Sunday, April 11, 2010

Facts on Taxes: The Rich Pay Little or Nothing

This week, the wingnut Reality-Denying Squad turned its Backwards World attention to taxes, claiming that President Obama's tax cuts and tax credits for working families have turned middle-class Americans into welfare-sucking commies.

The truth, of course, is that over the past 50 years, tax rates for the rich - both individuals and corporations - have dropped to next to nothing, with the middle-class and small businesses having to make up the difference.

The banana-republic spread has gotten so bad, in fact, that the richest of the rich themselves are protesting the inequality.

From The Nation:

It's against that political backdrop that a just-released report from Wealth for the Common Good--a network of business leaders, high-income households and partners working together to promote shared prosperity and fair taxation--is a welcome and common sense antidote. History is always important, especially in the "US of Amnesia"--as writer Gore Vidal once put it--and this tight, fact-filled report gives us the history we need to understand how enormous tax cuts over the last 50 years have favored the wealthiest Americans at the expense of a strong and secure middle class. Its must-read facts and common sense ideas deserve and demand as much media attention as the tea partiers' kvetching.

What's crystal clear in this well-documented report--whose title might have been "The Real Story Behind Today's Unfair Economy"--is that the middle-class has largely been shafted by both Republicans and Democrats, whose campaign coffers are equally greased by wealthy donors. And the shift in the tax burden has fueled a rising inequality and concentration of wealth that weakens our democracy--as The Nation argued in its June 30, 2008 special issue, "The New Inequality."


Taxpayers in the middle--who made more than the bottom 40 percent but less than the top 40 percent--saw an increase in their taxes, paying 15.9 percent of their incomes in total federal taxes in 1960 and 16.1 percent in 2004. Adding insult to injury, "Our children and grandchildren... will be asked to pay back, with interest, the trillions our federal government has been borrowing to offset our loss of tax revenue from wealthy taxpayers."

The result of this imbalanced, unjust, and out-of-whack tax shift?
A public investment deficit--seen in our crumbling infrastructure, lack of investment in a robust green economy, and rising tuition costs at public universities, to name just a few areas--and a concentration of wealth and power that bought a deregulated casino economy and subsequent economic collapse that the rest of us are paying for.

Yet despite this historic shift in the tax burden, the debate we are having on tax reform is inadequate to say the least.

What's really shocking is we can't even manage Tax Reform 101--to tax the hedge fund managers like we do normal working people. They pay a stunning 15 percent on their billions--a lower rate than teachers, cops, even their own assistants! (see here, here, and here.) And a 2008 GAO report found that two-thirds of US corporations paid zero federal income taxes from 1998-2005. Twenty-five percent of the largest US corporations had $1.1 trillion in gross sales in 2005 but paid no federal income taxes. Where is the debate on corporate tax rates and loopholes? If corporations are now people, can't they start paying taxes like people too? (Not if their new Supreme Court-sponsored campaign ads can help it.)

Here are some examples of what a smart tax reform program would look like as prescribed by the Wealth for the Common Good report: End the income tax cuts for households earning more than $250,000 and raise capital gains and dividend rate from 15 to 20 percent ($45 billion increase in revenues); a progressive estate tax on estates worth over $2 million or $4 million for a couple--taxing no more than one in every 200 estates--generating $40 billion immediately and over $100 billion a decade from now; end overseas tax havens used by the likes of Citigroup and Best Buy ($100 billion per year); a modest financial transaction tax ($100 billion per year); a new 50 percent tax bracket for income over $2 million ($60 billion per year).

This is the kind of common sense, creative thinking that needs to be taken up by elected officials who understand that another generation of this tax madness will lead to ever higher concentrations of wealth, gut an already weakened middle class, and unravel the American Dream.

As Oliver Wendell Holmes wrote, taxes are the price we pay for civilization. When I pay mine, I keep my mind on the highways I drive and the clean municipal water I drink and the fire and police departments and National Public Radio. I try not to think about the billions Blackwater and Halliburton have stolen from American taxpayers. It would be easier if I knew the obscenely wealthy were paying their share of those billions.

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