Blame Budget Shortfall On Tax Cuts For The Rich
Let’s leave aside the question of fairness, for now. The paramount question is whether the United States is generating the revenue it needs to fund the public structures that are essential for business and individual prosperity—things like transportation networks, schools, healthcare, college, and many other important functions of government in a capitalistic society. By any indicator the answer is that the United States is falling short in providing both the revenue to fund these services as well as providing for their ongoing maintenance and modernization.
Federal tax revenue is lower than it has been in half a century. The federal government’s revenues from income taxes on households make up 6.4 percent of GDP; which is 1.1 percentage points lower than half a century ago, and 3.8 percentage points lower than the peak in the boom year of 2000. Our current tax revenues are not only low relative to historical levels, but they rank low internationally as well. Our total tax revenues, including federal, state, and local taxes, comprise 27 percent of GDP, a level far lower than most of our peers in the developed world. In fact, among the 33 nations of the Organisation for Economic Co-operation and Development, only three (Korea, Turkey, and Mexico) take in proportionately less tax revenue than we do.
And so we come to the question of whether the richest in America are paying their fair share. The reality is that the steep fall in federal tax revenue was caused largely by cuts in the tax rates for the very wealthiest households. The current marginal tax rate for the highest income bracket—in other words, the tax rate on income above a threshold for the wealthiest taxpayers—of 35 percent is among the lowest since WWII, far lower than the 80 percent rate during the high-growth 1960s and the 39.6 percent rate of much of the 1990s. Of course, most rich households do not pay the published rate—after taking into account deductions and other big tax benefits, the actual percentage of a rich household’s entire income paid in taxes has also fallen precipitously, dropping from 31.3 percent for millionaires in 1993 to 22 percent today.
So, no, the rich are not paying their fair share of taxes—neither as defined by historical American norms or by international standards. And, the result of that shirking of responsibility is sluggish growth, diminished social mobility, declining educational attainment, and lost business efficiencies due to our insufficient and often outdated transportation and information networks.
By: Tamara Draut, U. S. News and World Report, December 16, 2011
Why GOP Voters Love Irresponsible Newt
Newt Gingrich has done it again. With his new tax plan he has raised the bar from irresponsibility to recklessness.
Every dollar estimate I’m about to share with you comes from the independent, non-partisan Tax Policy Center – a group whose estimates are used by almost everyone in Washington regardless of political persuasion.
First off, Newt’s plan increases the federal budget deficit by about $850 billion – in a single year!
To put this in perspective, most forecasts of the budget deficit cover ten years. The elusive goal of the White House and many on both sides of the aisle in Congress is to reduce that ten-year deficit by 3 to 4 trillion dollars.
Newt goes in the other direction, with gusto. Increasing the deficit by $850 billion in a single year is beyond the wildest imaginings of the least responsible budget mavens within a radius of three thousand miles from Washington.
Imagine what Standard & Poor’s or Moody’s or Fitch would do if it became law. We’d go directly from a triple-A credit rating to triple X – the veritable porn star of fiscal mayhem. Interest on our debt would become larger than most of the rest of the budget.
Most of this explosion of debt in Newt’s plan occurs because he slashes taxes. But not just anyone’s taxes. The lion’s share of Newt’s tax cuts benefit the very, very rich.
That’s because he lowers their marginal income tax rate to 15 percent – down from the current 35 percent, which was Bush’s temporary tax cut; down from 39 percent under Bill Clinton; down from at least 70 percent in the first three decades after World War II. Newt also gets rid of taxes on unearned income – the kind of income that the super-rich thrive on – capital gains, dividends and interest.
Under Newt’s plan, each of the roughly 130,000 taxpayers in the top .1 percent – the richest one-tenth of one percent – reaps an average tax cut of $1.9 million per year. Add what they’d otherwise have to pay if the Bush tax cut expired on schedule, and each of them saves $2.3 million a year.
To put it another way, under Newt’s plan, the total tax bill of the top one-tenth of one percent drops from around 38 percent of their income to around 10 percent.
What about low-income households? They get an average tax cut of $63 per year.
Oh, I almost forgot: Newt also slashes corporate taxes.
I’m not making this up.
This might be amusing if Newt were just being old Newt – if this were another infamous hot-air bubble emerging from an always provocative, sometimes clever, often bizarre mind.
But it’s the tax plan of the leading candidate for president of one of the two major political parties of the United States.
And it comes at a time when America’s super rich are raking in a larger portion of total income and wealth than at any time over the last 80 years, and when their marginal taxes are lower than they’ve been in three decades; a time when the nation’s long-term budget deficit is causing cuts in education and infrastructure which will impair our future and that of our children, and when safety nets and social services are being slashed.
Can Newt get away with this?
Probably — because his plan also comes at a time when Americans are so cynical about the major institutions of our society that someone who offers huge, outrageous plans holds a special fascination: The whole system is so awful, people tell themselves, why not just jettison everything and start from scratch? Let’s throw caution to the winds and do something really big – even if it’s colossally stupid.
This is why the more outrageous Newt can be, the better his polls. The more irresponsible his bomb-throwing, the more attractive he becomes to a sizable portion of Americans so fed up they feel like throwing bombs.
History is full of strong men with dangerous ideas who gain power when large masses of people are so desperate and disillusioned they’ll follow anyone who offers big, seemingly easy solutions.
At times like this a nation must depend on its wise elders – people who have gained a reputation for good judgment and integrity, and who are broadly respected by all sides regardless of political affiliation or ideology – to call out the demagogues, speak the truth, and restore common sense.
The great tragedy of America today is the paucity of such individuals when we need them the most.
By: Robert Reich, Published in Salon, December 14, 2011. (This originally appeared on Robert Reich’s blog, December 13, 2011)
Gingrich’s Tax Plan Would Give Millionaires A $600,000 Tax Cut
The latest 2012 GOP presidential frontrunner, Newt Gingrich, has, like Texas Gov. Rick Perry (R-TX) before him, released a plan to overhaul the U.S. tax code by giving taxpayers the option of paying a single, flat, income tax rate, as opposed to using today’s progressive tax code. In fact, Gingrich goes a bit further than Perry, setting his flat rate at 15 percent, as opposed to Perry’s 20 percent.
Gingrich claims that his plan will “allow Americans the freedom to choose to file their taxes on a postcard, saving hundreds of billions in unnecessary costs each year.” However, according to an analysis by the Tax Policy Center, the plan will also achieve another of Gingrich’s ends — giving millionaires a tax cut of more than $600,000 per year:
Gingrich’s plan would create an optional 15 percent flat tax with a per-person deduction of $12,000. He would drop the corporate tax rate to 12.5 percent from 35 percent, allow businesses to write off capital expenses and eliminate taxes on capital gains and estates, according to his website.
People earning more than $1 million a year would receive an average tax cut of $613,689 in 2015, compared with what they pay now. That change would boost their after-tax income by 28.7 percent and put their average tax rate at 11.9 percent.
Under the plan, half of the entire benefit goes to the richest 1 percent of taxpayers. The richest 0.1 percent of the country will receive a tax cut worth nearly $2 million each and every year. These tax cuts are in addition to what the wealthy are already receiving from their disproportionate share of the Bush tax cuts.
The end result of the plan would be millionaires paying a lower tax rate than middle-class families, as a millionaire would pay an 11.9 percent rate, while a family making $40,000-$50,000 would pay 12.7 percent.
Gingrich has already criticized his top competitor, Mitt Romney, for not lavishing enough tax breaks onto the wealthy. And it would seem that Gingrich’s critique is extremely genuine, as his own tax plan hands out tons of breaks to the very wealthy, in the misguided hope that prosperity will then trickle down to everybody else.
By: Pat Garofalo, Think Progress, December 12, 2011
Does GOP Really Want To Increase Taxes On The Middle Class?
As the Senate considers an extension of the payroll tax holiday, the big question is: why in the world would Republicans in Congress consider raising middle class taxes by $1,000 to $1,500 per household in the midst of an economic downturn and an election year?
This is a particularly vexing question when you recall the ardor with which the GOP has campaigned against raising the taxes paid by millionaires and billionaires by even one dime.
At the beginning of the week it appeared that virtually every Republican in the Senate was prepared to vote no on a Democratic proposal to extend and broaden the current payroll tax holiday.
Now some are beginning to get cold feet. Senate Republican Leader Mitch McConnell has now reportedly “opened the door” to considering the possibility of a payroll tax cut extension.
But the real question is why Republicans would contemplate voting against extension of the payroll tax holiday in the first place?
Voting no would be like leaping off a political cliff — taking an iconic vote that would no doubt become emblematic of the fact that they are willing to sacrifice the interests of the 99% to protect the fortunes of the wealthiest people in America. John Paulsen — the Wall Street hedge fund manager who made $5 billion last year (that’s $2,400,000 per hour!) — might consider this a courageous stand. But the everyday worker — who will take 48 years to make as much as Paulsen makes in one hour — might not be so charitable.
Perhaps, you might say, it’s because Republicans are taking a strong principled stand against raising the deficit. But that would not be the case, since the Democratic proposal is entirely paid for by a small increase in the taxes of millionaires.
What on earth could drive Senate Republicans to consider taking such a stupid vote? Four possibilities jump to mind.
1). Possible Reason Number 1: They claim the extension of the payroll tax holiday will undermine Social Security and Medicare.
Republican Senator Jon Kyl made this argument on the weekend talk shows. We can dismiss this talk as a complete smoke screen.
First, Senator Kyl and the Republicans have never given a rat’s rear about Social Security and Medicare in the first place.
Second, the payroll tax holiday that was passed last year does not remove one dime from the Social Security or Medicare trust funds. In fact, the lost payroll tax is replaced dollar for dollar from the Federal general revenue fund.
The payroll tax holiday itself is simply a means of putting money directly into the pockets of working people that is then replaced with money from the much more progressive overall Federal tax structure.
2). Possible Reason Number 2: Some Republicans really don’t believe that taking $1,500 out of the paychecks of everyday consumers will hurt the economy.
There are apparently some Republican lawmakers who have drunk the “Keynesian Economics Doesn’t Work” Kool-Aide. They actually believe that the only way to stimulate economic growth is to shovel more and more income into the hands of the top 1% — the “job creators” — and watch that money “trickle down” on the rest of us.
The problem is that there is absolutely no evidence that “trickle down” economics works — or ever worked.
We had an actual experiment with “trickle down” economics during the Bush Administration. The Republicans cut tax rates for the wealthy. The rich got a lot richer, and the median income of everyday families actually dropped. In fact it was the first decade in modern history that the economy did not create one net private sector job.
But — the Republicans say — two and a half years ago Congress passed a huge stimulus bill, and we still don’t have enough jobs.
Of course, they forget to mention that at the time, the economy was shedding hundreds of thousands of jobs because the financial system had collapsed as a result of the very same policies they are now advocating once again. And there is the inconvenient fact that since the stimulus worked its way through the economy, we have had 20 straight months of private sector job growth — whereas during the last twelve months of the Bush Administration we lost massive numbers of private sector jobs.
Of course a good deal of that private sector growth has been offset by the Republican refusal to continue the stimulus bill’s aid to state and local governments. That resulted in layoffs of teachers, firefighters, police officers — and other public service workers who they must presume do not hold “real jobs.”
The problem with the stimulus bill was not that it didn’t work. The problem was that it wasn’t big enough. Republicans remind you of a guy who uses a hose to put out half of a house fire, turns off the water and then contends that water doesn’t put out fires because the entire fire hasn’t been extinguished. The obvious answer is to get more water. Not only do the Republicans want to stop pouring on the water of stimulus — they want to pour on the gasoline of austerity — just the opposite of what is needed to put out the bad economic flames.
When an economy is in recession the problem — by definition — is too little demand to absorb the goods and services that the economy can produce. The way to solve the problem is to generate more demand to jump-start the economy. This is not just a matter of opinion — it’s a matter of mathematics.
Republicans who run around claiming that economic stimulus — money in consumer pockets — isn’t what’s needed to stimulate economic growth are like people in the middle ages who refused to believe that the earth circles the sun. If the evidence doesn’t support their ideological frame, they throw out the evidence — not the ideological frame. They ignore the facts. It makes no more sense for them to vilify “Keynesians” than it did for an earlier generation to vilify “Copernicans.”
There is complete economic consensus that eliminating the payroll tax holiday today will be a disaster for the economy. In fact, economists like Mark Zandi — who advised John McCain’s campaign — argue that if the payroll tax holiday is not extended, it will shave 1.7% off the gross domestic product and throw the economy into a double dip recession.
3). Possible Reason Number 3: The Republicans oppose extending the payroll tax holiday, because President Obama is for it.
That’s certainly their knee-jerk response. They believe that anything that makes Obama look effective hurts Republican chances in 2012.
But they have some big problems here. First, many Republicans supported a payroll tax holiday in the past — and many voted for the original holiday last year. If they form a solid wall of opposition, they will look like hypocrites who changed their position simply to hurt their political opponents.
And, second, the entire issue puts them in political box canyon — with no escape. If they oppose extension they look like they are obstructing something that is good for the economy — and very palpable to everyday voters. If they support an extension, they give the President a victory.
4). Possible Reason Number 4: Republicans actually understand that ending the payroll tax holiday will hurt the economy — and that’s exactly what they want to do.
There are clearly some Republicans in Congress who actually believe that ending the payroll tax holiday won’t hurt the economy. But there are a lot of Republicans who know exactly what will happen and would be perfectly happy to hurt the economy.
In fact, the Republican leadership has laid a bet that if the economy continues to stagnate they are that much more likely to defeat Democrats next fall. They know that no President in a hundred years has been re-elected when the economy was not materially improving. And they are certainly right that a major issue in next year’s election will be who is responsible for the lousy economy.
Their problem is that by supporting an increase in the payroll tax that takes $1,500 out of the pockets of every middle class family, they create an iconic example of why the real problem is the “do-nothing Republican Congress.”
Sixty-seven percent of Americans believe that Congress is completely controlled by Republicans. And even though the Senate leadership is Democratic, the Republican willingness to stop action using the filibuster means that they are, in fact, entirely responsible for preventing action to create jobs.
That’s good news for Democrats, since in some polls only 9% of Americans have a positive view of Congress and overwhelming numbers believe the country is on the wrong track.
That means that Democrats in Congress can run as outsiders who want to break the log jam in Congress and take action on jobs — take action to defend the middle class. It means that the President can lay the blame for the lousy economy directly at the doorstep of the Republican Party – and its nominee.
The battle over the extension of the payroll tax holiday plays right into that narrative. It is a huge problem for the Republicans in Congress. Bad enough that the “do-nothing Republican Congress” is doing everything it can to oppose President Obama’s agenda to create jobs. Taking $1,500 out of the pockets of everyday Americans gets downright personal.
That’s why, when the chips are down, the odds are good that the Republican leadership will fold its hand and support extension of the payroll tax holiday.
By: Robert Creamer, The Huffington Post, November 30, 2011
With Economic Plans, GOP Abandons Middle Class Entirely
I have watched with a truly curious sense of amazement as the Republicans, especially the presidential candidates, have stuck it to the middle class.
What have they been thinking with their tax plans and their relentless pursuit of even greater tax-cut largess for the very wealthiest of Americans? What do they have against the middle class, those who have seen their incomes drop by 4.8 percent this past decade, according to a report in the Wall Street Journal?
The latest Republican proposal made to the Senate’s Gang of 12 “supercommittee” is to lower the tax rate on the top wage earners from 35 percent to 28 percent; this on top of the temporary tax cut that Bush provided. The Republicans propose various revenue increases to help reduce the budget deficit but take them away with this giveaway to the wealthy.
Once again, the middle class is left holding the bag, watching as they get stuck with less take-home pay and more expenses for rent, mortgage, college tuition, basic essentials.
Let’s look at the Republican presidential candidates‘ tax proposals. Governor Perry has proposed a huge tax windfall for those whose income averages over a million dollars. For those millionaires and billionaires, he would give them a $512,733 average tax break! How can that possibly be justified since these wage earners have seen a 385 percent increase in their wealth over the last 20 years?
Perry’s plan would actually see tax rates go up for those who make less that $50,000, according to the Tax Policy Center.
Herman Cain’s pie in the sky 9-9-9 plan would see the poor and middle class lose with a 15.8 percent drop; those families who make the average of $49,445 would see their effective tax rate go from 14.3 percent to 23.8 percent, according to the Tax Policy Center.
The Romney tax plan is more of the same. More tax cuts for the wealthy: 67 percent of his lower capital gains taxes would go to millionaires; 50 percent of the continuation of the Bush tax cuts go to the top 5 percent of wage earners.
The policy prescriptions we are seeing from Republicans as we approach 2012 are coupled with a complete lack of explanation of why it is important to help middle-class families. All their rhetoric is ideological—anti-Washington, anti-government, anti-taxes. They have drunk the Grover Norquist Kool-Aid, even to the detriment of those families struggling to make it in a tough economy.
The benefits go to Wall Street, not Main Street; the analyses of all the tax plans clearly point to giveaways to those top 2 percent of Americans, with the squeeze put on those in the middle.
As they campaign in the next 12 months, the Republicans will find it increasingly difficult to make the case that they stand for hard-working, middle-class families. This could well be their downfall come next November.
By: Peter Fenn, U. S. News and World Report, November 9, 2011
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