Rejecting tax breaks for the plutocrats: On the front page of last Monday’s Washington Post, Steven Mufson did a lengthy report about a key aspect of federal taxation.
On Nexis, the headline says this: “Tax policy feeds gap between rich, poor.”
Mufson’s report was long and strong. Early on, he said this:
MUFSON (9/12/11): For the very richest Americans, low tax rates on capital gains are better than any Christmas gift. As a result of a pair of rate cuts, first under President Bill Clinton and then under Bush, most of the richest Americans pay lower overall tax rates than middle-class Americans do. And this is one reason the gap between the wealthy and the rest of the country is widening dramatically.Mufson’s report ran almost 2500 words. Before long, he was offering information which fleshed out this admittedly clunky observation: “How the wealthiest Americans managed to get Congress to treat money made from investments differently from salaries or wages involved a variety of lobbyists, economists and lawmakers.”
The rates on capital gains—which include profits from the sale of stocks, bonds and real estate—should be a key point in negotiations over how to shrink the budget deficit, some lawmakers say.
Most Americans depend on wages and salaries for their income, which is subject to a graduated tax so the big earners pay higher percentages. The capital gains tax turns that idea on its head, capping the rate at 15 percent for long-term investments. As a result, anyone making more than $34,500 a year in wages and salary is taxed at a higher rate than a billionaire is taxed on untold millions in capital gains.
Mufson’s report deserved praise from progressives. But then, so did this editorial, which appeared in the August 24 Post.
In their informative piece, the editors supported Warren Buffett’s claim that the highest earners are getting indefensible tax breaks. On-line, their headline calls for “taxing the rich fairly.”
We thought the editors' piece was quite strong. Good lord! As they ended, they even took a shot at the “plutocrats:”
WASHINGTON POST EDITORIAL (8/24/11): Preferential treatment for capital gains is a tenet of Republican economic orthodoxy that has, alas, been adopted by Democrats in recent years on specious pro-growth grounds. Even President Obama favored a temporary zero capital-gains rate for small businesses, ostensibly as a job-creation measure. In fact, taxing capital gains more lightly than income earned through other means—e.g., work—promotes wasteful tax shelters and breaks such as the $1.5 billion-a-year “carried interest” provision for investment managers.The editorial made a lot of strong points. Mufson’s front-page news report was highly informative.
The 1986 tax reform closed the gap between capital gains and ordinary income, taxing both at a top rate of 28 percent. But subsequent legislation under both Republican and Democratic administrations, culminating in the tax cuts enacted under President George W. Bush, reopened it. This is one reason that the effective tax rate on the top 400 earners in the United States fell from 29.2 percent in 1992 to 21.5 percent in 2008, even as their income more than quintupled.
For Mr. Buffett, the solution is higher rates on both ordinary and investment income for all those earning $1 million a year, with an extra boost in rates for those making $10 million and up. That seems reasonable; but he isn’t precisely clear about how to do it. Unless you equalize the ordinary income and capital-gains rates, there would still be myriad ways for the rich to avoid taxes.
Congress should follow the precedent set by the 1986 reform: Tax all income at the same top rate. Wiping out other special breaks would yield even greater gains in revenue and equity. Indeed, expanding the tax base could yield more revenue at a relatively modest top rate. It might not have to be much more than the 29.2 percent top earners paid back in 1992. A fair, efficient system that raises more revenue than the current one is something all Americans—from plutocrats to the poverty-stricken—could support.
We liberals have made little attempt, in the past thirty years, to inform the public about matters like these. In recent weeks, the Post has been doing some very good work.
Granted, this is all happening thirty years late. But shouldn’t we stand up and praise the Post's efforts? Beyond that, shouldn’t we brainstorm about the best ways to transfer all this news to “the folks?”
Sometimes, it seems like we liberals don't enjoy speaking to all those crude, unwashed people!
Funny, I've heard these facts over and over. They are pretty well known to anyone who cares to know them. Another well known fact is that those "crude, unwashed people" don't care. They've bought the "class warfare" arguments perpetuated by Republicans.ReplyDelete
For whatever reason, the "crude, unwashed people" don't want to hear from "professors". That "professors" are just feckless elitists who are out of touch with "regular" people is a long-lived and powerful narrative. (A narrative that is echoed from the darnedest corners.)
Meanwhile, its the rich that enjoy the fealty of the "crude, unwashed people". Why? Perhaps it is simply the fact that it is hard to argue with success. Its hard to convince people that the rich are doing something wrong -- especially in a society that measures worth primarily in dollars.
Its easy to convince people that professors are worthless. Bonus -- people will tell you that you are a brave truth-teller for piling on to this long deprecated class.
Consider global warming. Heck, consider evolution. You will see what happens when professors set their own hair on fire trying to get people to pay attention to basic, well-informed reasoning.
Bob, I have been following politics for well over 30 years. As Anonymous says, these arguments have been made over and over and over and over again, by professors, by pols, by journalists, authors, activists, etc. Geez, I ask myself: How did *I* learn this stuff? Well, from those folks who have been hammering away, tirelessly on these points for as long as I can remember.ReplyDelete
You have created a straw man here.
The only difference between now and, say, every year since the Reagan ascendancy is that maybe --- just maybe --- with inequality at levels comparable to 19th century Britain, and all of us living with the fallout from Sept 2008....maybe the public is receptive to the message. Maybe.
But to say people haven't been hammering away at this for decades --- and often in non-condescending ways that would please The Howler --- is wrong.
Too often, Bob, you (a) make unfounded claims about what the experts sas or don't say and (b) let We the People off the hook for our ignorance.
I've been listening for years and I've hardly heard the points the upper two have been making. Not compared to how racist, sexist, homophobic, etc. people who aren't automatically on our side are supposed to be. As you say, Republican propaganda has been relentless while our side has been feeble and intermittent. If our side keeps making the point that the rich are paying a lower tax rate than they are, how come the public doesn't know it?ReplyDelete
Here is the liberal program in a nutshell: 1) Don't tell the people what's going on, 2) blame them for not knowing, 3) call them racist.
>>> If our side keeps making the point that the rich are paying a lower tax rate than they are, how come the public doesn't know it?ReplyDelete
Oh, dear, where to begin?
>>>I've been listening for years and I've hardly heard the points the upper two have been making.ReplyDelete
I'd say your listening has been rather selective. Or perhaps, as with many people, your ears perk up at the more inflammatory stuff. Whatever the case, it is darned near impossible to read a newspaper with any regularity, listen to reasonably intelligent radio, read any number of magazines, etc., and not see and hear the messages The Howler --- and the rest of us --- want delivered, and in the non-insulting way we want them delivered.
Are snooty, accusatory liberals also to blame for the rather alarming % of people who believe man-made climate change is a hoax, despite overwhelming scientific evidence to the contrary, nicely presented in an Oscar-winning movie? Or that the Bible is the literal truth?
When, or when, will We the People be held to account for our ignorance?
The problem is the conservative sound machine is much bigger and better that the progressive one. Rich men own the print, radio and TV media. Just as they bribe politicians with campaign contributions, they buy out journalists with huge salaries.ReplyDelete
Progressives have had a few voices, Warren Buffett, "We are engaged in class warfare, and my side is winning."
Mario Cuomo, "It is class warfare, and the Republicans started it."
We have a few on our side, Paul Krugman, Bernie Saunders, Sherrod Brown, Barney Frank, Ralph Nader, Michael Moore and others.
President Obama is being disingenuous when he says, "This isn't class warfare, its math."
He has fired a shot across the bow of the plutocrats, and they are already shooting back.
It's about time.
As Americans, we have had it beaten into our heads since grade school that rich men create jobs and build America, and anyone that disagrees with that is a socialist (read communist).
It's about time we took a look around and ask the question, "Where are the jobs? Show me the jobs the millionaires and billionaires are creating!"
I have rarely heard this argument clearly made, i HAVE heard arguments about how 47% of people pay no income taxes (shh, ignore payroll taxes) and most money comes from the wealthy, blah, blah, blah. I've heard all about Joe Plumber worrying about what happens when he makes $250,000 a year (as if).ReplyDelete
And i listen to NPR and read the NYtimes ever day.
Geof, what are you listening too or reading?
In college I had professors in the business school decry the very existence of any corporate taxes. I made no economic sense, they would say, shaking their Friedmaniac heads in knowing frustration. Tax them and they simply pass the cost on to their customers. There should be zero corporate taxes. Class dismissed!ReplyDelete
I never could wrap my head around this, economics being a neverending comes-around-goes-around affair. Non-corporate entities, shouldered with the entire tax burden, would have less money to spend on corporate products and services, so corporations would still wind up with less income with which to expand and create wealth and jobs, so what difference would it make? Why not make corporations pay all taxes and leave individuals alone? Corporations would more efficiently file the fewer returns the IRS would have to deal with, and folks would then have more money with which to buy corporate product, and corporate income would rise to cover the increase corporate taxes burden. What's the diff?
Is there a moral argument in having people understand the extent of the government take? Would that create more tax rebels? I remember Reagan wanting to end payroll withholdings, so people would get one whopping tax bill at the end of the year. Then, by god, we'd have a serious tax revolt. Who knows? Maybe the resulting revolt would make the French Revolution look like a Fourth of July picnic, with liberal heads a-bouncing like lottery balls.
By the same token, why not let folks know the full and true cost of other things? Lift the scales from their eyes when it comes to the true cost of food, fuel, and who knows what else we hold dear and take for granted? Instant dystopia. America a a Cormac McCarthy novel.
Great point; most people probably don't realize the full extent of their tax burden. But they know their tax burden like the back of their hand, when compared to the benefits they receive.ReplyDelete
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