Monday, December 20, 2010

Why the Rich Protect Their Wealth So Fiercely (As If We Didn't Know Already) & Social Inequality in America: Tax Law Overwhelmingly Benefits Wealthy

Did you really not notice that the rich are different from you and me?* Not only do they have more money but they also know the best places to vacation. (Uh, and one thing you may not have thought of before is that the "keeping up the Jones" syndrome is pretty out and about with the wealthy. Look at the behavior of the rich from other countries, where they have no political history respecting the necessity of maintaining a strong middle class. Now, tell me whom do these people identify with more?) I'm not saying that no rich people want to be fair and pay a larger share of their wealth to taxes (ha!), but that you've got to understand what the last 30 years have bought for the very wealthy recipients of these tax reductions. When you comprehend that the tax rates were 92-plus % under Eisenhower and they fell to a median of 50% under Reagan (way down from Nixon's rate of 70-plus %), it's easy to see how mealy-mouthed President Obama's plan to roll back the Bush tax cuts for the wealthiest Americans from 35% to 39.6% was. It was a scandal, wasn't it? Their "screaming" about it certainly attests to that "fact." And these top rates only applied to the top tax brackets anyway - today's is over $$357,701. (Of course, the real measure of who pays what is the effective tax rate, which is what is paid after tax breaks. The wealthy have much of their money in municipal bonds, which means they pay zero federal taxes on it (proving that most of the screaming about rates is a convenient fabrication to get the dumbed-down population off the scent of what's really happening at tax time). * The Great Gatsby

Eisenhower (1953-1961): 91-92%

Nixon (1969-1974): 70-77%

Ford: (1974-1977): 70%

Reagan (1981-1989): 28%-69.13%

Bush I: (1989-1993): 28%-39.6% (39.6% after Clinton Administration.)

The Storming of St. Barth’s

On St. Barth’s, the chic-est Caribbean island, Christmas and New Year’s are the mad season. “During Christmas the energy is incredible,” says a longtime resident, who describes the island then as a “summer camp for wealthy, well-known New Yorkers,” business tycoons, music stars, and Hollywood celebrities. “It’s like the whole island is Studio 54 at its peak.”

There are so many rental cars on the roads that the traffic crawls. All the hotels are full. So, too, are the rental villas, which go for as much as $150,000 a week during the holiday season.

St. Barth’s Slavery Cover-Up The most recent wave of invaders is the “New Russian” super-rich, and the island’s biggest celebrity at the moment is billionaire investor Roman Abramovich, who last spring renovated the local soccer stadium as a gift to the island. He paid $89 million for a 70-acre estate above Gouverneur Beach, which he visits with his 29-year-old girlfriend, Dasha Zhukova, and he can be seen tooling around in his Mini Cooper without the bodyguards that usually accompany him in London.

On New Year’s Eve, parties are given all over the island and on the yachts moored in Gustavia Harbor. “The tradition is if you know the friend of the friend of the friend you’re in,” says the longtime resident. Party crashing is an accepted local pastime. Last year Abramovich’s party was the party to crash. If you managed to get in, you could mingle with the invited guests, including Gwen Stefani and Beyoncé — who both reportedly performed — Jay-Z, Orlando Bloom, Miranda Kerr, and Lindsay Lohan.

When you got bored there, according to the resident, “you could always go to the party aboard [Microsoft co-founder] Paul Allen’s boat [the 416-foot Octopus], because it’s so huge that he literally just sends shuttles [to shore], and anybody can come.”

The regular holiday crowd includes Revlon chairman Ronald Perelman and modern-art collector Peter Brant and his newly reconciled wife, Stephanie Seymour. Some wealthy visitors like the island so much they have bought homes there—for instance, art dealer Larry Gagosian, Jimmy Buffett, Steve Martin, photographer Patrick Demarchelier, David Letterman, and legendary French singer Johnny Hallyday, who sometimes performs spontaneously at parties, just as Mikhail Baryshnikov sometimes sweeps a pretty girl off her feet on the dance floor.

The true story of what just happened under Obama's new tax law is told below.

Social Inequality in America: Tax law Will Overwhelmingly Benefit the Wealthy

The claim by President Obama and Congressional Democrats that the new tax law is an economic stimulus that will benefit working class people is a lie. It is a law tailored to benefit the extremely wealthy. At a cost of $150 billion over the next two years, it maintains George W. Bush’s reduction in the high-end income tax rate ― for those taking home over $250,000 for married couples and $200,000 for individuals ― at 35 percent.

According to the Center for Tax Justice, the wealthiest one percent of taxpayers will pocket almost $77,000 per year more as a result of the deal. The top 1 percent would take home over 25 percent of the total tax cut; the bottom 60 percent would share less than that, about 20 percent.

Despite White House protestations to the contrary, there is no reason to believe that Democrats will reverse these tax cuts in two years’ time, when Republicans will control the House of Representatives.

Over the next ten years, the perpetuation of the high-end income tax rate reduction will cost $700 billion, according to the Congressional Budget Office, far more than was allocated for infrastructure improvements in Obama’s 2009 stimulus package, the American Recovery and Reinvestment Act.

The law also includes a number of measures designed to secure the hereditary prerogative of what is, in all but name, an aristocracy. It increases the size of fortunes exempt from the estate tax to $10 million for couples and $5 million for individuals. For fortunes beyond those thresholds, the law will reduce the tax rate to 35 percent.

The rate was going to reset to 55 percent after this current year’s “holiday” in which the rich could pass on their estates without any taxation. To further sweeten the deal for the rich, the bill includes a measure that will allow multi-million dollar estates settled in 2011 for deaths taking place in 2010 to take advantage of the zero percent tax rate.

The law also allows the $5 million exemption to apply to gifts and “generation-skipping investments,” making it “much easier for wealthy taxpayers to make gifts during life to grandchildren," according to estate attorney Beth Kaufman of Caplin and Drysdale in a comment to the Wall Street Journal.

The package also perpetuates for two years the all-time low tax rate on capital gains and dividends at 15 percent, along with a number of additional tax write-offs for corporations.

In an attempt to provide a degree of political cover for Obama and the Democrats, the bill includes a few measures that ostensibly benefit those outside of the richest one percent of the population.

The law extends tax cuts introduced in the Bush years for middle and lower income Americans. The working population has realized a much smaller share of the overall tax cut, however, and the money withdrawn from the public coffers will be offset by cuts to social spending.

For months the Democrats called for maintaining the tax cuts for all households except for the wealthiest, but have now made into law the Republican position.

The law also extends funding for federal long-term unemployment benefits for millions of workers for another 13 months at a cost of $56 billion, about a third of the price of the two-year income tax give-away to the rich. Hundreds of thousands of workers have lost their benefits since the November 30 expiration of extended unemployment benefits. Repeatedly held hostage by the Republican opposition and Democratic indifference over the past year, extended federal benefits will almost certainly expire at the beginning of 2012 with Republican control of the House.

The law also includes a one year Social Security tax cut, by which the payroll tax rate will be reduced from 6.2 percent to 4.2 percent on the first $106,800 of a worker’s wages.

According to an analysis by the Tax Policy Center, 51 million households ― a third of the total ― will be worse off as a result of the tax package. This is because for those with the greatest need - couples making less than $40,000 or individuals making less than $20,000―the Social Security tax break will not offset the tax break it is replacing, the Making Work Pay credit, resulting in an average household loss of $210 per year for 45 million households.

Another 6 million households will lose their Making Work Pay credit and will receive nothing in compensation through the Obama-Republican plan because they are state or local government employees who do not contribute to Social Security.

Perhaps most significantly, cutting Social Security payroll taxes sets the precedent for further attacks on the federal retirement program. The bill marks the first time in the 75-year history of the program that Congress has intervened to cut the payroll tax rate, and there is a campaign already underway to lengthen the tax “holiday.” This would have the effect of accelerating Social Security’s insolvency. The program is currently not predicted to become insolvent for several decades.

The law has specific benefits for the Wall Street elite, whose reckless financial speculation triggered the global economic collapse. “[A]mong the big winners are private-equity and hedge-fund executives who prevailed in their battle against ‘carried interest’ provisions that would have taxed their earnings at higher ordinary-income rates rather than as capital gains,” the Wall Street Journal notes.

In other words, the law shelters the most lucrative forms of speculative wealth accumulation on Wall Street from the personal income tax by defining these as capital gains, a form of wealth accumulation historically associated with productive investment.

The law also puts in place a two-year repeal of two laws already on the books that sought to limit the ability of the extremely wealthy to claim tax write-offs, the Pease Limitation and the Personal Exemption Phase-out (PEP).

The net effect of the law is an acceleration of the redistribution of wealth from the working class to a tiny layer of the financial elite. This takes the immediate form of tax cuts for the wealthy, but the resulting deficit spending will be paid for through unprecedented cuts to social spending.

So, exactly whom did we elect again?

Happy Holidays to you and yours and wishes for a much improved economic vision for this country in the new year!

Suzan _______________


Beach Bum aka Captain Barbossa said...

So, exactly whom did we elect again?

Is this one of those trick questions?

Seriously, when you have Shep Smith flipping out on Fox saying the rich didn't need their tax breaks and that they wouldn't help the economy anyway something has gone really bonkers.

Suzan said...

Unless it's another scam, huh?

I wouldn't put it past those faux folk to pretend "shock and repulsion" at the largesse they've been handed after all their strong arming for it.

After all, since they've won everything they wanted now, isn't it time to appease the Tea Baggers?

I don't give their words any credence.