Archive for the ‘Policy’ category

Who Really Pays Taxes?

October 7th, 2012

Let’s explore the misconceptions and realities about who pays taxes.

Republicans love to paint the rich as the minority-victims who pay most of the taxes in this country. Mitt Romney’s recent video gaffe is a perfect example of this view. They will say things like, “86% of all income taxes are paid by the top 25% of income earners” (source). Or in the case of Romney, he claims that 47% of the country does not pay taxes and mooches off the system; these people are therefore entitled and will not take responsibility for their lives. These claims are wildly inaccurate. Their point is to paint the rich as victims and force more of the tax burden on the poor and middle class. They have despised our progressive tax system for decades, favoring a flat tax that would dramatically harm the poor and middle-class to the benefit of the wealthy (go learn about “regressive taxes“).

The Center on Budget and Policy Priorities provides some important insights on this topic.

“The notion that ‘half of Americans don’t pay taxes’ not only overstates the share of households that do not pay federal income taxes in a typical year.  It also ignores the other taxes people pay, including federal payroll taxes and state and local taxes.  Policymakers, pundits, and others sometimes overlook this point.” Source: bit.ly/iWtaO0

“The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only tax that matters.  Some 82 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to 1.6 percent of income for those in the top 1 percent of the income distribution.” Source: bit.ly/iWtaO0

See also: http://economix.blogs.nytimes.com/2009/04/13/just-how-progressive-is-the-tax-system/

“The liberal Citizens for Tax Justice says the highest overall tax rate (this includes federal, state, and local taxes) is 32.2 percent. The top 1 percent pay even less—30.9 percent. They include employer-paid FICA taxes as income, which seems wrong to me. But the conservative Tax Foundation reports that the top 0.1 percent pay an effective federal tax rate of 21.5 percent. The last total tax rate I see from them is 2004, when it reported that the top quintile of earners paid an average total tax rate of 34.5 percent. They don’t break out the top 1 percent, but their rate would actually be lower than that of the top 20 percent as a whole.” (Source)

 

And: http://morallowground.com/2011/11/21/u-s-billionaires-paying-1-tax-or-why-the-buffett-rule-makes-sense/

 

 

 

Paul Ryan’s Road Map to Disaster

November 21st, 2010

In a previous column, we looked at the Republican agenda. Knowing how Republican’s plan to govern as they take control of the House next year should be of interest to every U.S. Citizen. Specifically, our column looked at the Republicans’ “Pledge to America.” The Pledge is one of two recent Republican platform proposals. The second document is Representative Paul Ryan’s (R – WI) “A Roadmap for American’s Future.” The Roadmap continues the conservative fear-mongering about deficit spending, which we have also addressed in a previous column.

See this Critique of Paul Ryan’s “Road Map by economist Dean Baker; and this report. Dean Baker found 20 inaccuracies and 4 references to raiding Medicare in the Road Map. See also Nobel Prize-winning economist Paul Krugman’s critique of the Road Map. He points out that Ryan’s plan would reduce federal government revenues by $4 trillion over the next decade, which would add significantly to the current deficit (something Republicans see to worry about on the surface). Krugman goes on to state that, “the Road Map wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich…even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.” The Road Map assumes zero dollar growth in domestic discretionary spending (including energy, education, the courts, etc.), but, outside of Medicare, he does not say specifically what specific programs he would slash.

Representative Ryan’s proposal, if implemented, would be a disaster for the economy, for working families, and would essentially redistribute wealth upward. Ryan is really proposing the same destructive policies that have been pushed bu Republicans for the past thirty years, usually with painful result for low-income and middle class families. In 2012, voters will have a choice about whether they want to live in a society of massive inequality and increased vulnerability for the majority of hard working Americans, or the more-centrist approach that Obama and the Democrats are pushing for. To read excerpts from Paul Ryan’s Roadmap, click the “more” button. » Read more: Paul Ryan’s Road Map to Disaster

Deficits Don’t Matter?

November 7th, 2010

In a moment of honesty, Vice President Dick Cheney told a reporter, “Reagan proved deficits don’t matter” (source). Yet, more often the Republicans and their fringe backers, Fox News and the Tea Party, have made the public debt a source a public anxiety and anger. The reality is that deficit spending is required for a healthy economy, and we have been in much more debt in the past (i.e., during WWII) and we experienced the greatest boom and largest middle-class in our history (source). This is not an endorsement of “welfare for the rich, capitalism for the poor.” I think it is a crime when the government bails out corporations who have been irresponsible, and the public gets stuck with the bill. No, I strongly disagree with what went on during the Bush and Reagan years: Redistribution of lower-income/middle-class wealth to the rich, through corporate welfare (i.e., tax cuts/loopholes/shelters, no-bid contracts, bailouts, deregulation, privatization of public resources, etc.). But being against welfare for the rich does not mean all deficit spending is a bad thing. In fact, it may actually be essential for a thriving economy.

(Rick Seaman of Portland, Oregon, made this chart from data he found on TreasuryDirect.gov.)

Republicans seek to spook the population into balanced budget spending, but then they go on a spending spree when they are in power (see the chart above). Keynesian economics have proven over and over, and history bears this out, that during economic downturns government spending is essential for recovery. Some economists even insist that ongoing deficit spending is required for a vibrant economy, and deny that there is a downside. Republicans pose as the “fiscal conservatives” who are for “fiscal responsibility,” but this is a ridiculous claim. It is Democrats that have been the fiscal conservatives, and have tried to balance the budget during economic booms.

Joe Conason of Salon.com wrote that, “In our time, the Republican Party has compiled an impressive history of talking about fiscal responsibility while running up unrivaled deficits and debt. Of the roughly $11 trillion in federal debt accumulated to date, more than 90 percent can be attributed to the tenure of three presidents: Ronald Reagan, who used to complain constantly about runaway spending; George Herbert Walker Bush, reputed to be one of those old-fashioned green-eyeshade Republicans; and his spendthrift son George “Dubya” Bush, whose trillion-dollar war and irresponsible tax cuts accounted for nearly half the entire burden. Only Bill Clinton temporarily reversed the trend with surpluses and started to pay down the debt (by raising rates on the wealthiest taxpayers)…Not all of the warnings about deficit spending are false. Wasteful federal spending can eventually lead to inflation; excessive deficits can cause interest rates to rise, although that doesn’t always occur. But as Clinton proved in confronting the huge legacy of debt left over from the Reagan era, it is possible to raise taxes and slow spending without damage to the broader economy” (source).

According to their own stated standards, Republicans regularly commit the unpardonable sin of massive deficit spending. If we buy-in to their fear-mongering about deficit spending (even during recessions) then we must give Republicans very poor ratings. It is worth mentioning that when Republicans implement deficit spending, the spending usually ends up in the hands of the ultra-rich, who tend to save; whereas Democrats typically channel deficit spending to the middle-class, who are likely to spend, which leads to a stronger economy. There is a big difference between awarding no-bid military contracts to Haliburton and Blackwater, and on the other hand, extending unemployment benefits. Only the later actually ends up helping the economy.

Conason also points out that, even though deficit spending is an essential part of sound fiscal policy,”Not all of the warnings about deficit spending are false. Wasteful federal spending can eventually lead to inflation; excessive deficits can cause interest rates to rise,although that doesn’t always occur. But as Clinton proved in confronting the huge legacy of debt left over from the Reagan era, it is possible to raise taxes and slow spending without damage to the broader economy” (source). Tax rates in the U.S. are among the lowest of industrialized countries (only Mexico, Turkey, South Korea and Japan have tax rates lower than ours), and we spend more on our military than all other nations combined—if our deficit become a real problem, we could easily make some changes in these areas, without cutting “entitlements,” and wipe our our debt in a decade. Ron Paul has said, “Deficits mean future tax increases, pure and simple.” Perhaps there is truth to this. However, take a look at countries that have higher taxes. For example: Denmark. » Read more: Deficits Don’t Matter?

Legalized Marijuana is Coming

September 12th, 2010

Recreational cannabis use may become legal in California this November. That’s right. Whatever you prefer to call it—pot, grass, weed, marijuana—like alcohol, it would become legal for adults to use recreationally. Cannabis is already permitted for medical purposes in 14 states. Millions of Americans use it for recreational purposes. Regulating it allows the government to tax it and control how it is used. This is not unlike the prohibition amendment in the early 20th century that led to a massive black market. When substances like alcohol and cannabis are forced underground, you simply feed crime, lose control of age limits, lose out of taxing it, send a lot of otherwise productive citizens to jail, create drug wars in other countries (e.g., Mexico), and make it more attractive to users.

The state of California need the money. Taxing cannabis will bring in between $1.4-2 billion annually, and will significantly reduce the costly prison population of California’s overcrowded detention facilities. It will also save on drug enforcement, allowing the police to work in more productive areas. In 2003, the Office of National Drug Control Policy (ONDCP) published “Economic Costs of Drug Abuse,” which stated without separately analyzing cannabis related costs, the United States was spending $12.1 billion on law enforcement and court costs, and $16.9 billion in corrections costs, totaling $29 billion.

Right now polls indicate that the bill have a shot of passing this November. Before we look at further implications of this initiative—called Prop 19—let’s review some history. » Read more: Legalized Marijuana is Coming

Do Tax Cuts Increase Revenue?

July 28th, 2010

On Sunday Treasury Secretary Tim Geithner made the case for letting Bush-era tax cuts for the wealthiest Americans expire later this year. He dismissed concerns that the move could push a teetering economy back into recession and argued that it would demonstrate America’s commitment to addressing its trillion-dollar budget deficit.

Republicans have countered with predictable fearmongering. In a USA Today op-ed, on July 22, Utah Republican Senator Orrin Hatch, wrote that letting the tax cuts expire could potentially “trigger another recession, the last thing out-of-work Americans need…Dr. Christina Romer, chair of the president’s Council of Economic Advisers, found…that there’s ‘a powerful negative effect of tax increases on investment.’ Her analysis showed that $1 in tax cuts results in a $3 increase in GDP, demonstrating why lower taxes are key to investment and an economic recovery.” (OK, Sentator Hatch, then you should be thrilled that Obama gave tax cuts to 95% of Americans…where’s your op-ed about that?)

So we have Treasury Secretary Geithner saying raising taxes back to Clinton-era level is a good thing, but the senior member of the Senate Finance Committee (Hatch) saying it will be devastating to the economy. This illustrates the fundamental differences between Republicans and Democrats is their view of taxes. Democrats believe in progressive taxation–that is, taxing the rich at a higher percentage because a flat tax would take a larger percentage of income from those with lower income; and the past 30 years tells us that it is the Democrats who are the fiscal conservatives when it comes to managing the deficit. On the other side of the aisle, Republicans believe that reducing taxes for high-income earners is better for the economy because it will “trickle down” to the lower income workers in the form of jobs; and they believe that lowering taxes for the rich increases government tax revenues. Repeat: Republicans believe that taking less money from the rich will give the government more money. Yes, they believe this like an article of faith. And they repeat it ad nauseum.

Examples:

President George W. Bush: “You cut taxes, and the tax revenues increase” (2006)

Vice President Dick Cheney: Keeping taxes low, “does produce more revenue for the Federal Government.” (2007)

Senator John McCain:  “Tax cuts … as we all know, increase revenues.” (2007)

Rudy Giuliani: “I know that reducing taxes produces more revenues.” (2007)

Rep. Lynn Westmoreland, Georgia-R: “This Congress must recognize that tax cuts spur economic growth.” (2005)

Carly Fiorina, U.S. Senate Candidate: Let me propose something that may seem crazy to you. You don’t need to pay for tax cuts. They pay for themselves. (2010)

If this concept holds true then the Bush tax cuts should have brought in more revenue and helped decrease the budget deficit. They did the opposite. » Read more: Do Tax Cuts Increase Revenue?

Budgeting for the Living

May 23rd, 2010

We hear a lot of criticism these days about government spending. This is a primary concern for the Tea Party movement, and is a major focus in the wave of new conservative books and publications—from Representative Paul Ryan’s “Roadmap to America’s Future,” to recent books by Gingrich, Hannity, and Beck. This concern was nonexistent during the unprecedented spending of the Bush years. Moreover, in all of their fear-mongering, we only hear about the problem of “entitlements.” It is always a concern with too much spending that directly helps low income citizens. We never hear concerns from those who claim to be conservative about government spending that feeds our massive military industrial complex. » Read more: Budgeting for the Living