“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
Newt Gingrich’s Congressional Ethics Scandal Explained
As Newt Gingrich looks to complete his improbable political comeback, his opponents won’t let him (or the electorate) forget about the scandal that ended the first act of his political career—a string of 84 ethics complaints in the House that culminated in a $300,000 sanction. The pro-Romney super PAC Restore Our Future hammered home the message in a recent Iowa television ad, citing the fine as evidence that “Newt has a ton of baggage.”
The former Speaker of the House has a handy response for those taking aim at his past. “All of the substantive issues, we were ultimately told we were right,” Gingrich told the DesMoinesRegister editorial board on Thursday. “It’s truly one of the most frustrating things of my career.” He blamed his congressional downfall on bad lawyering and on the zealotry of the House ethics committee (although half of the members were Republican).
Lost in the campaign trail barbs about Gingrich’s ethical lapses, however, is any sense of what Gingrich actually did, either allegedly or as a matter of record. In short, he used a network of consulting firms, educational institutions, and even a charity for inner-city teens to promote a set of clearly partisan political goals designed to sweep Republicans into power in Washington. Gingrich’s web of interconnected organizations formed the early prototype for the multi-million-dollar public and private network he established after leaving public office, known now as “Newt Inc.”
Here’s how it worked:
Step 1: The Vehicle
Gingrich’s political machine took advantage of a number of institutions that actually predated his congressional tenure, the most significant of which which was GOPAC, a political action committee founded by former Delaware Gov. Pierre S. du Pont. GOPAC had not distinguished itself particularly in its early years, but things began to change in 1986 when Gingrich, an ambitious back-bench congressman from Georgia, took control of the group. He instilled in it a sense of purpose—namely, his vision of a Republican majority in Washington by 1996. GOPAC, in turn, became a fundraising machine, raking in $15 million on Gingrich’s watch. As Connie Bruck later reported in the New Yorker, it also skirted Federal Election Commission disclosure requirements by distributing fundraising dollars without ever actually handling the money itself. In some cases, it effectively served as a matchmaker, pairing candidates with like-minded donors.
The committee’s plan was to change the very language of politics and recast the terms of the debate entirely; Gingrich would, like the professor he once was, educate rising conservative politicians to “speak like Newt.” One way to do that was to issue buzzword-packed cassette tapes to aspiring Republican lawmakers.
The other method Gingrich conceived of was to hold nationally televised seminars. In 1990, he developed a program, the American Opportunities Workshop, in which he offered his—and by extension, GOPAC’s—vision for the future and outlined steps to organize activists on cable television. Gingrich specifically avoided linking the program to the Republican Party by name, lest he scare off political novices. But winning elections was, by all accounts, the intent. As the House ethics committee noted in 1997, “While the program was educational, the citizens’ movement was also considered a tool to recruit non-voters and people who were apolitical to the Republican Party.”
Step 2: The Shell Charity
Running a national political movement without the formal backing of the party was resource intensive. So to save money, Gingrich and his allies tried something new. They replaced the American Opportunities Workshop with an almost identical program with a different name, American Citizens’ Television. And they turned over the operations to the Abraham Lincoln Opportunity Foundation, a tiny Denver-based charity founded and controlled by GOPAC ally Bo Callaway, a former Colorado Congressman and Army Secretary.
According to papers filed with the IRS in 1984, ALOF was designed to instill a sense of civic virtue inner city kids by sponsoring “Land of Opportunity Speaking Competition Contests” in Colorado public schools. The charity’s leadership was nearly identical to the leadership of the Colorado Republican Party (in fact, it was the state GOP that had come up with the idea for the contest in the first place).
If the contest helped nudge teenagers toward the Republican party and further the GOP’s minority outreach efforts, well, that was all well and good; the first winner, a Vietnamese immigrant, earned a $2,500 scholarship and delivered the opening Pledge of Allegiance at the 1984 Republican National Convention.
By 1987, Colorado Republicans had lost interest in speech competitions, the contests had stopped, and ALOF had gone dormant. It had just $486.08 in its bank account—but it did have one thing of much greater value: 501(c)3 status from the IRS, meaning all donations to the group were tax-exempt. Control of the charity remained in the hands of Callaway.
Step 3: Doubling Your Money
Gingrich brought the Abraham Lincoln Opportunity Foundation back to life in 1990—albeit in a dramatically different role. Instead of fostering a love of capitalism and civic virtues in inner-city kids, it was paying for Gingrich to teach conservative activists how to elect Republicans. Internal memos placed a premium on airing the program in specific congressional districts.
The strategy was clear—by giving money to a tax-exempt organization, donors could effectively double their buying power because they could write it all off as a tax deduction (meaning it was that much less they had to pay to Uncle Sam). Not that there was much of a difference between ALOF and GOPAC. It was a matter of paperwork and little else; the two organizations shared a DC office, and many of the same employees. They even shared money—while the Abraham Lincoln Opportunity Foundation was nominally operating Gingrich’s television program, GOPAC loaned the group $45,000; the Los Angeles Times reported that in 1990, GOPAC donors gave the former inner-city charity at least $150,000.
In 1997 Gingrich was ultimately slapped with a $300,000 fine by the House ethics committee for his “reckless” or “intentional” use of nonprofits for partisan political ends.
Ultimately, the IRS caught wind of the arrangement and stepped in, ruling that as an educational nonprofit, ALOF couldn’t finance a purely political enterprise. In 1990, the final episode of the program was produced instead by a third conservative group, Citizens Against Government Waste—which, while not technically affiliated with Gingrich, was a major donor to his enterprises.
With the IRS’ ruling, ALOF’s new role was more or less dead. But it continued to beat on, at least for a few years, as a conduit between donors and GOPAC. Because ALOF owed GOPAC money, Callaway offered donors the option of giving to ALOF instead, thereby shoring up the group’s finances and taking advantage of its tax status. Citizens Against Government Waste gave $37,000 to ALOF in 1991, and ALOF cut a check for $37,000 to GOPAC later that day. The Ethics committee report noted that in addition to Callaway, “Two other GOPAC Charter Members made contributions to ALOF which were immediately turned over to GOPAC.”
Step 4: The College Course
With ALOF relegated to the background, Gingrich once again devised an elaborate funding and control mechanism to organize conservatives. This time, GOPAC would craft and develop a message of civilizational drift that would propel his party to victory; the corrupt welfare state was steering the United States away from the values that had made it great. But to cut costs (and skirt tax laws), he’d recruit outside groups to handle the fundraising and operations.
Gingrich unveiled a new television program, “Renewing American Civilization,” and found a willing host in Georgia’s Kennesaw State College, which offered to make it a four-credit course. Publicly, the goals were strictly educational; privately, it was a partisan mobilization drive. As Gingrich wrote in a letter, “Our hope is to have at least 50,000 individuals taking the class this fall and to have trained 200,000 knowledgeable citizen activists by 1996 who will support the principles and goals we have set.”
You didn’t need to work at GOPAC to see the real aims of the course. Gingrich was rebuked by many of the same scholars he claimed had helped devise the course. Boston College professor James Q. Wilson, whom Gingrich touted as an adviser to the course, actually repudiated the program after initially coming on board. According to one letter obtained by the ethics panel, the famed academic scolded the Speaker for the clearly partisan tone of his lesson plan: “If this is not to be a course but instead a sermon, then you should get a preacher to comment on it.”
Larry Sabato, a University of Virginia political scientist whom Gingrich had also touted as a contributor to the course, soured on the experiment as well. In a 1996 book, he called the course “a partisan organizing tool.”
It was an odd public-private partnership. Kennesaw State provided classroom space to Gingrich and gave out course credits to students who participated in the class, but it relied on a third-party called the Washington Policy Group to manage and raise funds. All of that would be pretty innocuous, except GOPAC was the Washington Policy Group’s only client, and its staff consisted of three GOPAC vets. Gingrich promoted the entire operation in floor speeches.
Step 5: Public to Private
When a new Georgia state law explicitly prohibited public universities from sponsoring elected officials as teachers, Gingrich found a new home for Renewing American Civilization, but he kept the operation intact. GOPAC continued to supply the message, and Gingrich continued to deliver it. He simply moved the course from Kennesaw State to tiny Reinhardt College. And in place of the Washington Policy Group, Reinhardt outsourced fundraising for the course to a small group called the Progress & Freedom Foundation.
Like WPG, its staff overlapped GOPAC’S, and its ties to Gingrich ran deep. As the Washington Post reported, much of the $900,000 the group raised came from Gingrich donors.
Step 6: Sanctions
In 1997, Gingrich was ultimately slapped with a $300,000 fine by the House ethics committee for his “reckless” or “intentional” use of nonprofits for partisan political ends, and for misleading the House by offering conflicting account about GOPAC’s role in all of it (for which he blamed his lawyer). Although the sanction was tied to the specific violation of providing misleading information, he wasn’t exactly absolved of other wrongdoing. In some cases, the committee decided not to pursue a matter any further simply because he had stopped the unethical activity that had gotten him in trouble in the first place; for other charges (such as the use of official resources for his own non-profits, Gingrich received letters of admonition). That same year, Abraham Lincoln Opportunity was stripped of its nonprofit status by the IRS, only to have it restored again six years later in a decision that raised eyebrows among campaign finance watchdogs.
Whether or not Gingrich technically broke House rules, his makeshift fundraising network was undeniably shady. He gladly appropriated a tax-exempt organization aimed at helping inner-city kids and used it to finance his goal of winning control of the House of Representatives. He likewise took two nonprofit educational institutions and used them to host a college course whose partisan aims he happily gushed about in private correspondence, and whose high-profile advisers actually repudiated it.
At a campaign stop in New Hampshire in November, Gingrich promised that if elected, he would teach an online class to the American people. The course, he said, would be free to the public. If the past is any indication, the real questions is: What’s the real motive—and who’s footing the bill?
By: Tim Murphy, Mother Jones, December 20, 2011
The Republican Supreme Court Sticks It To The Little Guy (Again)
Once again the United States Supreme Court under Chief Justice John Roberts has shown the nation it will always favor corporations over people even if it means conjuring new law out of thin air. Like Citizens United, the recent 5-4 ruling in AT&T’s favor gutting the power of consumers to file class-action lawsuits against giant corporations tips the scales of justice against the people and renders the enormous power of corporations even more enormous.
When I first heard about the case, AT&T Mobility v. Concepcion there was little doubt in my mind that the Gang of Five — John Roberts, Antonin Scalia, Samuel Alito, Anthony Kennedy, and Clarence Thomas would figure out a way to ignore Supreme Court precedent and again apply their judicial activism in service to the corporations, and by extension, to the oligarchy they apparently believe the “founders” intended.
It’s kind of funny when we see Republican presidential candidates like Mitt Romeny, Tim Pawlenty, and Newt Gingrich pandering to the “little guy” denouncing “elites” who are trampling on their rights only to remain mute on the fact that their beloved Republican Supreme Court never, ever rules in favor of the “little guy.”
The Republican president Ronald Reagan gave us Scalia and Kennedy; the Republican president George Herbert Walker Bush gave us Thomas; and the Republican president George W. Bush gave us Roberts and Alito. This cabal has shown over and over again where its true loyalties lie, not to “the law,” not to “the Constitution,” not to “calling balls and strikes,” but to a 21st century version of corporate feudalism. This new corporate feudalism that the High Court is determined to thrust on the nation is even more exploitative than the earlier brand of Medieval feudalism because it is absent noblesse oblige.
The serfs toiling on the corporate plantation can only continue to pay Chase and Bank of America for their underwater mortgages, ExxonMobil and Chevron for their $4 a gallon gas, and AT&T, Comcast, T-Mobile and the rest for the privilege of communicating in a modern society. And if the serfs seek redress the High Court will slap them down before they can get anything substantial off the ground. With Citizens United placing a stranglehold of corporate power over our state, local, and federal system of elections, we cannot turn to our political “leaders” for redress, we can’t turn to the courts, and we certainly can’t turn to trying to morally persuade sociopathic non-human entities called corporations — so where does that leave us?
In the current context of unrestrained corporate dominance it’s unconscionable that the Obama administration has not done more to blunt its disastrous effects. The Justice and Treasury Departments, the Securities and Exchange Commission, the Internal Revenue Service, etc. could be doing a hell of a lot more in bringing balance to the equation of corporations versus people. The administration’s lagging performance in holding Wall Street accountable is well known, but it won’t even lift a finger to block grotesque mergers like the one between Comcast and NBC Universal, and AT&T and T Mobile. In all these mergers and acquisitions it’s always the consumers and the employees who lose, while the CEOs and a select few of shareholders and financiers make out like the bandits they are.
Nothing illustrates the corruption rampant in Washington more than the recent resignation of Federal Communications Commission member, Meredith Attwell Baker, a Republican who Obama appointed to show how “bipartisan” he can be, who is now going to work as a lavishly paid shill for the very industry she was supposedly “regulating.” Ms. Baker will now make the big bucks serving Comcast/NBC Universal after she voted for the merger of Comcast and NBC Universal. Sweet. And few in the Beltway see anything unsavory about it.
Our political leaders, our Supreme Court, our captains of industry and finance, are so out of touch it’s going to be a long, long time before ordinary working people see any relief. All of our institutions, political, economic, even religious, social, and cultural, all of them, are failing the people miserably in pursuit of the Almighty Buck. The cunning game of appointing young ideologues to the bench has paid off handsomely for the corporate power structure. Someone should tell those people running around in tri-cornered hats and talking about the “founders” that it might be wise to save an ounce of their collective wrath for the Republicans who have appointed five Justices who are trampling on individual freedoms in service of corporations.
By: Joseph A. Palermo, The Huffington Post, May 15, 2011
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