American politics are dominated by those with money. As such, America’s tax debate is dominated by voices that insist the rich are unduly persecuted by high taxes and that low-income folks are living the high life. Indeed, a new survey by the Pew Research Center recently found that the most financially secure Americans believe “poor people today have it easy.”
The rich are certainly entitled to their own opinions — but, as the old saying goes, nobody is entitled to their own facts. With that in mind, here’s a set of tax facts that’s worth considering: Middle- and low-income Americans are facing far higher state and local tax rates than the wealthy. In all, a comprehensive analysis by the nonpartisan Institute on Taxation and Economic Policy finds that the poorest 20 percent of households pay on average more than twice the effective state and local tax rate (10.9 percent) as the richest 1 percent of taxpayers (5.4 percent).
ITEP researchers say the incongruity derives from state and local governments’ reliance on sales, excise and property taxes rather than on more progressively structured income taxes that increase rates on higher earnings. They argue that the tax disconnect is helping create the largest wealth gap between the rich and middle class in American history.
“In recent years, multiple studies have revealed the growing chasm between the wealthy and everyone else,” Matt Gardner, executive director of ITEP, said. “Upside-down state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State policymakers shouldn’t wring their hands or ignore the problem. They should thoroughly explore and enact tax reform policies that will make their tax systems fairer.”
The 10 states with the largest gap between tax rates on the rich and poor are a politically and geographically diverse group — from traditional Republican bastions such as Texas and Arizona to Democratic strongholds such as Illinois and Washington.
The latter state, reports ITEP, is the most regressive of all. Four years after billionaire moguls such as Amazon’s Jeff Bezos and Microsoft’s Steve Ballmer funded a campaign to defeat an income tax ballot measure, Washington now makes low-income families pay seven times the effective tax rate that the rich pay. That’s right, those in the poorest 20 percent of Washington households pay on average 16.8 percent of their income in state and local taxes, while Washington’s 1-percenters pay just 2.4 percent of their income. Like many of the other regressive tax states, Washington imposes no personal income tax all.
“The problem with our state tax systems is that we are asking far more of those who can afford the least,” concludes ITEM’s state director Wiehe.
By contrast, the states identified as having the smallest gap in effective tax rates are California, Delaware, Minnesota, Oregon and Vermont — all Democratic strongholds and all relying more heavily on progressively structured income taxes. Montana is the only Republican-leaning state ITEP researchers identify among the states with the least regressive tax rates.
Of course, if you aren’t poor, you may be reading this and thinking that these trends have no real-world impact on your life. But think again: In September, Standard & Poor’s released a study showing that increasing economic inequality hurts economic growth and subsequently reduces public revenue. As important, the report found that the correlation between high inequality and low economic growth was highest in states that relied most heavily on regressive levies such as sales taxes.
In other words, regressive state and local tax policies don’t just harm the poor — they end up harming entire economies. So if altruism doesn’t prompt you to care about unfair tax rates and economic inequality, then it seems self-interest should.
By: David Sirota, Senior Writer at The International Business Times; The National Meno, January 23, 2015
“GOP Response; The Breadbags Of Empathy”: From Tiny Booties Made From Hostess Twinkie Wrappers To Bidding For Plutocrats
Imagine going to the doctor and saying, “My back is killing me. I can barely move. What can you do to help me? Should we do an X-ray? Physical therapy? Medication?” And the doctor responds, “Yeah, I hurt my back once. It was awful. So I know exactly what you’re feeling. Anyway, thanks for coming in—just see the receptionist on the way out to pay your bill.”
That’s not too far off from what we heard from Senator Joni Ernst in the GOP response to the State of the Union address last night. I’m particularly interested in this part:
As a young girl, I plowed the fields of our family farm. I worked construction with my dad. To save for college, I worked the morning biscuit line at Hardees.
We were raised to live simply, not to waste. It was a lesson my mother taught me every rainy morning.
You see, growing up, I had only one good pair of shoes. So on rainy school days, my mom would slip plastic bread bags over them to keep them dry.
But I was never embarrassed. Because the school bus would be filled with rows and rows of young Iowans with bread bags slipped over their feet.
Our parents may not have had much, but they worked hard for what they did have.
These days though, many families feel like they’re working harder and harder, with less and less to show for it.
Because America is still the home of the world’s most creative and inspiring strivers, within minutes people were not only posting pictures of themselves with bread bags on their feet to Twitter, some even crafted shoes out of bread to photograph. But what, precisely, is the point of the bread bag story supposed to be?
The point is affinity, saying to ordinary people, in Christine O’Donnell’s immortal words, “I’m you.” I understand your struggles and fears, because I’ve experienced them. I don’t need to walk a mile in your shoes to feel your pain, because I’ve already done it, though mine were covered in bread bags. At a time like this, Ernst’s ability to tell stories about her hardscrabble roots is no doubt one of the big reasons Republican leaders chose her to deliver their response.
There’s a second part of this message that no Republican is going to lay out too explicitly, and Ernst certainly doesn’t, which is that because I’m just like you, when it comes time to make decisions about the policies that will affect you, I will have your interests at heart.
But there’s a problem with that, because despite the years she spent trudging through the snow in her bread bag feet, Joni Ernst’s beliefs about economics are no different from Mitt Romney’s, Jeb Bush’s, or those of any other Republican whose childhood feet were shod in loafers hand crafted from the finest Siberian tiger leather. There’s almost perfect unanimity within the GOP on economic issues, an agreement that the minimum wage should not be raised, that taxes on the wealthy are onerous and oppressive and should be reduced, that regulations on corporations should be loosened, and that government programs designed to help those of modest means only serve to make them indolent and slothful, their hands so atrophied that bootstrap-pulling becomes all but impossible.
But now that both parties agree that they must address economic inequality and stagnant wages, you really need to follow up the tale of long-ago hard times with some specifics about what you want to do now. And this is where things break down. When Ernst got to laying out the GOP economic agenda, here’s what she offered: First, the Keystone XL pipeline, which as an economic stimulus is a joke. For whatever combination of reasons—the fact that environmentalists hate it is the most important—Republicans have locked themselves into arguing that a project that will create at most a few thousand temporary jobs is the most important thing we can do to boost the American economy. Second, Ernst said, “Let’s tear down trade barriers in places like Europe and the Pacific.” Kind of vague there, but nobody likes trade barriers. She didn’t elaborate, however. And finally, “Let’s simplify America’s outdated and loophole-ridden tax code.” Which, again, nobody disagrees with in the abstract, but I doubt there are too many struggling families saying that their biggest problem is that the tax code is riddled with loopholes.
So that isn’t much of a program. But she did close by saying that America is “the greatest nation the world has ever known.” And it’s inspiring that someone like Joni Ernst can start life in the most modest of circumstances, fitted as a baby with tiny booties made from Hostess Twinkie wrappers, then graduate to bread bags as she learned to castrate hogs (they do help keep the blood off your one good pair of shoes), and eventually grow up to do the bidding of the nation’s noblest plutocrats. It shows what’s possible in this great country of ours.
By: Paul Waldman, Senior Writer, The American Prospect, January 21, 2015
With his penultimate State of the Union address, President Obama gave the speech that Democrats have always wanted him to give.
After six years of hedges and qualification, the president finally offered a confident, full-throated defense of his economic record, and of his progressive vision of government.
“Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999. Our unemployment rate is now lower than it was before the financial crisis,” the president declared. “More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we’ve been in almost 30 years.”
“It’s now up to us to choose who we want to be over the next 15 years, and for decades to come,” Obama said. “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”
The president went on to lay out a program of “middle-class economics,” featuring tax cuts for working families, the expansion of paid sick leave, free community college, new infrastructure spending, and a higher minimum wage. He also highlighted his administration’s work on several issues close to the hearts of liberals, such as combating climate change, protecting the rights of LGBT people around the world, closing the prison at Guantánamo Bay, defending the right to vote, and safeguarding elections from “dark money for ads that pull us into the gutter.”
While nothing the president proposed would have the impact of historically significant Obama-era achievements like the Affordable Care Act or the Dodd-Frank Wall Street reform law, most of his proposals poll extremely well with the American public. And Obama practically dared Republicans to stand in their way.
“These policies will continue to work, as long as politics don’t get in the way. We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns,” Obama said. “We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix. And if a bill comes to my desk that tries to do any of these things, it will earn my veto.”
The president’s speech featured few surprises (in fact, the White House released a full transcript of Obama’s remarks before he even entered the House chamber). But the official Republican response from newly elected senator Joni Ernst (R-IA) contained even fewer. Her sunny speech had almost nothing to do with what Obama proposed; in fact, just seconds in, she flatly acknowleged that “rather than respond to a speech, I’d like to talk about your priorities.”
Apparently, Republicans still think that those priorities include building the Keystone XL pipeline — which Ernst labeled the “Keystone jobs bill,” although it will create just 35 permanent positions — cutting taxes and spending, repealing the health care reform law, and little else.
“Americans have been hurting, but when we demanded solutions, too often Washington responded with the same stale mindset that led to failed policies like Obamacare,” Ernst lamented. “It’s a mindset that gave us political talking points, not serious solutions.”
That statement betrays Republicans’ central political problem in 2015. For years, they have claimed that President Obama’s policies would lead to disaster. But now, as the GOP takes full control of Congress, those “failed policies” have resulted in a booming economy — an irony that the president noted in his address.
“At every step, we were told our goals were misguided or too ambitious; that we would crush jobs and explode deficits,” Obama said. “Instead, we’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in 50 years.”
Meanwhile, the GOP had no response except for the same plans that it pitched at the depth of the recession.
It’s no secret that Republicans will dismiss most of the proposals that President Obama put forth during his speech. But the rest of the nation might not follow suit. According to a new NBC News-Wall Street Journal poll, 45 percent of Americans are happy with the state of the economy — an 11-year high — and 49 percent approve of Obama’s handling of the issue. Democrats’ economic message is starting to resonate, and Republicans still don’t have a serious plan of their own.
If they don’t find one shortly, they risk seeing the national debate leave them behind just as they hope to win the White House in 2016.
By: Henry Decker, The National Memo, January 21, 2015
“Republican Fear Campaign Running Out Of Steam”: Obama Dares GOP To Help The Middle Class In His State Of The Union
Can you remember a time when the political zeitgeist has ping-ponged the way ours has in just two months? The day after last November’s election, Barack Obama was finished. Now, two positive jobs reports and a 60-odd-cent-per-gallon drop in gasoline prices later, he’s the president again. And the Republicans have just taken power and have run Congress for only two weeks, but suddenly they’re kind of on the defensive.
Of course this isn’t to say that Obama is going to get a single plank of the ambitious agenda he laid out in the State of the Union Address through Congress. The Republicans still hold those cards.
But what’s happened in the last couple of months, and what Obama seized effectively with this speech, is this. The mood has changed. The public is open to ideas it wasn’t open to a year ago; even two months ago.
Politics in this country is really about only one thing at a time, and that one thing favors one party or the other. In 1981 and for a few years thereafter, it was about how oppressive the federal government was. Advantage Republicans. For a short time in the late 1980s, it was about how we’d vanquished the Soviet Union (and won a little side war). Advantage Republicans.
For a while in the 1990s, it was about building a future-oriented economy. Advantage Democrats. After 9/11, it was about security. Advantage Republicans. And so on. It’s a little more complicated than this, because thrown into these cycles we have the scandals and the social changes that all have some impact on how people think about things, but basically, this is how American politics rolls: We go through these eras, and the eras make the majority of people decide that one party or the other is better equipped to do something about the challenges.
And now, we seem to be—seem to be—entering an era in which the chief debate is going to be about expanding prosperity downward from the people who’ve enjoyed the lion’s share of the prosperity of the last 30 years. Not positive about that. But that’s the smell. Look at all those minimum-wage initiatives that passed on ballots last November, passed even by a comparatively conservative electorate. Look at Mitt Romney talking empathetically in recent days about the people he didn’t seem to care much about in 2012. Something has turned.
Obama has helped turn it—with a few speeches over the years, and certainly with some of his policies, like health care, which he defended in an impressively in-your-face way in this speech. But even a president can’t turn it himself. He needs luck. And finally he’s had some—the gas prices, the energy explosion, the jobs reports, all of them culminating in a sunnier public mood.
All that adds up to an atmosphere in which a majority of Americans are finally starting to add two and two and get four. The Republicans didn’t give them much. The Great Recession, most notably. Obama, to most of them, still hasn’t given them all that much either, but at least we’re out of that mess and things are finally looking up.
And when things are looking up, people are less anxious, and they can start thinking about things like free community college. In lousy economic times, free community college sounds to your average person like a bunch of airy-fairy liberal nonsense. Like something they’re going to be stuck paying for. In better economic times, it sounds to your average person like a not-half-bad idea, and something they or someone they know might even benefit from.
It’s all public psychology. We liberals have a hard time accepting this. That’s because of Keynes. Keynes, see, has taught us the concept of counter-cyclical investment: that when the economy is in dire straits, that is exactly when the government should be spending a boatload of money. It makes economic sense, to people who read a lot. But to average people, it doesn’t make any common sense. Common sense tells average people that when the economy is in dire straits, you tighten your belt and spend less. This is right for a family, but wrong for a government, which is the opposite of a family, economically speaking. And Lord did it infuriate liberals when Obama himself played into it. He gave these speeches—what, 2010, maybe—when he likened the government to a family sitting around the kitchen table deciding what expenses it needed to cut out.
No! Wrong, wrong, wrong, in economic terms. But in real-life political terms, he was right at least insofar as you can’t get people to think about longer-term economic goals when they’re out of a job, or underemployed. But once that’s turned, you can.
That is what’s turning now—not turned, but turning. And that is what is about to make our political conversation be about this new one thing: sharing the prosperity. The speech was not a great speech, a speech for the ages; but it did understand that, and it did tap into that. People are now willing to start thinking about longer-term economic goals. A quickie CNN poll found that the speech was extremely well-received: 51 percent very positive, 30 percent somewhat positive, only 18 percent negative.
That really should worry Republicans, no matter how many seats they have in Congress. Our politics is becoming about one big thing on which the Republicans have nothing to say. Actually, they do have something to say, and it’s “No!” They looked ridiculous, sitting on their hands, refusing to applaud simple and obvious things that have 60, 65 percent public support. I have a feeling more such moments await them.
By: Michael Tomasky, The Daily Beast, January 21, 2015
“This Isn’t The Debate Republicans Want To Have”: Republicans Befuddled By Obama Plan To Cut Middle-Class Taxes
Even President Obama’s most fervent opponents must acknowledge that he’s getting quite good at putting them on the defensive. Facing a Republican Congress and with only two years remaining in his presidency, he seems to come up with a new idea every couple of weeks to drive them up a wall. So he certainly wasn’t going to let the State of the Union address go by without using the opportunity — days of pre- and post-speech commentary, plus an audience in the tens of millions — to its utmost.
At Tuesday’s speech, Obama will announce a series of proposals meant to aid middle class and poor Americans and address inequality, most particularly an increase in the child care credit and a $500 tax credit for working couples (here’s the White House’s fact sheet on the proposals). To pay for it, investment and inheritance taxes on the wealthy would be increased and some loopholes that small numbers of the super-rich (like one Willard Romney) exploit will be closed. While the SOTU is often the occasion for dramatic announcements that are soon forgotten, this one lands in the center a debate that is looking like it will shape the upcoming presidential race. Naturally, Republicans are not pleased.
But if you listen carefully to what they’re saying, you’ll notice that they are barely mentioning the proposals for middle-class tax breaks which are supposed to be the whole purpose of this initiative; instead, all their focus is on the increases America’s noble job creators would have to endure in order to pay for it.
“Slapping American small businesses, savers and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs,” said Orrin Hatch. “More Washington tax hikes and spending is the same, old top-down approach we’ve come to expect from President Obama that hasn’t worked,” said John Boehner’s spokesperson. “This is not a serious proposal,” said Paul Ryan’s flak. “We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending.” For the record, a “flatter” tax system means either the poor paying more or the rich paying less, though Republicans never say which they prefer.
Marco Rubio was on the same page. “Raising taxes on people that are successful is not going to make people that are struggling more successful,” he said on Face the Nation. “The good news about free enterprise is that everyone can succeed without punishing anyone.” That was about as close as any Republican came to actually talking about the tax cuts Obama is proposing (though this National Review editorial does discuss them, by arguing that it’s an attack on motherhood). That’s probably because Republicans been in favor of ideas like them in the recent past.
While Obama does want to provide new funds to make community college free to anyone who wants it, most of his proposals in this round use the tax code to help people of modest means, which is exactly what Republicans usually suggest when they’re forced to come up with an idea to help the poor or middle class. Since they believe that government programs to help ordinary people are useless almost by definition, the only way to give anyone a hand is with a tax cut. And yes, the hand they usually extend is toward the wealthy, whose burdens are so crushing that justice demands that lawmakers not rest until they can be afforded relief. But tax cuts are so magical they can help anyone, which is why Republicans been in favor of expanding the Earned Income Tax Credit and the child care tax credit before.
But paying for it by increasing investment and inheritance taxes on the wealthy, like Obama is proposing? Not on your life.
One thing’s for sure: as the economy improves, both parties are now being forced to address the underlying issues of stagnant wages and inequality that have been an anchor around ordinary people’s lives for the last few decades. It’s fair to say this isn’t the debate Republicans want to have, and it’s easy to mock them for their insistence that they’re really the party with something to offer the middle class and the poor. But it’s a lot more productive to just take them at their word and see what they actually propose to do.
So Mitt Romney says he has cast off his previous contempt for those of modest means and now wants to focus his 2016 presidential campaign on the issue of poverty? All right — what are his ideas? If they’re actually worthwhile, he should get whatever credit he’s due. If it’s more trickle-down policies and stern lectures about bootstrap-pulling, then we’ll know nothing has changed.
You can argue — and many will — that it’s pointless for Obama to introduce significant policy proposals like this when he knows they couldn’t make it through the Republican Congress. But what alternative does he have? He could suggest only Republican ideas, but he wouldn’t be much of a Democratic president if he did that. Or he could offer nothing at all, and then everyone would criticize him for giving up on achieving anything in his last two years. If nothing else, putting these proposals forward can start a discussion that might bear legislative fruit later on. Major policy changes sometimes take years to accomplish, so it’s never too early to start. And if Republicans have better ideas, let’s hear them.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line, The Washington Post, January 19, 2015