“The Wealthy, And Everyone Else”: Big Tax Bills For The Poor, Tiny Ones For The Rich
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
“Your Tax Dollars”: Family Of New GOP Senate Pork Buster Joni Ernst Pocketed Almost Half A Million In Government Assistance
Anyone who tuned in to hear the GOP response to the State of the Union address was treated to an introduction to the GOP’s newest freshman Senate star, Joni Ernst of Iowa.
You may recall Ms. Ernst’s legendary campaign commercial where she informed us all that she had grown up castrating pigs and was, therefore, uniquely qualified to cut the pork from bloated federal spending. You may also recall that, in the castration commercial, she told us about how her family had taught Ernst what she needed to know about the importance of living within one’s means—a lesson, Ernst argued, that has been lost on the federal government.
Turns out, the Senator’s family has a somewhat unusual concept of what “living within one’s means” actually involves as we now know that her father and uncle have been the beneficiaries of some of that good old government pork that the newly minted Senator has sworn to snip from the body of the federal budget.
Apparently, living within their means, inside the Senator’s family, involves including some of your tax dollars and mine as a part of the family budget.
While it may be true, as Senator Ernst recounted in her official response to the SOTU, that she had to walk to school in the snow, uphill both ways, when she was a kid—not really as her actual claim to feeling the pain of low income Americans is that she and her friends wore bread bags over their one and only pair of shoes to protect them from the snow—her family may well have paid for those shoes with taxpayer cash.
An examination by the Washington DC based District Sentinel website reveals that Ernst’s father, Richard Culver, pocketed $38,395 in taxpayer money in the guise of corn subsidies.
But then, Ernst’s dad can’t hold a candle to his brother when it comes to receiving government redistribution of wealth as Senator Joni’s Uncle Dallas has pocketed a cool $370,000 in government subsidies.
Somehow, as Senator Ernst castigated the federal government for all this wasteful spending and wealth redistribution, she failed to mention that her own family has benefitted substantially from the same.
I suppose we can forgive this bit of hypocrisy given Ernst’s long record of involving herself in ‘clean’ government back in Iowa, right?
Not so much.
As reported by Salon, it turns out that daddy’s construction company (and here I thought he was but a poor, struggling farmer) was awarded some $215,665 in building contracts from the Montgomery County during the years 2009 and 2010.
There is certainly nothing inappropriate in a builder winning a few government contracts—unless it turns out that the builder’s daughter Joni, who would go on to become a United States Senator, happens to be the powerful county auditor for that very same Montgomery County.
According to Iowa law, that is a “no-no.”
“The Iowa Code lays out stringent conflict of interest standards for county contracts. Chapter 331 of the code stipulates that ‘[a]n officer or employee of a county shall not have an interest, direct, or indirect, in a contract with that county.’ The provision applies if 5 percent of a company’s outstanding stock is owned by either a county employee or an immediate family member – including a parent – of an employee.”
I’m not sure how much more “on point” the statute could be.
Meet the new GOP—same as the old GOP.
By: Rick Ungar, Contributor, Forbes, January 22, 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
“MLK’s Prophetic Call For Economic Justice”: This Country Has Socialism For The Rich, Rugged Individualism For The Poor
The Rev. Martin Luther King Jr.’s economic message was fiery and radical. To our society’s great shame, it has also proved timeless.
As we celebrate King’s great achievement and sacrifice, it is wrong to round off the sharp edges of his legacy. He saw inequality as a fundamental and tragic flaw in this society, and he made clear in the weeks leading up to his assassination that economic issues were becoming the central focus of his advocacy.
Nearly five decades later, King’s words on the subject still ring true. On March 10, 1968, just weeks before his death, he spoke to a union group in New York about what he called “the other America.” He was preparing to launch a Poor People’s Campaign whose premise was that issues of jobs and issues of justice were inextricably intertwined.
“One America is flowing with the milk of prosperity and the honey of equality,” King said. “That America is the habitat of millions of people who have food and material necessities for their bodies, culture and education for their minds, freedom and human dignity for their spirits. . . . But as we assemble here tonight, I’m sure that each of us is painfully aware of the fact that there is another America, and that other America has a daily ugliness about it that transforms the buoyancy of hope into the fatigue of despair.”
Those who lived in the other America, King said, were plagued by “inadequate, substandard and often dilapidated housing conditions,” by “substandard, inferior, quality-less schools,” by having to choose between unemployment and low-wage jobs that didn’t even pay enough to put food on the table.
The problem was structural, King said: “This country has socialism for the rich, rugged individualism for the poor.”
Eight days later, speaking in Memphis, King continued the theme. “Do you know that most of the poor people in our country are working every day?” he asked striking sanitation workers. “And they are making wages so low that they cannot begin to function in the mainstream of the economic life of our nation. These are facts which must be seen, and it is criminal to have people working on a full-time basis and a full-time job getting part-time income.”
King explained the shift in his focus: “Now our struggle is for genuine equality, which means economic equality. For we know that it isn’t enough to integrate lunch counters. What does it profit a man to be able to eat at an integrated lunch counter if he doesn’t earn enough money to buy a hamburger and a cup of coffee?”
Obviously, much has changed for African Americans since that time; anyone who says otherwise is plainly wrong. There is no longer any question of who gets served at lunch counters. Mississippi, where African Americans were once disenfranchised at the barrel of a gun, has more black elected officials than any other state. An African American family lives in the White House.
But what King saw in 1968 — and what we all should recognize today — is that it is useless to try to address race without also taking on the larger issue of inequality. He was planning a poor people’s march on Washington that would include not only African Americans but also Latinos, Native Americans and poor Appalachian whites. He envisioned a rainbow of the dispossessed, assembled to demand not just an end to discrimination but a change in the way the economy doles out its spoils.
King did not live to lead that demonstration, which ended up becoming the “Resurrection City” tent encampment on the Mall. Protesters never won passage of the “economic bill of rights” they had sought.
Today, our society is much more affluent overall — and much more unequal. Since King’s death, the share of total U.S. income earned by the top 1 percent has more than doubled. Studies indicate there is less economic mobility in the United States than in most other developed countries. The American dream is in danger of becoming a distant memory.
This column is not about policy prescriptions or partisan politics. King was a prophet. His role was to see clearly what others could not or would not recognize, and to challenge our consciences.
Paying homage to King as one of our nation’s greatest leaders means remembering not just his soaring oratory about racial justice but his pointed words about economic justice as well. Inequality, he told us, threatens the well-being of the nation. Extending a hand to those in need makes us stronger.
By: Eugene Robinson, Opinion Writer, The Washington Post, January 16, 2015
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