[Frick and Frack (Car Talk Wits) Retire!]
It seems almost silly to make this analogy, but have you noticed how like three-year-olds the entire Republican brigade is now? And they'll hold their breath until they get more tax breaks (or are allowed to steal the Social Security savings to fund new wars of choice). (Don't tempt them!)
David Cay Johnston
"We don't pay taxes. Only the little people pay taxes." - billionaire hotelier Leona Helmsley.
"Six American families paid no federal income taxes in 2009 while making something on the order of $200 million each. This is one of many stunning revelations in new IRS data that deserves a thorough airing in this year's election campaign. The data, posted on the IRS website last week, brings into sharp focus the debate over whether the rich need more tax cuts (Mitt Romney and congressional Republicans) or should pay higher rates (President Obama and most Democrats).
The annual report, which the IRS typically releases with a two-year delay, covers the 400 tax returns reporting the highest incomes in 2009. These families reported an average income of $202.4 million, down for the second year as the Great Recession slashed their capital gains.
In addition to the six who paid no tax, another 110 families paid 15 percent or less in federal income taxes. That's the same federal tax rate as a single worker who made $61,500 in 2009. Overall, the top 400 paid an average income tax rate of 19.9 percent, the same rate paid by a single worker who made $110,000 in 2009. The top 400 earned five times that much every day.
Just 82 of the top 400 were taxed in accord with the Buffett rule, which proposes a minimum tax of 30 percent on annual incomes greater than $1 million.
Let's return for a moment to the single worker who made $61,500 in 2009 and paid 15 percent of his salary in federal income taxes. The top 400 made more every three hours than he did in a year, and yet many of them paid the same or a lower tax rate, according to the data in the report. On top of his $9,225 federal income tax, he also paid $9,409 in payroll taxes, which include Social Security and Medicare taxes. Half of the payroll tax was deducted from his check. His employer paid the other half, which was really hidden wages taxed at a 100 percent tax rate. His total federal tax burden was 30.3 percent, exactly 50 percent more than the 20.2 percent tax burden, measured the same way, on the 400 at the top.
This comparison illustrates how Congress has created two income tax systems, separate and unequal, burdening millions much more heavily than the few, those with gigantic incomes and a propensity to make campaign contributions. One system is for wage earners and pensioners, whose taxes are withheld from their checks. This rigorous, efficient system taxes them fully. The other system is for business owners, executives, managers of hedge and private equity funds, name brand athletes and entertainers, and many others with huge incomes. Congress lets them put unlimited amounts of income in sheltered accounts and put off paying taxes for years or even decades.
Deferral does not prevent these super rich Americans from spending their money. Hedge fund managers and others can borrow against their untaxed wealth, currently at interest rates close to zero. So long as their wealth grows faster than their borrowing their net worth continues to increase. The IRS report covers only the 400 highest incomes reported on tax returns, not the 400 highest actual incomes, which I am certain are much larger on average because of deferrals. That means the report overstates the tax burdens of the richest Americans pay.
The issue we need to debate is not how much you earn - make all you can. The issue is that everyone should pay their taxes now, not in some far-off tomorrow, and as you go up the income ladder so should your tax rate. By what economic, political or moral standard should working stiffs be forced to pay their taxes immediately, while plutocrats pay their taxes by-and-by? And why should anyone who makes more than $200 million live tax-free? Those are questions to ask candidates on the hustings, insisting they give specific, focused answers.
To give this a sense of scale, the top 400 are financial giants compared to Mitt Romney. It took Romney a quarter century of smart work to build up a fortune that his campaign says is between $190 and $250 million. The top 400 made about that much in one year. Romney says that those of us who tell these hard facts about the zero-to-low tax burdens of the richest Americans are promoting class warfare. Income inequality, according to Romney, should be discussed only "in quiet rooms." If you agree with Romney then keep quiet. If not, now is the time to spread the word and encourage robust and thoughtful debate, just as the framers of our Constitution intended. “
Wisconsin, once home of the moral paragons La Follette, Proxmire and Feingold, now inhabited by the short-sighted and jealous? It's hardly an interesting new fiction.
On, Wisconsin! Or so it was meant to be with a union-led recall in the home state of Robert “Fighting Bob” La Follette Sr., the populist governor and senator who once shaped the cry for anti-corporate social justice in this nation. After La Follette there was the Wisconsinite William Proxmire, the great conscience of the U.S. Senate, followed by the equally impressive Russ Feingold, who, despite being exactly correct in warning of the consequences of unfettered banking greed, was turned out by Wisconsin voters in 2010.
Perhaps if the original McCain-Feingold legislation — gutted by the Supreme Court — was still the law of the land on campaign finance, the Democrats and their union base would have survived Tuesday’s election.
Certainly that is the excuse provided by what remains of the liberal media, which point to the lopsided advantage in funding for Wisconsin Gov. Scott Walker and to the high court’s Citizens United ruling in seeking reasons for this “billionaire’s victory” over “people power.” But the larger truth is that the spirit of populism has been perverted by the Republican tea party right and that Democrats are left defending government bureaucracy while remaining incapable of responding to America’s widespread economic pain.
At a time when so many are worried about obtaining or holding on to work, it’s difficult to rally around the guaranteed job security and high pensions of some privileged government employees. Not all public workers fit into this category, to be sure. But nonpublic workers who must struggle with the vagaries of private employment have seen more than enough examples of government employee unions, the last stronghold of organized labor, exercising their power to ensure what appears to be outsized compensation for their members.
Of course this argument is a red herring. The budget crises of state and municipal governments were not brought on by excessive pay to firemen, cops and other civil servants, but rather by a banking meltdown that has enriched those who engineered it. Housing values, and the local taxes dependent on them, are down because of financial shenanigans that wrapped mortgages into collateralized debt obligations, and that is the root cause of government red ink. But the job security and pensions of government employees make terribly convenient scapegoats at a time when so many Americans are lining up at food banks.
The electorate in Wisconsin, and San Diego and San Jose, Calif., that voted Tuesday against public employee unions were not expressing a rational response to the crisis, but rather a tantrum stoked by the lavishly financed demagogues of the right. The voters bought their story because the opportunism of the Democratic Party leadership has left progressives without a believable alternative to the tea party’s narrative. Indeed, job creation became a bigger issue than collective bargaining in the Wisconsin race, and the dismal national unemployment figures that came out just days before the election didn’t hurt the Republicans’ cause.
By refusing to campaign in the state before Tuesday’s vote, President Obama proved he has no heart for engaging in a real debate about the sources of our economic crisis. As Bloomberg News reported in an editorial titled “All Eyes on Wisconsin, Except Obama’s,” the president made two fundraising stops within 50 miles of the Wisconsin border last Friday, but studiously avoided entering the state he easily carried in the 2008 election.
Instead of visiting, Obama tweeted: “It’s Election Day in Wisconsin tomorrow, and I’m standing by Tom Barrett. He’d make an outstanding governor. -bo.” Not a word of support for the unions that so slavishly support the president and spent millions propping up Barrett.
“Bo” emerged with his popularity intact, according to exit polls, and he will do better in November than Barrett did this week, despite media attempts to treat the Wisconsin election as an omen of things to come.
And, on the other hand, this could be why (if you're like me and enjoy beating yourself up over your so-called friends' bad political choices):
A fair number of voters who say they're Obama supporters obviously voted for Walker, and I doubt that they're really in favor of the governor's extreme anti-labor views. They probably just didn't feel right giving him the boot over policy and might vote for an opponent next time around. In other words, it may well be that some people simply don't like the idea of recall elections, even ones they're voting in. Sure, Californians kicked out Gray Davis years ago, but that only succeeded because Republicans whipped up fervor over Davis' not-so-great handling of a power-grid crisis – the people felt that they were getting ripped off and that he hadn't done anything about it. The GOP also fielded a celebrity candidate, Arnold Schwarzenegger, who turned out to be a pretty good campaigner. Had Republicans picked some middling pol, I don't think they would have had such an easy time of it.
But the mentions of labor above bring me to my main simple-dino observation: I suspect that underlying Walker's reaffirmation Tuesday is a need on the part of ordinary people to distance themselves from the very concept of labor. Why? Because that concept is associated with being a working-class stiff. And if there's one thing we know for certain about Americans, it's that we are ALL card-carrying members of the "middle class." People who are patently working-class will tell you they belong to the great middle class. Here's a hint: if you work from paycheck to paycheck or nearly so, you're working-class; if you're fairly comfortable, own some property and have economic options to fall back on in case of hard times, you're middle-class; if you could retire right now without feeling pinched, you're rich; if you're currently scheming to corner the silver market, looking into a second yacht, buying a suit that costs more than most people's college education, or donating ten million dollars at a pop to your favorite politician, you're REALLY rich.
I don't believe the phenomenon I'm describing is due to highfalutin' cultural aspirations since a great number of self-describing middle-class Americans will snicker on cue at the merest whiff of Euro-baiting – you know, jokes about the French and all that. (Freedom fries all round, with extra ketchup, please. Take that, you over-edjikated socialist sissies!) Their contempt for or uneasiness with labor unions can't be derived from any expectation that they're all too busy listening to nuanced Haydn cello concerti or enjoying opera. No, most likely the uneasy feeling stems not from cultural or literary aspirations but rather from strictly economic ones: fear of being condemned to what Mr. Carlyle called the bourgeois "hell of not making money."
Almost everyone here buys into the Horatio Alger up-from-nowhere, rags to riches dream, even if they've been stuck waiting tables for the last fifteen years and haven't a viable notion in their heads how they might ever do otherwise. There's something admirable about such optimism, but at the same time, I think, it gives a devastating blow to any hopes this country might harbor for social justice and genuine opportunity. Isn't the rise and fall of labor closely correlated with the rise and fall of the so-called middle class? I mean with the prospects of working people to move a bit beyond the very category so many of them deny belonging to and take up a position somewhat more secure and comfortable, more option-laden than working from one paycheck to the next?
No? Well, okay, then, America, let's all just keep thinking we're middle-class -- that ensures most of us never really will be, let alone Thurston Howell-rich. I say, Lovey, oh Lovey, where did I leave that third martini? Gilligan my boy, be a good lad and fetch me another, won't you?
And Paul Krugman as usual provides an unwelcome history lesson to the ever-complaining Reaganites.
. . . many readers have probably figured out the trick here: Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration — mainly for emergency aid programs like unemployment insurance and food stamps — that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War.
Why was government spending much stronger under Reagan than in the current slump? “Weaponized Keynesianism” — Reagan’s big military buildup — played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
08 June 2012
There’s no question that America’s recovery from the financial crisis has been disappointing. In fact, I’ve been arguing that the era since 2007 is best viewed as a “depression,” an extended period of economic weakness and high unemployment that, like the Great Depression of the 1930s, persists despite episodes during which the economy grows. And Republicans are, of course, trying — with considerable success — to turn this dismal state of affairs to their political advantage.
They love, in particular, to contrast President Obama’s record with that of Ronald Reagan, who, by this point in his presidency, was indeed presiding over a strong economic recovery. You might think that the more relevant comparison is with George W. Bush, who, at this stage of his administration, was — unlike Mr. Obama — still presiding over a large loss in private-sector jobs. And, as I’ll explain shortly, the economic slump Reagan faced was very different from our current depression, and much easier to deal with. Still, the Reagan-Obama comparison is revealing in some ways. So let’s look at that comparison, shall we?
For the truth is that on at least one dimension, government spending, there was a large difference between the two presidencies, with total government spending adjusted for inflation and population growth rising much faster under one than under the other. I find it especially instructive to look at spending levels three years into each man’s administration — that is, in the first quarter of 1984 in Reagan’s case, and in the first quarter of 2012 in Mr. Obama’s — compared with four years earlier, which in each case more or less corresponds to the start of an economic crisis. Under one president, real per capita government spending at that point was 14.4 percent higher than four years previously; under the other, less than half as much, just 6.4 percent.
O.K., by now many readers have probably figured out the trick here: Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration — mainly for emergency aid programs like unemployment insurance and food stamps — that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War.
Why was government spending much stronger under Reagan than in the current slump?
“Weaponized Keynesianism” — Reagan’s big military buildup — played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
And this, in turn, reflects a changed political environment. For one thing, states and local governments used to benefit from revenue-sharing — automatic aid from the federal government, a program that Reagan eventually killed but only after the slump was past. More important, in the 1980s, anti-tax dogma hadn’t taken effect to the same extent it has today, so state and local governments were much more willing than they are now to cover temporary deficits with temporary tax increases, thereby avoiding sharp spending cuts.
In short, if you want to see government responding to economic hard times with the “tax and spend” policies conservatives always denounce, you should look to the Reagan era — not the Obama years.
So does the Reagan-era economic recovery demonstrate the superiority of Keynesian economics? Not exactly. For, as I said, the truth is that the slump of the 1980s — which was more or less deliberately caused by the Federal Reserve, as a way to bring down inflation — was very different from our current depression, which was brought on by private-sector excess: above all, the surge in household debt during the Bush years. The Reagan slump could be and was brought to a rapid end when the Fed decided to relent and cut interest rates, sparking a giant housing boom. That option isn’t available now because rates are already close to zero.
As many economists have pointed out, America is currently suffering from a classic case of debt deflation: all across the economy people are trying to pay down debt by slashing spending, but, in so doing, they are causing a depression that makes their debt problems even worse. This is exactly the situation in which government spending should temporarily rise to offset the slump in private spending and give the private sector time to repair its finances. Yet that’s not happening.
The point, then, is that we’d be in much better shape if we were following Reagan-style Keynesianism. Reagan may have preached small government, but in practice he presided over a lot of spending growth — and right now that’s exactly what America needs.
And, of course, Reagan hadn't signed the pledge to ruin all government-funded activities except for the Republican-favored ones then.
Here are some of my favorite comments, hundreds of which will appear on most days, under Dr. Krugman's essays:
Sheldon Bunin, Jackson Heights, NY
At least Dr. Krugman's readers aren't naïfs about economics or history. Or am I getting everyone else wrong?