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“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

January 24, 2015 Posted by | Middle Class, Plutocrats, Taxes | , , , , , , | Leave a comment

“Falling Further Into A Hole”: Wage Stagnation Puts The Squeeze On Ordinary Workers

Laurie Chisum works as a manager for a small office-equipment company in Orange County. She puts in about 30 hours a week on the job and spends much of her time at home caring for her mother, who is afflicted with Alzheimer’s disease.

She’s not complaining — she’s thankful to have a steady paycheck. But no matter how hard she works, it feels as if she just can’t get ahead.

“It’s been six years since anyone at our company has had a raise,” said Chisum, 52. “It seems like I just keep falling further into a hole. The price of gas has gone down, but nothing else has.”

It’s a refrain we’ve heard throughout the year: wealth gap, income inequality, wage stagnation.

No matter how you say it, the upshot is the same. The rich are getting richer and everyone else is feeling squeezed.

The wealth gap in this country is now the widest it’s been in decades, according to a report this month from the Pew Research Center.

The median net worth of upper-income families reached $639,400 last year. That’s nearly seven times as much as for those in the middle and almost 70 times what people at the lower end of the economic spectrum are making.

That’s not just a data point. It’s sad proof of a system that grossly favors the rich over ordinary working families — even when the economy is improving.

“Far too many people simply aren’t feeling the benefits of this economic growth,” said U.S. Labor Secretary Thomas Perez. “People are working harder and smarter, but their sweat equity hasn’t translated into financial equity.”

David Neumark, director of the Center for Economics and Public Policy at the University of California, Irvine, said that “people at the top have had phenomenal wage growth,” whereas “people at the lower end of the spectrum have seen their real purchasing power decline.”

Corporate profits are at or near record levels. So’s the stock market. Chief executives are doing just fine, thank you very much. A recent report found that some of the biggest U.S. companies pay their CEOs more than they pay in federal income taxes.

For ordinary working stiffs, the numbers are more sobering. Average hourly wages rose an itsy-bitsy 0.4 percent in November, according to the Labor Department. And this was seen as good news because average wages increased a pitiful 0.1 percent in October and didn’t budge in September.

For the year, average hourly earnings through November rose 1.7 percent, according to the Bureau of Labor Statistics. Since the end of the recession in 2009, they’ve gained about 11 percent.

At the same time, though, the consumer price index — the cost of living — has increased 1.3 percent since the beginning of the year and about 11 percent since the end of the recession.

Wages, in other words, are barely keeping pace with overall inflation. That’s why many people feel as if they’re stuck in a financial rut.

“You wonder from month to month what else you’re going to have to cut back on,” said Chisum, a single mom who also is caring for a grown son with Down syndrome.

Things look even tougher when you tighten the focus on specific expenditures, such as food and rent.

Average food costs have climbed 12.5 percent since the end of the recession, according to the bureau. Average residential rents have risen 12 percent. The average cost of healthcare has jumped nearly 17 percent.

In that context, the 11 percent gain in wages since 2009 means that each of these necessities has taken a bigger bite out of family budgets and has left fewer dollars for other expenditures, such as the occasional restaurant meal or movie.

“There’s no evidence I can see that this is going to change in the near future,” said Edward Lawler, a professor at the University of Southern California’s Marshall School of Business. “These are tough times for workers.”

One key issue, he said, is that labor unions have less clout than they once enjoyed. This denies workers a unified voice at the bargaining table.

Improvements in technology have boosted productivity and allowed employers to limit hiring. And it’s become easy to ship jobs abroad, where people are willing to work for a fraction of the cost of American workers.

All these factors conspire to keep wages down while profits and the compensation of senior managers skyrocket.

Earlier this month, Microsoft shareholders approved an $84-million pay package for the company’s new chief executive, Satya Nadella, making him one of the country’s highest-paid corporate leaders. He’s run the company for less than a year.

Boeing, Ford, Chevron, Citigroup, Verizon Communications, JPMorgan Chase and General Motors each paid their CEOs more last year than they paid in income taxes to Uncle Sam, according to a report from the Center for Effective Government and the Institute for Policy Studies.

A recent study by Harvard Business School found that most Americans believe chief executives make roughly 30 times what the average U.S. worker makes. That was indeed the case in the 1960s. Nowadays, CEOs pull down more than 350 times the average worker.

Chief executives are important people, to be sure. But is their importance to a company 350 times that of their employees? I doubt most people — other than CEOs — would think so.

More effective unions would help, as would programs to give workers the skills they need to compete better in the 21st century workplace.

Chris Tilly, director of the University of California, Los Angeles’ Institute for Research on Labor and Employment, said a key step would be establishing a national minimum wage of $10 to $12 an hour, and then indexing that wage to consumer prices so that paychecks automatically rise with inflation.

“That way you wouldn’t have to wait for Congress to act every year,” he said. “This would be a basic decision that wages would keep up with the cost of living.”

Perez, the labor secretary, also called for a higher minimum wage, plus “strengthening overtime protections” and “ensuring that workers have a strong voice in the workplace.”

A rising tide lifts all boats. At least that’s how we’re told things are supposed to work.

The reality is that the tide is rising in a big way for some, and they’re comfortably sunning themselves on the decks of their yachts.

For most others, that rising tide is more like a stormy sea threatening to swamp the family lifeboat.

We’ll likely hear a lot in the coming year about how the economy is improving and businesses are thriving. Chief executives will point toward fast-rising stock prices as proof that they’re worth every million they’re paid.

And everyone else will try to make their 0.4 percent hourly pay hike go as far as they can.

 

By: David Lazarus, Columnist, The Los Angeles Times; The National Memo, December 29, 2014

January 1, 2015 Posted by | Corporate Welfare, Minimum Wage, Workers | , , , , , , , | 1 Comment

“The Haves And The Have-It-Alls”: The Pain Of Inequality Among Yacht Buyers

In this season of mass commercialism, let’s pause to consider the plight of simple millionaires.

Why? Because we now share a common cause: Inequality. You don’t hear much about it, but millionaires are suffering a wealth gap, too, and it’s having a depressing impact on both their level of consumption and their psychological well-being. While it’s true that millionaires certainly are still quite rich — indeed, they’re counted as full members of the 1 percent club. But that generalization overlooks the painful and personally grating fact that mere millionaires today are ranked as “lesser 1 percenters.” They don’t dwell in the same zip codes as the uber-rich few, who comprise the uppermost 100th of the 1 percenters, with wealth starting in the hundreds of millions of dollars and spiraling up into multiple billions.

No doubt you’ll be saddened to learn that this divide between The Haves and The Have-it-Alls is widening. Astonishingly, plain old millionaires are being abandoned by retailers that are now catering to the most lux of the luxury market. For example, have you checked out what is happening in the yacht market recently? Sales of your 100- to 150-footers are down by as much as 50 percent from 2008, and that is just one indicator of the hidden suffering being endured by the merely rich.

In the same time period, however, yacht sales of your 300-footers, with price tags above $200 million, are at all-time highs. As noted by Robert Frank, a New York Times wealth columnist (yes, such a rarefied beat does exist), “For decades, a rising tide lifted all yachts. Now it is mainly lifting megayachts.”

“Whether the product is yachts, diamonds, art, wine, or even handbags,” says the Times‘ chronicler of American wealth, “the strongest growth and biggest profits are now coming from billionaires and nine-figure millionaires, rather than from mere millionaires.” What this reflects is not the widely acknowledged wealth divide between the 1 percenters and the rest of us, but a stunning concentration of America’s total wealth in the vaults of the ever-richer 0.01 percenters.

They are the elitest of the elites, an extravagant moneyed aristocracy, sitting so high above our society that they largely go unseen. This exclusive club includes only a tiny fraction of American families, with each holding fortunes of more than $110 million. The riches of these privileged ones keep snowballing — their outsized share of our national wealth has doubled since 2002, and their holdings are expanding twice as fast as other 1 percenters.

Their growing control of wealth is distorting high-end consumerism, including not just yachts, but private jets as well. Sales of your common millionaire-sized jets are down by two-thirds since the 2008 Wall Street crash. So jet makers have shifted to the billionaire buyers, including some who are spending eye-popping levels of lucre to possess such pretties as their very own Boeing 777-300 — which normally carries 400 passengers, rather than one gabillionaire.

Imagine how this makes people with only a few million dollars feel. This extreme, obscene concentration of wealth is creating an intolerable inequality that will implode our economy and explode America’s essential, uniting sense of egalitarianism. It’s important to remember that money is like manure — it does no good unless you spread it all around.

In the spirit of holiday harmony and good will toward all, I say it’s time for you working stiffs (and even those of you who’ve been badly stiffed and still can’t find work in this jobless economic recovery) to extend your hands in a gesture of solidarity with America’s millionaires. Let’s reach out to comfort our downcast brothers and sisters. Tell them, “We’re all in this inequality fight together,” and invite them to come to the next rally in your area to raise America’s minimum wage above the poverty level.

 

By: Jim Hightower, The National Memo, December 10, 2014

December 11, 2014 Posted by | Economic Inequality, Plutocrats, Wealthy | , , , , , , | 1 Comment

“When Whites Just Don’t Get It”: After Ferguson, Race Deserves More Attention, Not Less

Many white Americans say they are fed up with the coverage of the shooting of Michael Brown in Ferguson, Mo. A plurality of whites in a recent Pew survey said that the issue of race is getting more attention than it deserves.

Bill O’Reilly of Fox News reflected that weariness, saying: “All you hear is grievance, grievance, grievance, money, money, money.”

Indeed, a 2011 study by scholars at Harvard and Tufts found that whites, on average, believed that anti-white racism was a bigger problem than anti-black racism.

Yes, you read that right!

So let me push back at what I see as smug white delusion. Here are a few reasons race relations deserve more attention, not less:

  • The net worth of the average black household in the United States is $6,314, compared with $110,500 for the average white household, according to 2011 census data. The gap has worsened in the last decade, and the United States now has a greater wealth gap by race than South Africa did during apartheid. (Whites in America on average own almost 18 times as much as blacks; in South Africa in 1970, the ratio was about 15 times.)
  • The black-white income gap is roughly 40 percent greater today than it was in 1967.
  • A black boy born today in the United States has a life expectancy five years shorter than that of a white boy.
  • Black students are significantly less likely to attend schools offering advanced math and science courses than white students. They are three times as likely to be suspended and expelled, setting them up for educational failure.
  • Because of the catastrophic experiment in mass incarceration, black men in their 20s without a high school diploma are more likely to be incarcerated today than employed, according to a study from the National Bureau of Economic Research. Nearly 70 percent of middle-aged black men who never graduated from high school have been imprisoned.

All these constitute not a black problem or a white problem, but an American problem. When so much talent is underemployed and overincarcerated, the entire country suffers.

Some straight people have gradually changed their attitudes toward gays after realizing that their friends — or children — were gay. Researchers have found that male judges are more sympathetic to women’s rights when they have daughters. Yet because of the de facto segregation of America, whites are unlikely to have many black friends: A study from the Public Religion Research Institute suggests that in a network of 100 friends, a white person, on average, has one black friend.

That’s unfortunate, because friends open our eyes. I was shaken after a well-known black woman told me about looking out her front window and seeing that police officers had her teenage son down on the ground after he had stepped out of their upscale house because they thought he was a prowler. “Thank God he didn’t run,” she said.

One black friend tells me that he freaked out when his white fiancée purchased an item in a store and promptly threw the receipt away. “What are you doing?” he protested to her. He is a highly successful and well-educated professional but would never dream of tossing a receipt for fear of being accused of shoplifting.

Some readers will protest that the stereotype is rooted in reality: Young black men are disproportionately likely to be criminals.

That’s true — and complicated. “There’s nothing more painful to me,” the Rev. Jesse Jackson once said, “than to walk down the street and hear footsteps and start thinking about robbery — then look around and see somebody white and feel relieved.”

All this should be part of the national conversation on race, as well, and prompt a drive to help young black men end up in jobs and stable families rather than in crime or jail. We have policies with a robust record of creating opportunity: home visitation programs like Nurse-Family Partnership; early education initiatives like Educare and Head Start; programs for troubled adolescents like Youth Villages; anti-gang and anti-crime initiatives like Becoming a Man; efforts to prevent teen pregnancies like the Carrera curriculum; job training like Career Academies; and job incentives like the earned-income tax credit.

The best escalator to opportunity may be education, but that escalator is broken for black boys growing up in neighborhoods with broken schools. We fail those boys before they fail us.

So a starting point is for those of us in white America to wipe away any self-satisfaction about racial progress. Yes, the progress is real, but so are the challenges. The gaps demand a wrenching, soul-searching excavation of our national soul, and the first step is to acknowledge that the central race challenge in America today is not the suffering of whites.

 

By: Nicholas D. Kristof, Op-Ed Columnist, The New York Times, August 31, 2014

September 1, 2014 Posted by | Ferguson Missouri, Racism, White Privilege | , , , , , , | Leave a comment

   

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