday, Can the Working Class Be Saved? (Feb. 12, 2012).  He starts with Charles Murray's conclusion (in a book reviewed earlier in the Times)  that the working class has lost its way because it no longer values fidelity, piety, industry, thrift, and personal responsibility. 

These are of course the typical right-wing approaches to explaining the problems of much of the poor, near-poor and middle class in America today.  The right sees it as their fault for not being responsible (select cheaper doctors for health care, or die), not being faithful (if women would stay married to the bums that abuse them, they'd have more financial support), or not being faithful enough (turning away from church leads to teenage sex leads to pregnancies leads to abortions--and it's all bad in the eyes of the pious right that wants to impose its views on the rest of us).

But Douthat doesn't like Murray's answer--he considers it a too radical libertarian policy proposal that is "impractical" and "divorced from political reality."  Murrary would scrap all the individualized programs that result in too much government intervention in daily lives, and instead provide  a guaranteed minimum income to all Americans.  Murray's answer has much to appeal in it--direct aid probably costs less overall, since it goes directly to the people who need it instead of to all the middlemen.  Of course, the minimum is likely too low, and it probably doesn't provide enough to ensure that those in the bottom tiers of the income distribution have a fair chance at college and improving their lives.  It probably won't work to remove government from the picture entirely--after all, the reason we need to work together in the form of government is that we cannot as individuals do so many of the things that we need to do as a community.  For example, we need state support for public education at all levels to increase, so that there are public goods available to meet the needs of everyone.

But Douthat doesn't like the left's response to Murray's arguments about the American working class either.   He says that that liberals acknowledge "the social breakdown [Murray] described may be real enough, ... , but [claim that] it’s an inevitable consequence of an economic system that Republicans have rigged to benefit the rich." 

 He treats the assertion of untruth of that statement as though it proves itself.  But of course it doesn't.  In any system, there will tend to be power elites who gradually move the system more and more to favor themselves.  If they can co-opt the underclass to serving their needs and voting against interest, they will.  That is pretty much what has happened in the US under reaganomics--tax cuts, deregulation, militarization, privatization--those policies have ultimately all greatly benefited the rich and sometimes helped but often hurt the not-rich.   That has left us with the problem of the top 1%--called attention to by the Occupy Wall Street movement--garnering productivity gains for themselves and leaving the rest of Americans in dire straits.

In particular, the privatization/deregulation combination have permitted employers to have the upper hand in their treatment of workers and supported the gradual weakening of worker unions, which offered them their best means of combatting neo-feudal workplace policies.  Once private sector worker unions were weakened, the right began its effort to decimate public sector worker bargaining rights, an effort that is accelerating today.  Much of it is achieved by using a divide and conquer strategy--tell private workers that public workers are getting overpaid on their tax dollars, even when it is either untrue (most public workers are underpaid compared to private workers) or only partly true (some public workers make more than private workers, but in those cases it is the private workers who are underpaid, as their employee rights and their share of productivity gains have diminished over the last decades, while the managers' shares of productivity gains have increased like an expanding black hole).

What is Douthat's explanation for the problem?

It was globalization, not Republicans, that killed the private-sector union and reduced the returns to blue-collar work. It’s arithmetic, not plutocracy, that’s standing between the left and its dream of a much more activist government.

That, my folks, is post hoc rationalization, at best.  Globalization as we have experienced it is indeed a part of the problem.  But Milt Friedman's adulation of unfettered markets, the brute capitalism that the right has promoted for decades, is the driving impulse of globalization as we have experienced it.  The US gave up its own environmental sovereignty in trade agreements with other countries.  The US failed to protect its workers and industries--by , for example, exacting an "exit toll" when its own corporations moved jobs outside the country.  The US policy approach to globalization was determined by the "unfettered market" approach of the Chicago School--what Naomi Klein referred to in her insightful book as "The Shock Doctrine" (which is a good description of what Grecians are undergoing now in order to satisfy Morgan Stanley, Goldman Sachs and the other big multinational banks who hold a good deal of Greece's debt).  And the US's failure to provide adequate stimulus at the worker level--through job programs and even job guarantees--is a big part of the reason that the financialization of the economy had such drastic results for ordinary Americans.  See, e.g., Pavlina Tcherneva, why the job guarantee is superior, Naked Capitalism (Feb. 12, 2012).

As to the second part of Douthat's assertion--that "it's arithmetic and not plutocracy" that is the problem?  Again, that answer overlooks the way other nations have controlled health care costs  with single provider systems where hospitals and Big Pharma lose their market-making power, and doctors are subject to a more rational pricing system.  Health care is the primary driver of the expected increase in government benefit payouts (other than the "temporary" increase from the baby boom wave). 

So a combination of governmental actions could change the numbers in Douthat's "arithmetic"--utilization of the savings from transitioning from engagement in multiple wars to a more defensive, anti-war approach; re-regulation, anti-trust actions and a narrower scope for corporate consolidations and reorgs (to prevent the need for more bailouts); beefening of our unionization rules to protect workers against the current lopsided power of employers (e.g., a card check rule and requiring employers to permit a union meeting with workers for every employer meeting that addresses unionization issues); health care reform through a public option/single payer or even single payer/single provider solution (to prevent the continuing rentier profits from health services that are exploding health care costs in the US compared to other developed nations); and adjustments to the tax system to ensure a more appropriate "ability to pay" measure than the rough brackets and systems we have now.

The tax system, in other words, cannot redress that problem in and of itself, but it can certainly be a major contributor to a remedy. 

For example, we have a relatively flat bracket system, that doesn't make a distinction between $400,000 of income and $300 million of income.  A finer-tuned bracket structure that responds to today's income levels rather than those of the 1950s would have more rate brackets and a higher top rate for those hedge and equity fund managers and CEOs who earn multiple millions, even hundreds of millions a year (some earning in half a day more than their average workers make in an entire year). 

Furthermore, although the estate tax is our only method for a "last chance" to extract some tax from the financial assets mostly held by the very rich ( and mostly passed on, unsold, to their heirs in a windfall of unearned benefits and stepped up tax basis), the current estate tax is pitiful against the mighty estates it should be taxing based on ability to pay.  The current estate rules include a too-large exemption--$10 million for a couple--that lets many large estates off the hook for any tax whatsoever.  Worse, the current estate tax rules has a flat rate that is too low--those with a family farm worth $20 million pay the same rate on the amount above the exemption as those with estates worth billions (albeit with provisions for paying that amount over up to 14 years).  Even worse, Congress hasn't acted to eliminate the many gimmicks that sophisticated tax advisers use to work around the pitiful estate tax provisions that are still included in our Code (e.g., the complete exclusion of life insurance proceeds rather than just the investment return, gimmicky trusts and phony partnership valuations to get around the estate exemption amounts, among others).

Douthat's prescription is the following:

1. lower the payroll tax burden (by paying for Social Security in "other ways" and structuring benefits so as not to create a disincentive to work--he doesn't provide specifics, but one suspects that he means privatization of Social Security)
2. build family friendly policy into planning (either through the left's favored european style family leave requirements or the right's favored method of child tax credits)
3. control immigration (favor highly skilled immigrants, disfavor low-skilled immigrants)
4. reduce incarceration rates (with "swift certain punishment" and "larger police forces")

Note that there's no mention of increasing taxes on the rich or of using the windfall from the end of the Iraq and Afghanistan wars to support work programs like the WPA that helped end the Great Depression.  While these are topics that should be discussed, there are as many questions raised by this list as are answered.  Surely we have to reduce incarceration--but swifter punishment implies loss of due process (quicker death penalty executions is a common plea from the radical right), while more police is not the answer to things like the methamphetamine criminal gangs (modernizing our drug laws to treat most drugs as legal would be a great first step, since it is the criminalization of drugs that makes the criminality  of drug lords  so profitable, as we learned during Prohibition).  Surely we should be more aware of our immigration policies' impact on US families and workers.  But immigrants actually create new jobs--the mouths have to be fed, the families have to be housed, etc.  It is not so clear that shutting the door protects US jobs but may in fact close them down.  Family friendly policy is a good idea--which is why legalization of same-sex marriage and repeal of DOMA needs to happen, so that all the different kinds of US families can have similar protections and similar assurances of long-term security, that will help them be steadier and more responsible workers and parents.  Lowering the payroll tax burden for the poor and near-poor makes sense, but increasing it for those who are better off makes sense too. 

James Kwak: Department of Duh (as in...GOP tax plans ALL increase the deficit)

From Mark Thoma, a Kwak comment on the way each of the GOP candidates' tax proposals would add much bigger holes to the deficit than anything Obama proposes, while simultaneously contributing to the obscene inequality in this country by rewarding the rich with large tax cuts (and in most cases shifting the burden to those who can least bear it).  Class warfare on the campaign trail is most represented by these redistributionist proposals for making the rich richer and the poor poorer.

See Kwak, Department of Duh (Jan 19, 2012).  Here's Kwak's concluding statement:

Someone has to point out that the same people who are complaining about deficits are proposing to vastly increase those deficits. Especially when their fantastic claims are essentially going unchallenged on the campaign trail.

Why We Should Care About Romney Refusing to Release His Tax Returns If Nominated

As most are probably aware, Romney announced a two days ago that he did not intend to release his tax returns even if he were selected as the Republican presidential nominee.  See, e.g., Mitt Romney Declines to Release Tax Returns, Cementing Posture of Secrecy, Huffington Post (Dec. 22, 2011) (quoting Romney as announcing "Never say never, but I don't intend to do so").

The reasons that such releases have traditionally been pushed for presidential candidates are myriad.  Voters can understand  more about a candidate's wealth  and potential conflicts from reviewing the returns.  They also have some idea of the candidate's understanding of finance from viewing the returns. 

What kinds of things likely prompt Romney not to want to release the returns?  Are they issues that voters might reasonably take into account in assessing his candidacy or are they irrelevant concerns? 

One can speculate that Romney may be worried that the stark revelation of his immense wealth compared to most voters will be damaging.  We are living through a second Gilded Age, when wealth is concentrated in enormous measure in the hands of very few Americans at the top, and the vast majority of us are just barely getting along and are worried about being tossed out of the middle class into the New Poor.  In that context, surely the wealth of a candidate is information that is relevant to voters.  Persons of immense wealth may have trouble understanding the daily trials and tribulations of 'average' Americans who have to save judiciously for unusual expenses and who may be thrust into bankruptcy by a car accident, storm-caused damage to a home, sudden change in job possibliites, or onset of a serious illness.  Further, Romney is trying to take advantage of his experience as a businessman and claims about his market abilities and savvy financial training:  that makes his tax returns directly relevant and it strikes this voter as contradictory that he both wants to claim it and hide it.

Given Romney's wealth, it is likely that most of his income is in the form of income from capital that is privileged under our tax code with especially low preferential capital gains rates--capital gains, almost all corporate dividends and income from pension funds (his private equity firm Bain Capital, still pays him a generous share of 'profits' through a deferred compensation plan--another tax -reduction scheme that most Americans can't benefit from).   Surely it is relevant to voters whether a presidential nominee is particularly benefited by the current tax laws that favor the wealthy or not.  And surely it is relevant just how extensive that benefit is.  For example, Romney may well pay a lower effective tax rate than many Americans who have many times less income than Romney does. Voters are entitled to know that fact, since it will undoubtedly influence Romney's views about tax reform.  As David Donnelly, the national campaigns director of the Public Campaign Action fund, notes in the Huffington Post piece, "the implications are that he is afraid of what this says about who he is and who he will represent if he is in the White House."

The decision not to release tax returns also provides more evidence of a person who does not believe in transparency.  Romney hasn't released information about campaign contribution "bundlers."  He destroyed records from his tenure as governor of Massachusetts.  This tendency towards secrecy runs against the importance of openness for the sustainability of democratic institutions.

Romney is "one of the wealthiest men ever to run for the presidency" and he made most of that money in the extremely tax-advantaged world of private equity fund managers (who have claimed preferential capital gains rates on their compensation income under the "carried interest" loophole in the partnership provisions that the wealthy members of Congress haven't yet been able to bring themselves to close).   Shear, Romney Says He Won't Release Tax REturns, New York Times, Dec. 22, 2011.  Release of returns would call attention to the privileged tax system applicable to private equity fund managers, and to the fact that Romney enjoyed that kind of special tax system while average Americans who toil for a living pay higher rates on their compensation.  Shouldn't we have that information in front of us in black and white? 

Tax policy is where a great many of the important decisions affecting every facet of the economic wellbeing of this country are now being made.  For a presidential candidate to refuse to release his/her tax returns and allow citizens to arrive at their own conclusions about how the candidate's wealth, tax advantages, and tax positions will influence his/her thinking on tax policy issues is worrisome.

Of course, the mere fact that there will be rampant speculation about the tax rate that Romney pays and the income that would be revealed on his tax returns if released is itself a reason to release the returns.  Americans will be interested, and they will want to understand how Romney's tax rates compare to their own.  The Democratic National Committee has already created a webstie that allows people to compare based on assumptions about Romney's rates, according to the New York Times story, at www.whatmittpays.com.  We already have too much misinformation and speculative information in our national campaigns, so it behooves Romney to release the forms so that people can see what the real information is.

And finally, the fact that Romney has challenged his own opponents to release their tax returns (Ted Kennedy in the 1994 Senate race) should be a "shame-on-you" reason for him to release his own returns now.  If he thought that Kennedy's tax returns would be relevant information for voters, then it is surely reasonable to assume that he thinks that his own tax returns would be relevant information for voters.

There doesn't seem to be any valid reason for Romney to withhold his tax returns if he is the nominee.  If he doesn't release them, then voters should attribute it to Romney's sense of patrician privilege.  And it wouldn't be unreasonable to assume along with that his acceptance of the corporatist agenda to shift more and more taxes onto working Americans and his inability to understand the daily lives of ordinary Americans. It should count against him in considering just how he will handle the key economic issues of our times--changes to the tax code that will finally require the wealthy and high income to pay more to redress the imbalance of the numerous changes made in the last 40 years that favor the wealthy.

Gingrich tax 'plan' starves government, feeds the wealthy, rests on flawed assumptions

In case you hadn't heard about it, Gingrich would offer taxpayers a choice to pay tax under current policy or at a 15% rate, with zero taxation of capital gains, dividends and interest that accrues mostly to the rich and uberrich, while corporate tax rate would be reduced to a mere 12.5%.  For the rich, the 15% rate on their ordinary income and the 0% rate on their predominant form of income (capital gains and income from capital) would be a windfall.  For corporations, it would practically amount to the elimination of the corporate tax.  It should be no surprise that tax revenues would decline substantially: the Tax Policy Center study of Gingrich's plan estimates by $1.3 trillion over a decade.  While the lower two quintiles would get an average tax cut of about $440, the top 1% (starting at incomes of about $629,000) would get an average $344,000 cut and the top 0.1% (starting at incomes of about 2.868 million) an average $1.9 million cut.  Id. 

See also Study: Gingrich Plan would provide big breaks for rich, blow huge hole in budget deficit, Washington Post (December 12, 2011); Rubin et al, Gingrich Plan to Add $1.3 trillion to Deficit, Study Finds, Bloomberg (Dec. 12, 2011).

Gingrich's rationale is one that the right-wing American Enterprise Institute strongly supports--the tired old reaganomics rationale that eliminating taxes on capital will create new investments.  See, e.g., Why Romney is Wrong and Gingrich is Right on Capital Gains Taxes, AEI ( Dec. 12, 2011).  This theory is hogwash--lowering the return on investment by the piddling tax (whether 15% or 20%) will not keep folks from investing.  Folks will still make profits and they will still invest those profits, even if they have to pay taxes.  Paying no tax on dividends and capital gains won't make the rich suddenly invest in entreprenuerial activities, my friends.  (Simply trading corporate stocks on the secondary market is not, by the way, entrepreneurial.)

The Gingrich website also objects that this plan is really good for everybody.

An optional flat tax reform will be simple: Tax returns can be done on one sheet of paper,” the website says. “Subtract from income a standard deduction and deductions for charity and home ownership, multiply the result by the fixed, single rate of taxation of at most 15 percent, and the process is over.”  Wash. Post, above (quoting the website).

Folks, the hardest part of the income tax is figuring out whether you have income and how it is characterized (capital or ordinary).  Neither of those two difficulties disappears under Gingrich's system.  Furthermore, ordinary fold really don't have a very difficult time with their tax returns--they have wage income (withheld against), report the standard deduction and personal exemptions, and get a refund of part of the amount withheld.  The appeal to simplicity is a cover for the real purpose--to provide an unprecedented tax break to the wealthiest Americans at a time when the right is targeting Medicare and Social Security for cuts.  This is just one more example of class warfare from the right wing.

GOP Representative moves to increase deficit--and aid the investor class

The GOP has made lots of fusses lately about the deficit.  According to the party line, earned benefits that Americans rely on for health care and retirement income just "have" to be reduced, no matter how painful it is to the GOP-controlled House to do it, because of the unrelenting deficits that are destroying the US economy.

How then can any GOP member of the House think it is reasonable to introduce legislation that institutes a permanent tax cut that will cost the government billions will benefitting primarily the very rich investors in corporate stock?

Peter Roskam (Republican from Illinois and member of the House Ways and Means Committee) introduced legislation--H.R. 3091 (for those with BNA access)-- on Tuesday that would make the ridiculously low Bush tax legislation provisions for capital gains and dividends permanent.   A 15% rate on the main source of income that the uberrich enjoy, while the rest of us pay regular ordinary income rates on our wages. 

How does Roskam justify this further giveaway to the rich, this further example of governmental capture by oligarchy?  He claims that this revenue reduction that benefits mostly the very rich will --yes, you guessed it--help generate U.S. investment and create jobs.  Making this giveaway rate permanent for everybody will "foster a culture that encourages investment, capital formation, and economic growth", he says.  BNA Daily Tax Report, Oct. 5, 2011.

Balderdash.   Low capital gains rates have nothing to do with encouraging investment or capital formation or job creation.  They mostly reward investors in the secondary market on their trades.  They let the rich get even richer and make more investments--probably in emerging markets rather than in the US.

It is true that having more cash on hand because you didn't pay as much taxes means  you'd have more to spend.  So why not encourage economic growth by putting cash in the hands of the middle and lower income classes through the payroll tax reduction proposed by Obama? (Yes, it should be temporary--as an economic stimulus.)  

This is just another example of class warfare in action in the right-leaning House GOP.  All the fuss about deficits.  All the economic terrorism about the U.S. debt limit.  But reducing revenues still more in order to benefit the wealthy--well, the Mr. R. just can't wait to do that one.

Sen. Levin's Seven-Point Plan to Reduce the Deficit

 Sen. Levin is continuing to publish his plan for reducing the deficit, "We Can Reduce the Deficit and Protect the Middle Class" (Sept. 30, 2011).  This is set forth in a letter to the Joint Select Committee on Deficit Reduction (Sept. 15, 2011).

Now, without even looking at the plan, I wish he'd named it something else.  How about "We can Move the U.S. Economy Forward and Continue to Enlarge the Middle Class".  After all, the point of any thinking about spending and taxes is how government can intervene to ensure a stable and sustainable economy that works well for our citizens.  The continuing growth of the middle class is essential to that--if the middle class is growing, the lower class should be shrinking.  (With luck, the UberRich upper class will also be shrinking, since sustainable economies that work well for our citizens do not result from oligarchic rule.)  But let's look at what he suggests.

First, he accepts the budget agreement goal to reduce the deficit by $1.2 trillion over the next decade.  After all, that is what Congress agreed to. 

[Beale here:  A point probably worth making here is that this amount is LESS than the decade-worth of costs of the Bush 2001 tax cuts at the time they were enacted.  Makes one think, doesn't it, that a good approach might be just to let those tax cuts all lapse as scheduled in 2012.  No action needed.  What was ostensibly enacted as a temporary cut to stimulate the economy could just be treated as what it was enacted as--a temporary cut.  You'd think Republicans, who designed the temporary nature of the Bush tax cuts and said that they were needed because our budget was in surplus at the time, would be the first to argue for simply letting the law apply as it is written (with the extensions through 2012, of course) and let them lapse.  Why?  We are no longer in surplus, and the Republicans are raising Cain about the level of the deficit.  Allowing these to lapse as they are slated to do will solve the deficit problem.]

Second, he argues that no significant deficit reduction can (or should) be accomplished with spending cuts alone: revenues must be restored.  He points to historical patterns and notes that even under Reagan, when the drastic 1981 revenue reduction created a huge deficit, there followed multiple deficit reduction plans built on revenue increases (i.e., tax increases).

Levin:  "Federal revenues today are the lowest share of gross domestic product in generations:  just 14.9 percent. And past efforts to reduce high deficits have made new revenue a significant part of the equation. President Reagan, for example, presided over three deficit reduction plans that achieved more than three-quarters of their deficit reduction through revenue increases."

Third, he identifies seven possible steps to eliminate loopholes and subsidies for a fairer result.  (these are detailed in the letter.)

1. eliminate offshore tax shelter abuses

Levin discussed these first two items in a Sept. 16 floor statement: Reducing the Deficit by Eliminating Loopholes for Tax Havens and STock Options as well as the original letter to the Committee.

The Stop Tax Haven Abuse Act (S.1346) would combat offshore tax abuses. It contains more than a dozen provisions to shut down offshore tax loopholes and expose offshore tax cheats, including measures to penalize offshore financial institutions and jurisdictions that impede U.S. tax enforcement; stiffen penalties on aiders and abettors of tax evasion; shift the burden of proof establishing who controls an offshore entity; stop companies managed and controlled in the United States from claiming foreign status; treat U.S. deposits and investments by offshore subsidiaries of U.S. parent corporations as taxable repatriated income; and treat credit default swap payments made from the United States to offshore recipients as taxable U.S. source income. (quoted from letter)

[Beale: these are all good ideas.  We absolutely must change the way we treat credit default swap payments.  We shouldn't allow naked credit default swaps at all, and we should source swap payments coming from the US to offshore recipients as US source income.  Currently, we encourage the use of these complex derivatives by giving them very favorable tax treatment.  We also must focus on the issues of legitimate foreign statuts (management and control) and we need to treat U.S. deposits by offshore affiliates as repatriated income.  This is a point I have made often in the discussion of the corporatist push for a repatriation tax holiday.  When proponents concede that the 2004 holiday was a farce and had a very poor cost to benefit ratio in terms of creating jobs, they tend to then say--oh, but just bringing all that cash back into the good ole USA is itself a boost to the economy.  My response--much is already back in the USA in bank accounts and other investments.]

2. eliminate tax provisions favoring issuance of stock options as compensation

The Ending Excessive Corporate Deductions for Stock Options Act (S.1375) would eliminate a corporate loophole that currently gives special tax treatment to corporations that pay their executives with stock options. Stock options are the only type of compensation which, due to a special method for calculating the tax deduction, often allows corporations to deduct more than the compensation expense shown in their books. The latest data available shows that, over a five-year period, from 2005 to 2009, corporate stock option tax deductions as a whole exceeded corporate stock option book expenses by $12 to $61 billion each year, forcing ordinary taxpayers to subsidize tens of billions of dollars in excessive executive pay tax deductions. Closing this loophole would end this unfair tax subsidy of corporate executive compensation. (from letter)

 3. close the 'carried interest' loophole

In a Sept. 19 speech Reducing the Deficit: Eliminating Wall Street Loopholes, Levin says in general about items 3 and 4 the following:

Each of these loopholes amounts to a subsidy. Working American families who pay their taxes every year end up carrying an extra burden because these provisions allow Wall Street to pay a lower tax rate than the rate applied to average workers. I cannot see how anybody can explain to working Americans that they must bear a greater tax burden so that hedge fund managers get a tax break on pay that often amounts to millions of dollars a year, or so that speculative traders can pay a lower tax rate on so-called investments they might hold for just a few seconds.

He adds about carried interest

One would end the “carried interest” loophole that allows hedge fund managers to pay the lower capital gains tax rate on their pay for managing investments.

***

We tax income that investors receive from hedge funds and other investments at the lower capital-gains rate because, in theory at least, those investments help put capital to work, creating jobs and growing the economy. But the fund manager isn’t putting his own capital at risk. He’s just doing his job – the same as his employees, or the janitor who cleans his office at night. This tax break doesn’t reward risk-taking or job creation. It rewards what is already an extremely lucrative profession. According to a survey by a magazine covering the hedge fund industry, the top 10 hedge fund managers last year each made at least $440 million. Six made more than $1 billion, in one year. It’s hard to imagine we need to offer a tax break to encourage people to become hedge fund managers.

[Beale here--Levin should apply this provision much more generally to "fund managers" rather than just hedge fund managers.  Under the partnership rules as currently interpreted, people are treated as "partners" when they are given a "profits interest" in a partnership in compensation for their services, and these profits interests are then treated as receiving distributive shares of partnership income and gains rather than as receiving payments of wage compensation.  If a partnership has lots of capital gain type income rather than ordinary income, then under this interpretation of the rules the manager ends up getting his compensation as mostly capital gains.  This is especially true of private equity funds (which generally buy an asset, break up the company or fire workers or restructure and then sell the asset a few years later, reaping a huge capital gain) or real estate partnerships.  Hedge funds get some of the capital gain play, but tend to deal in more ordinary assets, though they have manuvered the deals for going public so as to capitalize on tax favorable outcomes as well.  All of these fund managers fare extraordinarily well in terms of the amount of compensation they receive.]

4. close the  "blended rate" loophole

In that same Sept. 19 speech:

And what is the blended-rate loophole? Since 1981, those who trade in some financial products, such as futures contracts and options, have enjoyed a specially created tax loophole that allows them to pay a lower rate than, for example, traders who buy and sell stock. No matter how long a speculator holds on to a futures or options contract – again, even if it’s a few seconds –their gains and losses are taxed at a lower, so-called “blended” rate, that is, part at the capital gains rate, part as ordinary income.  So a dealer who buys a stock, and sells it within a year, must pay taxes at the ordinary income rate, while the same dealer who buys an option and sells it 30 seconds later gets to pay the lower capital gains rate on most of that income.

[Beale:  the special provision here is section 1256, which applies to certain types of financial instruments, as noted.]

 the derivatives blended-rate loophole doesn’t just add to the deficit. It’s plainly unfair. It’s unfair not only to working Americans who have to pay higher tax rates than these derivatives traders. It’s also unfair to investors who risk their capital in long-term stock and other investments that are more important to job creation, but don’t enjoy that same tax break. This loophole gives preferential treatment to short-term speculative trades over long-term patient capital, and that’s exactly the wrong message to send.

[Beale: Well, most investors aren't making investments that support job creation, since most stock market purchases are in the secondary market and don't add a dollar to the company's coffers.  But he is absolutely on target that "carried interest" recipients shouldn't get capital gains on compensation income, whereas investors who buy stock are at least risking their capital.]

5. restore the upper-bracket income tax rates to the pre-Bush levels

Levin explained the rationale for this more thoroughly in a September 26 speech on Reducing the Deficit: Reducing Tax Breaks for the wealthy, as follows:

First, we should allow Bush-era tax cuts to end for those making more than $250,000. The case for this change is straightforward: It would restore a measure of fairness to the tax code that has been sadly lacking for more than a decade, and it would reduce the deficit by hundreds of billions of dollars.

Supporters of the tax cuts in 2001 and 2003 made a number of promises. President Bush said his cuts “will bring real and immediate benefits to middle-income Americans.” And yet in the decade since they began, the incomes of middle-class Americans have stagnated. According to the U.S. Census Bureau, the typical American household’s income, when adjusted for inflation, actually fell more than 8 percent from 2001 to 2010. President Bush said his tax cuts would increase the pace of job creation. And yet during the Bush years, jobs grew at roughly one-third the rate that we enjoyed during the Clinton administration. President Bush said “we can proceed with tax relief without fear of budget deficits, even if the economy softens.” And yet just those tax cuts going to the wealthiest 1 percent of Americans have added hundreds of billions of dollars to the deficit since 2001. So, these tax cuts have failed to deliver the promised benefits, and they have driven us deeper and deeper into debt. Ending them will bring down the deficit; President Obama’s proposal to end the cuts for high-income earners would reduce the deficit by an estimated $866 billion over 10 years.

What these tax cuts did deliver is a striking and continuing rise in income inequality. It’s no coincidence that as we passed a series of tax cuts whose benefits overwhelmingly flow to the wealthiest Americans, those wealthy individuals have seen their fortunes rise. A few decades ago, the wealthiest one percent of Americans took home 10 percent of all income. Today, they get 24 percent of all income. As those at the top have prospered greatly, middle-class wages have stagnated – again, down more than 8 percent, for the median American household, since the Bush tax cuts took effect.

6. raise the capital gains tax rates

Levin also discussed this in the Sept. 26 speech:

Capital gains are income from the increase in value of an asset, such as a stock. Today, thanks to the Bush-era tax cuts, the top rate on capital gains is 15 percent. That’s substantially lower than the 28 percent rate included in President Reagan’s Tax Reform Act of 1986.

The theory in slashing capital gains tax rates was that lower rates would encourage investment, job creation and economic growth. But as has been the case with slashing ordinary income tax rates for the wealthy, cutting capital gains taxes simply has not delivered what supporters promised. Given the stagnation in middle-class living standards that we have seen since the 1980s, it is difficult to argue to middle-class Americans that reducing capital gains rates made them better off.

Instead, this is another benefit that flows overwhelmingly to the wealthiest among us. According to the Tax Policy Center, more than 75 percent of the benefit from lower capital gains taxes goes to those with incomes over $1 million a year, and 94 percent of the benefit to those above $200,000.
This tax break for the most fortunate of our citizens also adds tens of billions of dollars each year to the deficit. The Congressional Budget Office earlier this year estimated that raising the capital gains rate by just two percentage points would reduce the deficit by about $50 billion over 10 years. Raising the top rate closer to Reagan-era levels would bring far more deficit reduction.
Those who fight to preserve these high-income tax cuts call attempts to end them “class warfare.” Mr. President, ending these tax breaks won’t start a class war. It will help end one – a war that, for more than a decade, has taken a devastating and immediate toll on the middle class, and created huge new deficits that damage their future prospects as well.

7. revise the tax lien process to use electronic liens

 Tax liens are a basic tool to collect unpaid taxes. Today, federal law requires liens to be filed on paper in more than 4,000 locations around the country, determined by the location of the lien. The IRS maintains a service center that does nothing but monitor dozens of varying local requirements for lien filings, track filings, and release liens once they are paid.

I have introduced legislation, S. 1390, along with Sen. Begich, to replace this antiquated system with an electronic federal tax lien registry available to the public on the Internet at no cost. The IRS estimates that this change would not only save millions of dollars in administrative costs, but also enable the IRS to release liens more quickly once they have been paid and free up employees and resources for other work. Equally important, a public electronic registry could help encourage those who owe taxes to settle their bills and take enormous pressure off taxpayers who have paid what they owe.

Right-wing Blogger Peter Pappas' Problematic Post About Tax Lies

Peter Pappas is not a left-leaning blogger.  His "tax lawyer blog" tends to serve as a booster for the right-wing rants about how the rich are paying more taxes than the poor (as though that's any surprise--the rich are the ones with the staggeringly large incomes and the uber-rich are the ones garnering the gains from productivity, while the rest of us stagnate or decline).  He also tends to engage in ad hominem attacks on left-wing bloggers--yours truly being a frequent honoree.

Here's the most recent one--a rant that left wing bloggers complain about the misleading tax rhetoric of the right and "never" complain about the misleading tax rhetoric of the left.    Pappas, Tax Lies Some Left Wing Bloggers Ignore, Sept. 13, 2011.

Let's unpack this.  Bernie Sanders, in Congress, makes a speech and in it he states that Exxon Mobil didn't pay any taxes on its $19 billion in income.  Pappas thinks I should have complained about how this rhetoric was misrepresenting the facts and misleading the public, since the company didn't pay any federal income taxes but did pay a piddling amount of other (state, local, excise) taxes.  But Sanders' next sentence in the blurb that Pappas excerpts mentions the company's $157 million refund from the IRS:  that sentence fairly clearly sets the context as a discussion of what the companies pay in federal income taxes, don't you think?  Yeah, Sanders should have spoken perfectly articulately and made absolutely clear that he was talking about federal income taxes. After all, Exxon did pay a piddling sum in overall taxes on their $19 billion of income (they claim $500 million on $19 billion, which is about 2.5%, counting all state, local and excise taxes).   But that de minimis error of lack of specificity or ambiguity is very very small potatoes compared to what the right-wing rhetoric chain does.

Pappas gives a link to his earlier post, which shows a 'guide' that Sanders' office prepared about corporate freeloaders.  Note that the first item in that guide states the following: " Exxon Mobil's 2009 profits totaled $19 billion but according to the company's SEC filing it received a $156 million rebate from the IRS PLUS it didn't pay any federal taxes." 

However, Pappas doesn't give a link to the particular speech that he's quoting, which always makes me think that there is something in the speech that he doesn't like because he knows it is telling about the state of America today.  By not giving a link (or any other direct information about the speech), Pappas avoids providing any context.  What was the context of the speech?  Sanders was addressing the question of whether Congress should extend yet again the Bush tax cuts for the wealthiest Americans.  (Now I didn't say "federal income tax cuts passed in the Bush administration" but I believe all you readers know that when we talk about the Bush tax cuts we are talking about federal income taxes, don't you?)

Instead, Pappas just links to Politifact.com--a reader might think it is just a link to the website home page, since he doesn't provide the title in the link, but it is actually a link to PoliltiFact's "rating" of the statement about Exxon Mobil in Sanders speech on the Bush tax cut extension decision.  if you pursue that link you find a link to the Nov. 30, 2010 Sanders speech (which I've also linked here).  Here are a few excerpts from that speech:

It is very clear to anyone who spends 2 minutes studying the issue that the people on top are doing extraordinarily well at the same time as the middle class is collapsing and poverty is increasing.  ***

If you can believe this, since between 1980 and 2005, 80 percent of all new income created in this country went to the top 1 percent--80 percent of all new income. That is why people are wondering and asking: What is going on in my life? How come I am working longer hours for lower wages? ***

After we bailed them out, those [Wall Street] CEOs today are now earning more money than they did before the bailout. And while the middle class of this country collapses and the rich become much richer, the United States now has by far the most unequal distribution of income and wealth of any major country on Earth. ***

In the midst of all of this growing income and wealth inequality in this country, we are now faced with the issue of what we do with the Bush tax cuts of 2001 and 2003. And if you can believe it, we have people here--many of my Republican colleagues--who tell us: Oh, I am so concerned about our recordbreaking deficit. I am terribly concerned about a $13.7 trillion national debt. I am terribly concerned about the debt we are going to be leaving to our kids and our grandchildren. But wait a minute. It is very important that we give, over a 10-year period, $700 billion in tax breaks to the top 2 percent. ***

[in the penultimate paragraph, Sanders referred to the oil companies and their demand for even more tax breaks--(federal income tax breaks, I'm sure he meant to say).  That's where the quoted sentences discussed by Pappas are embedded.]

These people want to cut back on the powers of the EPA and the Department of Energy so that ExxonMobil can remain the most profitable corporation in world history while oil and coal companies continue to pollute our air and our water. Last year, ExxonMobil made $19 billion in profit. Guess what. They paid zero in taxes. They got a $156 million refund from the IRS. I guess that is not good enough. We have to give the oil companies even more tax breaks

All in all, Pappas' chagrin at the "misleading" nature of Sanders' talk seems manufactured.  Anybody reading the speech would have been quite clear that this was a discussion of federal income taxes.

And let's put Pappas' choice of doing this posting (and claiming that I in particular am somehow derelict in my duty as a blogger for not pointing out the "lie" in Bernie Sanders' speech) in context.  Let's look, for example, at one of the "related posts" on Pappas' own blog.   Pappas, 51% of Americans Pay Zero Tax; Share of Government Funded by the Rich Increases, May 9, 2011.   Now, of course you all know that the title by itself is an outright lie.  It is very hard for any American who buys various items necessary for existence (gas, food, clothing, necessaries, an occasional splurge) to manage not to pay any state or local sales taxes, and of course many states have income taxes as well and even poor Americans who have jobs will also pay payroll taxes (for Social Security and Medicare).  It simply isn't true that  51% of Americans pay "zero tax".  Now, in the body of the  post itself, Pappas does state that the 51% figure is a number in a congressional study suggesting the percentage of Americans that owe no federal income tax in 2009.   Does that make up for the headline?  It's an attention grabber--and a terribly misleading one.

I doubt if anyone thinks that anybody who talks frequently about tax gets it right all the time--we are human, after all, and we make mistakes.  But there is a big difference between an ambiguity that is clarified by context and the type of misleading tax rhetoric that the right indulges in regularly in order to push a corporatist and pro-elite, anti-tax, anti-government agenda.  You know those false claims about taxation-- that poor people don't pay taxes and they really "need" to so that they will have some "skin in the game", that family businesses and farms are lost due to the estate tax (no, there's only anecdotal evidence about some very few being slightly impacted and none about "loss" due to the piddling estate tax), or that capital gains preferential rates for stock sales reward investment in corporations (no--they primarily reward gains from secondary trades between investors), or that Social Security is insolvent (no, it is not ), or that the investor-class merits preferentially low taxes because they are the job-creation engine of America (no--jobs are created by entrepreneurs and by mom-and-pop business and by big corporations, not the secondary market investors in those corporations and certainly not by the private equity funds that routinely buy so that they can fire), or that the active financing exception to subpart F is merited because big banks otherwise would be taxed to death (no--it is merely a way to give a special subsidy to foreign banking operations that results in very low tax rates for such financial institutions), and on and on.....  Most Americans are so ill-informed that they do not understand that the "taxable income" that may be reported by the elite is already a figure far removed from (and generally much less than) the economic income of that same elite--because of the exclusion for muni-bond interest, the tax preferences for retirement income and the elite's access to incredibly generous benefits even while those of the vast majorithy of Americans are being reduced, etc.  Nor do they understand that many of the deductions that the middle class also enjoys --for example, the mortgage interest deduction--give special benefits to the elite.

There is a reason that vast numbers of Americans are misinformed about tax matters, the role of the debt ceiling, the solvency of Social Security, the relative distribution of incomes, the relative rates of taxation, and the share of government funding paid by major corporations and similar points.  It is due to a conscious campaign by the radical right to discredit government and protect the elite from taxation.  And as we saw in the recent manufactured 'debt ceiling crisis', the radical right today is wililng to commit economic terrorism in order to get its way and protect the elite at all costs. 

Lofgren's Exodus from GOP Politics--a worthy farewell

Mike Lofren, long-time GOP operative, decided it was time to leave the cult.  His farewell, published on Truth Out, is well worth reading:  Goodbye to all that: reflections of a GOP operative who left the cult, Sept. 3, 2011.

First, he acknowledges that both political parties fall short of what they should be ("are rotten"), but that the GOP is so bad because the "Party is full of lunactics."

Both parties are rotten--how could they not be, given the complete infestation of the political system by corporate money on a scale that now requires a presidential candidate to raise upwards of a billion dollars to be competitive in the general election?  Both parties are captives to corporate loot.  The main reason the Democrats' health care bill will be a budget buster once it fully phases in is the Democrats' rank capitulation to corporate interests--no single-payer system, in order to mollify insurers; and no negotiation of drug prices, a craven surrender to Big Pharma.  But both parties are not rotten in quite the same way.....

[I]t may have come as a shock that the Republican Party is so full of lunatics.  ..[T]he crackpot outliersw of two decades ago have become the vital center today:  Steve King, Michele Bachman (now a leading presidential contender as well), Paul Broun, Patrick McHenry, Virginia Foxx, Louie Gohmert, Allen West.   The Congressional directory now reads like a casebook of lunancy. ...

I could see as early as last November that the Republican Party would use the debt limit vote...in order to concoct an entirely artificial fiscal crisis.   They, they would use that fiscal crisis to get what they wanted, by literally holding the US and global economies hostage....It should have been evident to clear-eyed observers that the Republican Party is becoming less and less like a traditional political party in a representative democracy and ... more like an apocalyptic cult, or one of the intensely ideological authoritarian parties of 20th century Europe.  ...

Second, he notes that this new ideological purity means that the democratic institutions cannot function properly, and the GOP is undermining democracy itself by its extremist approach to governance.

During periods of political consensus...the Senate was a 'high functioning' institution: filibusters were rare and the body was legislatively productive.... [Now] virtually every bill, every nominee for Senate confirmation and every routine procedural motion is ... subject to a Republican filibuster. ...As Hannah Arendt observed, a disciplined minority of totalitarians can use the instruments of democratic government to undermine democracy itself. ...[Quoting John P. Judis, the author notes] "If there is an earlier American precedent for today's Republican Party, it is the antebellum Southern Democrats of John Calhoun who threatened to nullify, or disregard, federal legislation they objected to and who later led the fight to secede from the union over slavery."  ....[A] Republican committee staff director told me candidly ...what the method was to all this obstruction...By sabotaging the reputation of an institution of government, the party that is programmatically against government would come out the relative winner.

Third, the reason this sabotage of government by a radical right GOP is working is the ignorance of most US voters.

There are "tens of millions of low-information voters"  whose "confusion over who did what allows them to form the conclusion that 'they are all crooks' and that 'government is no good'.... This ill-informed public cynicism ... further intensifies the long-term decline in public trust in government that has been taking place since the early 1960s--a distrust that has been stoked by Republican rhetoric at every turn. ...

Fourth, the corporatist media "are also complicit in this phenomenon" because they dare not tell the truth or distinguish facts from fiction or even point out when a side is completely in the wrong, for fear of not appearing 'evenhanded.'

Ever since the bifurcation of electronic media into a more or less respectable 'hard news' segment and a rabidly ideological talk radio and cable TV political propaganda arm, the 'respectable' media have been terrified of any criticism for perceived bias.  Hence, they hew to the practice of false evenhandedness.  ...[Discussing Chris Cillizza, the author notes that ] the pundit's ironic depreciation falls like the rain on the just and unjust alike, on those who preciptated the needless [debt ceiling] crisis and those who despaired of it.  He seems oblivious that one side--or a sizable faction of one side--has deliberately attempted to damage the reputation of Congress to achieve its political objectives....

Fifth, as more voters become disillusioned by the GOP's anti-government propaganda and the media's misleading depiction of the parties' actions, it allows the radical fringe to acquire even more power.

And if the uninvolved middle declines to vote, it increases the electoral clout of a minority that is constantly being whipped into a lather by three hours daily of Rush Limbaugh or Fox News.  ...

[T]he deindustrialization and financialization of America since about 1970 has spawned an increasingly downscale white middle class--without job security (or even without jobs), with pensions and health benefits evaporating, and with their principal asset deflating in the collapse of the housing bubble.  Their fears are not imaginary; their standard of living is shrinking.

Sixth, the Republican method is "schizophrenic", in that it claims to be based on reverence of the Constitution yet denigrates  key constitutional principles, including the very federal government that the Constitution was written to create after the failure of the loosely joined states under the Articles of Confederation.

[The party] embodies a "caustic" denigration of the "very federal government that is the material expression of the principles embodied in that document....  [M]ost Republican officeholders seem strangely uninterested in the effective repeal of Fourth Amendment protections by the Patriot Act, the weakening of habeas corpus and self-incrimination protections in the public hysteria following 9/11 or the unpalatable fact that the United States has the largest incarcerated population of any country on earth.  If anything, they would probably opt for more incarcerated persons, as imprisonment is a profit center for the prison privatization industry, which is itself a growth center for political contributions to these same politicians.  Instead, they prefer to rail against those government programs trhat actually help people.  And when a program is too popular to attack directly, like Medicare or Social Security, they prefer to undermine it by feigning an agonized concern about the deficit.  That concern ... is largely fictitious.

Seventh, the Democrats cede the ground and fail to combat the Republican madness, and the Republicans succeed with faux populism that hides their destructive agenda.

Democratic Leadership Council-style 'centrist' Democrats were among the biggest promoters of disastrous trade deals in the 1990s that outsourced jobs abroad: NAFTA, World Trade Organization, permanent most-favored-nation status for China.  ...While Democrats temporized, or even dismissed the fears of the white working class as racist or nativist, Republicans went to work.  To be sure, the business wing of the Republican Party consists of the most energetic outsources, wage cutters and hirers of sub-minimum wage immigrant labor to be found anywhere on the globe.  But the faux-populist wing of the party, knowing the mental compartmentalization that occurs in most low-information voters, played on the fears of that same white working class to focus their anger on scapegoats that do no damage to corproations' bottom lines: instead of raising the minimum wage, let's build a wall on the Southern border (then hire a defense contractor to incompetently manage it).  Instead of predatory bankers, it's evil Muslims.  Or evil gays.  Or evil abortionists.

How do they manage to do this?  Because Democrats ceded the field.  Above all, they do not understand language. ...You know that Social Security and Medicare are in jeopardy when even Democrats refer to them as entitlements.  'Entitlement' has a negative sound in colloquial English: somebody who is 'entitled' selfishly claims something he doesn't really deserve.  Why not call them 'earned benefits.' which is what they are because we all contribute payroll taxes to fund them.  ...

It was not always thus.  It would have been hard to find an uneducated farmer during the depression of the 1890s who did not have a very accrurate idea about exactly which economic interests were shafting him. ...  But that is not the case in the present economic crisis. After a riot of unbridled greed such as the world has not seen since the conquistadors' looting expeditions and after an unprecedented broad and rapid transfer of wealth upward by Wall Streeet and its corporate satellites, where is the popular anger directed, at least as depicted in the media?  At 'Washington spending'--which has increased primarily to provide unemployment compensation, food stamps and Medicaid to those economically damaged by the previous decade's corporate saturnalia.  Or the popular rage is harmlessly diverted against pseudo-issues: death panels, birtherism, gay marriage, abortion, and so on, none of which stands to dent the corporate bottom line in the slightest.

Eighth, the GOP has three basic tenents that the party carries out with ideological purity.

A. The GOP cares only about the corporate elite and the rich owners and managers thereof.  That class warfare and corporatism is the reason for their opposition to tax increases, their groundless claims that capital gains preferences are necessary to create jobs, their repetition of myths about small businesses as job creators or American tax rates as so onerous that it chases the jobs away.

"Their caterwauling about deficit and debt is so much eyewash to con the public. ...The GOP refused [Obama's proposed $4 trillion defict reduction package] becdause it could not abide so much as a one-tenth of one percent increase on the tax rates of the Walton family or the Koch brothers, much less a repeal of the carried interest rule that permits billionaire hedge fund managers to pay income tax at a lower effective rate than cops or nurses.  ...

Republicans have attempted to camouflage their amorous solicitude for billionaires with a fog of misleading rhetoric. John Boehner is fond of saying 'we won't raise anyone's taxes' as if the take-home pay of an Olive Garden waitress were inextricably bound up with whether Warren Buffett pays his capital gains as ordinary income or at a lower rate.  Another chestnut is that millionaires and billionaires are 'job creators'.  US corproations have just had their most profitable quarters in history; Apple, for one, is sitting on $76 billion in cash, more than the GDP of most countries.  So, where are the jobs?

Another smokescreen is the 'small business' meme, since standing up for Mom's and Pop's corner store is politically more attractive than to be seen shilling for a megacorporation.  Raising taxes on the wealthy will kill small business' ability to hire: that is the GOP dirge. ...But the number of small businesses that have a net annual income over a million dollars is de minimis. ...And ...small businesses account for only 7.2 percent of total U.S. employment. ...

Likewise, Republicans have assiduously spread the myth that Americans are conspicuously overtaxed.  But compared to other OECD countries, the effective rates of US taxation are among the lowest.  In particular, they point to the top corporate income rate of 35 percent as being confiscatory Bolshevism.  But again, the effective rate is much lower.  Did GE pay 355 percent on 2010 profits of $14 billion?  No, it paid zero.

When pressed, Republicans make up misleading statistics to 'prove' that America's fiscal burden is being borne by the rich and the rest of us are just freeloaders. ...All of these half-truths and outright lies have seeped into popular culture via the corporate-owned business press. ...And when misinformation isn't enough to sustain popular support for the GOP's agenda, concealment is needed. ...

B. The GOP "worship[s] at the altar of Mars" with a "sheer, libidinous enthusiasm for invading other people's countries."

About a month before Republicans began holding a gun to the head of the credit markets to get trillions of dollars of [spending] cuts, these same Republicans passed a defense appropriations bill that increased spending by $17 billion over the prior year's defense appropriation.  ...A cynic might conclude that this militaristic enthusiasm is no more complicated than the fact that Pentagon contractors spread a lot of bribery money around Capitol Hill.  That is true, but there is more to it than that.  It is no neceesarily even the fact that members of Congress feel they are protecting constituents' jobs.  ...Some areas ... are heavily dependent on Department of Defense (DOD) spending.  But there are many more areas of the country whose net balance is negative: the citizenry pays more in taxes to support the Pentagon than it receives back in local contracts.  And the economic justification for Pentagon spending is even more fallacious when one considers that the $700 billion annual DOD budget creates comparatively few jobs. ... [A] disproportionate share is siphoned off into high-cost research and development (from which the civilian economy benefits little); exorbitant management expenditures, overhead and out-and-out padding; and, of course, the money that flows back into the coffers of political campaigns.  A million jobs appropriated for highway construction would create two to three times as many jobs as a million dollars appropriated for Pentagon weapons procurement. ...

The results of the last decade of unbridled militarism and the Democrats' cowardly refusal to reverse it have been disastrous both strategically and fiscally.  It has made the United States less prosperous, less secure and less free. ...

C.  The GOP has merged politics and religious fundamentalism to replace Eisenhower Republicanism with a "system of economic royalism, militarism and fundamentalism"

[The GOP embracing of fundamentalism has had the] "consequent normalizing of formerly reactionary or quaint beliefs", including backward positions on evolution versus creationism, scriptural inerrancy, and the existence of angels and demons, resulting in a "prevailing anti-intellectualism and hostility to science." ...

The Constitution to the contrary notwithstanding, there is now a de facto religious test for the presidency. ... Politicized religion is also the sheet anchor of the culture wars.

[This] rise of politicized religious fundamentalism (which is a subset of the decline of rational problem solving in America) may have been the key ingredient of the takeover of the Republican Party. ...

In summary, the GOP is out to make sure that ordinary Americans suffer and that the elite have everything that they want.

Having gutted private-sector pensions and health benefits as a result of their embrace of outsourcing, union busting, and 'shareholder value', the GOP now thinks it is only fair that public-sector workers give up their pensions and benefits, too.  Hence the intensification of the GOP's decades-long campaign of scorn against government workers. ...They will move heaven and earth to force through tax cuts that will so starve the government of revenue that they will be 'forced' to make 'hard choices'--and that doesn't mean repealing those very same tax cuts, it means cutting the benefits for which you worked.

The attack on public workers and their pensions is particularly galling in light of the way the super-elite have accumulated wealth while paying very low taxes.  See, e.g., this article on Alter.Net regarding Paulson and the carried interest advantage he enjoyes.  Les Leopold, hedge fund gamblers earn the same in one hour as a middle class household makes in over 47 years, AlterNet, April 2011.  As some point, ordinary Americans must claim back their lives and livelihoods from the corporatist/elitist agenda.

Jon Huntsman's Wall St. J. Op-Ed: warmed over Reaganomics

There he goes again.  Huntsman's op-ed ran in the Sept. 6, 2011 Wall St. Journal: Reigniting the Entrepreneurial Spirit.

As though enterpreneurs aren't being entreprenuers right now.  HOw about the group that made the news last night--two young men who realized that they could repai iPhones and other electronic gear for half the amount that the manufacturers charge and still make a cool profit (YoubreakIFix)?  If you have a good idea and you try to make it work, odds are you can make money off it.  That makes you an entrepreneur.

Huntsman seems to think that making the tax code friendly to Google and other Big Corps is the way to encourage entrepreneurialism.  That's like saying that taxing  the wages of partners in private equity funds at capital gains rates encourages entrepreneurialism--it's a big laugh.  Carried interest managers aren't entrepreneurs; they are speculators who buy cheap, breakup, and sell expensive. 

Huntsman wants "tax simplification, regulatory reform, and changes in energy and trade policy."  That's just more of Reaganomics--tax simplification means tax cuts for business and the 'owner' class, regulatory reform means deregulation, and changes in energy and trade policy mean deregulation and opening up of protected areas for exploitation.  None of those things will create jobs, foster entrepreneurialism, or create a sustainable American economy.

Huntsman says he favors a "revenue-neutral tax overhaul modeled after Ronald Reagan's 1986 tax reform package--which will require taking on sacred cows."  So he is willing to eliminate a few carveouts and deductions, that's good.  But he wants to lower rates even more, that's bad.  In fact, he says "flatter" is "fairer"--that's a weird view of fairness in a country that has consistently favored progressive taxation as a way to ensure that the wealthy pay for the many advantages bestowed upon them by government.  The 1986 tax cut worked as well as it did (it was no panacea) because rates could be cut in half and still be at 35%.  Today's rates are already at tax haven lows and can't really be cut any further without decimating important government programs.  Moreover, one of the key 1986 reforms was to eliminate the preferential rate for capital gains and tax the wealthy on their income the same way that the middle class is taxed--all at ordinary income rates.  Huntsman wants to couple rate reduction from all time lows with elimination of all taxes on capital gains!    He of course calls that 'eliminating the double taxation on investments" but as I've explained several times before, that use of "double taxation' is mostly false, especially in respect to investment in companies' stocks.  We already have a special tax code provision that provides for very low taxation on the capital gains an entreprenuer invests in a company directly.  But the preferential capital gains rate goes far beyond that and applies to secondary market capital gains.  That has nothing to do with direct investment.  Moreover, we have accelerated depreciation, bonus depreciation and expensing provisions that essentially make investment in business equipment very close to tax free--there's no 'double taxation' involved. 

 Huntsman repeats his proposed new rate schedule--8%, 14% and 23%--combined with "eliminating deductions and credits".  That means that the poor and middle class would bear an unconsciounable tax burden, while the wealthy would pay even less than most of them do today.  He says he'll "make business tax rates globally competitive"--that should mean RAISING rates, since the US business tax rates is already at tax haven status among the 40 OECD countries.  But of course, he actually intends to lower business taxes even further, for the benefit of wealthy managers and owners.

Huntsman's objections to regulations are equally misleading.  Regulations are the way that government acts to prevent business from passing along costs to taxpayers as 'externalities'--costs that they don't have to take into account to make a profit, but that create real harms for others, such as air pollution,  long term ecological destruction, ruination of mountains (strip mining), ruination of streams (sewage discharge), etc.  Huntsman has already reached judgement on the NLRB's consideration of Boeing's plant relocation to a right-to-work (union destroying) state.  He similarly has decided that the Dodd-Frank financial system overhaul represents "another regulatory sin" because it creates "massive compliance costs."  It appears he'd rather that the too big to fail banks continue to speculate freely in interconnected ways that end up creating a financial crisis like 2007-2008.  After all, the banksters will enjoy that, and the politicians will benefit from the big campaign contributions.  But the rest--ordinary Americans that make up the vast majority of living, breathing 'beneficiariies' of the kind of unsteady, speculative, volatile financial system created by deregulated banks--will suffer.  Huntsman understands taht the regulations that protect ordinary bank customers may face the big banks to "choose between downsizing or facing much higher capital ratios."  He casts this as a parade of horribles resulting from Dodd Frank.  Oddly, because that's actually a desirable result of banking legislation--if only that were a real possibility, it would help to end the 'too big to fail' problem!

Huntsman as president also would favor Reagan's mantra of privatization--he would 'privatize' Fannie and Freddie and "let the housing market clear".  In other words, he would let private companies now garner all the benefit of the federal taxpayer dollars in vested in Fannie and Freddie (he posed no conditions about returning all the benefits of the long-term federal guarantee) and he wouldn't give a damn about ordinary Americans who have underwater mortgages.  There's nothing in his proposal for clawbacks on mortgages in bankruptcy or otherwise.

Huntsman's warmed-over reaganomics proposals for favoring big business over ordinary Americans through a deregulatory regulatory policy, tax cut tax policy, and privatization don't address the right issues, don't promote entrepreneurialism, and are not fair.