Buffett Rule Will Raise $50 Billion Per Year, Affect Just 0.08 Percent Of Taxpayers
When President Obama announced his latest vision for the so called “Buffett rule” — a 30 percent minimum tax on millionaires — during his State of the Union address this week, Republicans were quick to criticize it. For instance, Speaker of the House John Boehner (R-OH) derided the proposal as a “political gimmick.” “It’s a smokescreen,” added Rep. Steve Scalise (R-LA).
However, as a new analysis from Citizens for Tax Justice pointed out, the Buffett rule as laid out in the speech could raise up to $50 billion per year to pay down the deficit, while affecting just 0.08 percent of taxpayers:
Citizens for Tax Justice has calculated that President Obama’s “Buffett Rule” would, if in effect this year, raise $50 billion in a single year and affect only the richest 0.08 percent of taxpayers— that’s just eight percent of the richest one percent of taxpayers. […]
To calculate the $50 billion figure, we assumed that there would be a minimum tax that applies to adjusted gross income (AGI) minus charitable deductions. (We’ll call this modified AGI.)
We assumed that a taxpayer with modified AGI greater than $1 million would face a minimum tax of 30 percent of modified AGI. The taxpayer would pay whichever is greater, their personal income tax under the existing rules or this minimum tax.
Obviously, $50 billion by itself won’t balance the budget, but it certainly doesn’t hurt. At the same time, the Buffett rule will aid in correcting some of the problems in the tax code — like one quarter of millionaires paying lower rates than millions of middle class families and some millionaires paying no income tax at all — that have helped drive income inequality up to a level not seen in the U.S. since the 1920s.
By: Pat Garofalo, Think Progress, January 27, 2012
“Taxes At The Top”: Low Taxes On The Very Rich Are Indefensible
Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils — partly out of voyeurism, of course, but also because it’s about time that we had this discussion.
The theme of his dance, for those who haven’t been paying attention, is taxes — his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.
Even then, however, he will face pressure to release previous returns, too — like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled “carried interest” tax break.
But the larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes — major burdens on middle-class families — this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains — three-quarters of which go to the top 1 percent of the income distribution — warrant such special treatment.
Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.
When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.
Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.
Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.
So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.
And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.
So Mr. Romney’s tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2012
“Everyday Workers”: Capitalism’s Real “Risk-Takers”
Mitt Romney is casting the 2012 campaign as “free enterprise on trial” — defining free enterprise as achieving success through “hard work and risking-taking.” Tea Party favorite Sen. Jim DeMint of South Carolina says he’s supporting Romney because “we really need someone who understands how risk, taking risk… is the way we create jobs, create choices, expand freedom.” Chamber of Commerce President Tom Donahue, defending Romney, explains “this economy is about risk. If you don’t take risk, you can’t have success.”
Wait a minute. Who do they think are bearing the risks? Their blather about free enterprise risk-taking has it upside down. The higher you go in the economy, the easier it is to make money without taking any personal financial risk at all. The lower you go, the bigger the risks.
Wall Street has become the center of riskless free enterprise. Bankers risk other peoples’ money. If deals turn bad, they collect their fees in any event. The entire hedge-fund industry is designed to hedge bets so big investors can make money whether the price of assets they bet on rises or falls. And if the worst happens, the biggest bankers and investors now know they’ll be bailed out by taxpayers because they’re too big to fail.
But the worst examples of riskless free enteprise are the CEOs who rake in millions after they screw up royally.
Near the end of 2007, Charles Prince resigned as CEO of Citgroup after announcing the bank would need an additional $8 billion to $11 billion in write-downs related to sub-prime mortgages gone bad. Prince left with a princely $30 million in pension, stock awards, and stock options, along with an office, car, and a driver for five years.
Stanley O’Neal’s five-year tenure as CEO of Merrill Lynch ended about the same time, when it became clear Merrill would have to take tens of billions in write-downs on bad sub-prime mortgages and be bought up at a fire-sale price by Bank of America. O’Neal got a payout worth $162 million.
Philip Purcell, who left Morgan Stanley in 2005 after a shareholder revolt against him, took away $43.9 million plus $250,000 a year for life.
Pay-for-failure extends far beyond Wall Street. In a study released last week, GMI, a well-regarded research firm that monitors executive pay, analyzed the largest severance packages received by ex-CEOs since 2000.
On the list: Thomas E. Freston, who lasted just nine months as CEO of Viacom before being terminated, and left with a walk-away package of $101 million.
Also William D. McGuire, who in 2006 was forced to resign as CEO of UnitedHealth over a stock-options scandal, and for his troubles got pay package worth $286 million.
And Hank A. McKinnell, Jr.’s, whose five-year tenure as CEO of Pfizer was marked by a $140 billion drop in Pfizer’s stock market value. Notwithstanding, McKinnell walked away with a payout of nearly $200 million, free lifetime medical coverage, and an annual pension of $6.5 million. (At Pfizer’s 2006 annual meeting a plane flew overhead towing a banner reading “Give it back, Hank!”)
Not to forget Douglas Ivester of Coca Cola, who stepped down as CEO in 2000 after a period of stagnant growth and declining earnings, with an exit package worth $120 million.
If anything, pay for failure is on the rise. Last September, Leo Apotheker was shown the door at Hewlett-Packard, with an exit package worth $13 million. Stephen Hilbert left Conseco with an estimated $72 million even though value of Conseco’s stock during his tenure sank from $57 to $5 a share on its way to bankruptcy.
But as economic risk-taking has declined at the top, it’s been increasing at the middle and below. More than 20 percent of the American workforce is now “contingent” — temporary workers, contractors, independent consultants — with no security at all.
Even full-time workers who have put in decades with a company can now find themselves without a job overnight — with no parachute, no help finding another job, and no health insurance.
Meanwhile the proportion of large and medium-sized companies (200 or more workers) offering full health care coverage continues to drop – from 74 percent in 1980 to under 10 percent today. Twenty-five years ago, two-thirds of large and medium-sized employers also provided health insurance to their retirees. Now, fewer than 15 percent do.
The risk of getting old with no pension is also rising. In 1980, more than 80 percent of large and medium-sized firms gave their workers “defined-benefit” pensions that guaranteed a fixed amount of money every month after they retired. Now it’s down to under 10 percent. Instead, they offer “defined contribution” plans where the risk is on the workers. When the stock market tanks, as it did in 2008, the 401(k) plan tanks along with it. Today, a third of all workers with defined-benefit plans contribute nothing, which means their employers don’t either.
And the risk of losing earnings continues to grow. Even before the crash of 2008, the Panel Study of Income Dynamics at University of Michigan found that over any given two-year stretch about half of all families experienced some decline in income. And the downturns were becoming progressively larger. In the 1970s, the typical drop was about 25 percent. By late 1990s, it was 40 percent. By the mid-2000s, family incomes rose and fell twice as much as they did in the mid-1970s, on average.
What Romney and the cheerleaders of risk-taking free enterprise don’t want you to know is the risks of the economy have been shifting steadily away from CEOs and Wall Street — and on to average working people. It’s not just income and wealth that are surging to the top. Economic security is moving there as well, leaving the rest of us stranded.
To the extent free enterprise is on trial, the real question is whether the system is rigged in favor of those at the top who get rewarded no matter how badly they screw up, while the rest of us get screwed no matter how hard we work.
The jury will report back Election Day. In the meantime, Obama and the Democrats shouldn’t allow Romney and the Republicans to act as defenders of risk-taking free enterprise. Americans need to know the truth. The only way the economy can thrive is if we have more risk-taking at the top, and more economic security below.
By: Robert Reich, Salon, January 17, 2012
MItt Romney, Money And “Quiet Rooms”: Mr. 1 Percent Is Clueless About Inequality
The GOP primary keeps getting funnier. Just as Newt Gingrich was telling a South Carolina Romney supporter “I agree with you” that attacking Mitt Romney’s Bain Capital career could help Democrats on Wednesday, his friendly Super PAC “Winning the Future” released the long version of its hit piece “When Mitt Romney Came to Town.” I thought MoveOn did a bang-up job last week with an ad profiling a pair of older Kansas City steelworkers left jobless thanks to Bain; this ad is so slashing MoveOn might have thought twice about releasing it. If you haven’t seen it, it’s here. Clearly, Gingrich is trying to have it both ways: Mollifying wealthy GOP donors horrified by his attacks on capitalism while continuing to bloody Romney. We’ll see how well it works.
Romney continues to insist Democrats, as well as some of his GOP rivals, are practicing “the politics of envy,” and on NBC Wednesday made what might be his dumbest remark yet. Asked whether there was ever a fair way to discuss income inequality, the GOP front-runner replied:
I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like. But the president has made it part of his campaign rally. Everywhere he goes we hear him talking about millionaires and billionaires and executives and Wall Street. It’s a very envy-oriented, attack-oriented approach and I think it will fail.
Maybe Mitt wants to confine talk of inequality to “quiet rooms” because he’s seen the Pew Research Center data showing that Americans think conflict is growing between rich and poor. Two-thirds of Americans see that conflict, up 50 percent since 2009. While African-Americans are still more likely than whites to see that conflict, the percentage of whites who agree tripled. Credit Occupy Wall Street for hiking consciousness about the gap between rich and poor, but credit the GOP for creating the conditions that allowed income inequality to soar, and the top 1 percent to gobble up 40 percent of the nation’s wealth.
A sly Sarah Palin called for Romney to release his tax returns on Sean Hannity’s show last night, to Hannity’s seeming distress. Palin defended Rick Perry’s “vulture capitalism” attack even as Hannity kept trying to get her to declare it unfair. She’s gone rogue again! We can only dream that Romney releases his tax returns. I think he’s less scared about showing his staggering wealth than revealing the scandalously low tax rate he pays, given how much of his income comes from investment and is thus subject to lower capital gain taxes. (I’m sure we’d also learn a lot from the tricks Romney’s accountants use to keep his effective tax rate even lower.)
Palin also demanded that Romney substantiate his claims to have created 100,000 jobs while at Bain, calling it a “come to Jesus” moment. What is she up to? Her snow-machine-driving husband Todd endorsed Newt Gingrich last week, to great derision, but it did raise questions about what the nominally neutral ex-V.P. nominee is thinking. She’s not thinking good thoughts about Mitt Romney, that’s for sure.
Meanwhile, the man who foisted Palin on the world, John McCain, today accused Romney’s anti-Bain attackers as supporting “communism.” But BuzzFeed recalls that in 2008, McCain himself attacked Romney’s Bain days. “He presided over the acquisition of companies that laid off thousands of workers,” McCain complained back then, and campaign manager Rick Davis told the National Journal:
“He learned politics and economics from being a venture capitalist, where you go and buy companies, you strip away the jobs, and you resell them. And if that’s what his experience has been to be able to lead our economy, I’d really raise questions.”
By: Joan Walsh, Editor at Large, January, 12, 2012
Willard Mitt Romney Rails Against “Entitlement Society” — That Takes Chutzpa
Earlier this week, Republican Presidential candidate Willard Mitt Romney delivered a speech framing the 2012 presidential election as a choice between an “entitlement society” and an “opportunity society.”
It really takes chutzpa for a guy who was born with a silver spoon in his mouth to rail against an “entitlement society.” Here is a guy who got his start in life the old-fashioned way — he inherited it.
Now I realize that you don’t get to choose your parents. He had no role in deciding that he would be born into the family of an auto executive and Michigan Governor — but at least he should have the decency not to attack “entitlements.”
This is not a guy who pulled himself up by his boot-straps. His name, his family connections and — not incidentally — his money gave him a real leg up when he decided to go into the investment banking business. And let’s not forget that when he did go into business for himself, he didn’t make money building things or inventing things — or designing new products. He made money buying companies, and often breaking them up, or firing employees.
Last Sunday’s New York Times reported that Romney continued to make money from his old firm Bain Capital through his time as Governor and his attempts to run for Senate and President. It noted that much of his income is likely taxed at only 15% — though we don’t know for sure since he refuses to release his tax returns.
He is the poster boy for the one percent — and he is talking about “entitlements”?
If you ask someone on the street which kid in high school Mitt Romney reminds him of, he is likely to tell you it’s the kid who drove to school in a Ferrari and got all the socially “in” girls. He was the smug guy who knew he was set for life.
As humorist and political commentator Jim Hightower used to say of the first George Bush — Romney is a guy who was born on third base and thinks he hit a triple. And he is lecturing America about the “entitlement society? ”
And let’s look at what he refers to as “entitlements.” Mainly he’s talking about Social Security, Medicare and Medicaid. Let’s remember that Social Security and Medicare are not “entitlements” at all. They are earned benefits that people pay for through their payroll taxes throughout their working lives.
And Medicaid? It’s the program that guarantees that if you’re a child who is not lucky enough to be born into the household of an auto executive and Michigan Governor you still get health care. It’s the program that assures that if you weren’t lucky enough to have a trust fund — or if some investment banker bought your company and fired you — that you can still get treatment if you get hit by a bus. It’s the program that assures that when you’re 80 years old and get Alzheimer’s but your 401-K disappeared because a bunch of Wall Street sharpies made reckless investments and sunk the economy — you can get long-term care instead of being left to die on the street.
Then again that’s not something a guy like Mitt Romney would know about. In fact he admitted the other day that he didn’t really know the difference between Medicare and Medicaid until he was 55 years old. Guess a guy who has about $200 million in assets doesn’t have to worry about such things.
You see, a guy like Romney doesn’t have the foggiest that the government initiatives he attacks are precisely the things that actually do create “an opportunity society.”
It was the GI Bill that sent the generation of Americans that fought World War II to college. It is Pell Grants and government-guaranteed student loans that allow most middle class Americans to send their kids to college.
It was Medicare and Social Security that rescued American seniors from poverty and provided guaranteed health care and a guaranteed base income for retirement. Romney, of course, wouldn’t know how important an average $14,000 annual Social Security benefit is to an everyday senior — that’s an hour’s compensation for the high-flying Wall Street types he hung around with at Bain Capital.
No, Romney is much more interested in privatizing Social Security and Medicare so his Wall Street buddies can get their hands on the Social Security and Medicare Trust Funds — even though that would eliminate the guaranteed benefits that are so critical to the health and welfare of America’s seniors.
Romney and the Republicans in Washington don’t seem to give a rat’s rear about the unemployment insurance or payroll tax holiday that will expire in ten days because the House Republicans have refused to pass a two-month extension while the terms of a year-long extension can be negotiated.
Forty dollars a paycheck — the cost of the increased payroll tax bite that everyday families will experience the first of the year — may not mean much to a multi-millionaire like Mitt Romney. But to ordinary families, $40 is the electric bill or several bags of groceries — and after just a few pay periods, it begins to add up pretty fast.
Turns out that when Republicans in Washington talk about taxes, they’re not so worried about a $40 increase ordinary people will have to pay in payroll taxes every time they get a paycheck. They’re worried about million dollar tax breaks for the gang on Wall Street.
Romney doesn’t even seem to have a clue that it is funding for public education and the public infrastructure that allows everyday Americans to have an opportunity to succeed — or that government has a responsibility to jumpstart the economy so that everyday, middle class people can get jobs.
In fact, he seems to agree with the Republican leaders of the House who say that unemployment benefits discourage people from looking for work. Guess Mitt has never been one of the five people competing for every available job. Oh, I forgot, Mitt says he is “unemployed” too. Talk about out of touch.
No, Romney’s view of an “opportunity society” is one where the government does nothing to help prevent foreclosures “so the market can bottom out.” It is one where the government stands by while the American auto industry collapses and costs a million Americans their good middle class jobs.
Then again, maybe Mitt’s idea of an “opportunity society” is having the “opportunity” to win the lottery — or maybe that would be a $10,000 bet. Doesn’t everyone make those?
By: Robert Creamer, The Huffington Post, December 22, 2011
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