First, it's a bad idea to throw rocks if you're in a glass house. Governor Palin passed a windfall profits tax on oil companies and passed the proceeds on to her constituents. She talks of Alaskans receiving an equitable share of the state's non-renewable resources. That explains her previous 80% approval rating as governor; if your governor gave every man, woman, and child in the state an extra $1,200, wouldn't you like said governor?
(Gov. Palin) Alaska—we’re set up, unlike other states in the union, where it’s collectively Alaskans own the resources. So we share in the wealth when the development of these resources occurs
I could go on about redistributing wealth to your cronies. For example, no-bid cost-plus contracts to the company which the Vice President is the former CEO of. The bailout for companies like Goldman Sachs, engineered by the former CEO of...Goldman Sachs. And so on.
Second, his plan is not a hand-out, but rather a hand up. Those who do not pay taxes are not going to get extra money back. Money will not be given to "lazy welfare bums" or "those who don't want to sacrifice and sweat."
(page 2) the “Making Work Pay” credit will provide a refundable tax cut of $500 for workers or $1,000 for working couples
Emphasis mine. By definition, working people are not on welfare.
Third, much of the noise regards "punishing the successful." I don't think anyone can honestly say that a higher tax rate will make someone reject a raise, so long as an increase in pay never means that you actually take less money in dollars home. Besides, if you don't like your tax rate, donate to charity or pay your employees a better wage and you can lower yourself to whatever tax bracket you want.
Don't we tax work more than we tax wealth? Are any of them advocating raising inheritance taxes? After all, the best way to get rich is to be born into it; this is not working hard, nor success, but aristocracy. Why not tax inheritance at a rate determined by the increase in the national debt during the lifetime of the individual?
The answer is because "punishing the successful" is a red herring. A progressive tax is not about punishing the successful, but about compensating for people who might not know when the concentration of wealth is causing a detriment to society. We rise and fall as one nation, and when your neighbor does better, you do better too. Remember, the Good Samaritan who helped and paid for the care of an injured stranger was credited by Jesus as more worthy than the Pharisee who simply walked by because the stranger was a pagan to him.
Think of the CEO who pilfers the pension fund for his company, runs it into the ground while receiving hundreds of times as much salary as a regular employee, and then gets a golden parachute worth $10s of millions for their failures.
Fourth, the tax rates are comparable to the rates under Clinton. Yet no one was calling Clinton a socialist. In fact, I suggest going back almost 100 years and looking at the tax rates in World War I, World War II, after World War II, and during the Cold War. For the highest bracket, they are in the neighborhood of 70-94%. But we weren't socialists back then, were we?
Put another way, Senator Obama is not proposing new taxes; he is proposing old taxes, most of which were legislated to expire sooner or later anyway. Taxes would just return to what they were previously, just a few years ago, for only the upper few brackets.
Fifth, what is so bad about taxes?
(Colin Powell) Taxes are always a redistribution of money. Most of the taxes that are redistributed go back to those who pay them, in roads and airports and hospitals and schools. And taxes are necessary for the common good. And there's nothing wrong with examining what our tax structure is or who should be paying more or who should be paying less, and for us to say that makes you a socialist is an unfortunate characterization that I don't think is accurate.
"Socialist", "communist", and "Marxist" stifle and suppress honest, open debate. It is just fear-mongering, meant to activate the amygdala and shut down the critical thinking regions of the brain.
Consider that taxes allow roads to be built and maintained, enabling the successful people to connect with consumers so that they can become rich in the first place. Taxes pay to maintain schools and for teachers to educate the workforce so that those successful people can hire competent employees. Taxes pay for health inspectors to make sure you don't get E. Coli when you go out to eat, to make sure that the plane you're flying in doesn't crash due to neglect, to make sure the home you live in meets public safety standards.
Who gets greater prosperity from the existence of roads and schools; the upper class, or the middle class? If our infrastructure falls apart, how will products be shipped to malls for consumers to purchase? Who will run cash registers if no one can do basic arithmetic? Doesn't it make sense that those who benefit most from government spending ought to contribute more of their income to it? Senator John McCain believed that back in October of 2000.
(I would like to point out that at just after 2 minutes, McCain admonishes the crowd for booing the speaker; imagine that, encouraging an open and honest discussion...)
In this video, McCain advocates a progressive income tax. Even Adam Smith (the "invisible hand" guy) advocates a progressive tax in The Wealth of Nations.
(Adam Smith) It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
McCain moves on to discuss loopholes and how they affect the effective tax rate. So let's look for some examples.
(Reuters) The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.
Also, check out this graph. Although the maximum tax rate is 35% in the US right now, not even the richest actually pay more than 31%.
Further, consider that capital gains are taxed at 15% for the upper bracket. So if you're a rich CEO and you get paid in stock options, you're effectively getting less than half of the normal income tax rate on that income. Even Warren Buffet denounces the system where his tax rate is less than his secretary's. The truly insidious twist to this is that our 401(k)'s are taxed as regular income, and not capital gains, despite being in the stock market.
The rich are not only getting richer but they're also paying less in taxes. And for the super-rich there are quasi-legal ways to avoid paying some taxes altogether. It's not worth most people's time to itemize their taxes. Rich folks can also afford accountants who exploit tax breaks and exemptions for their clients, off-shore tax shelters like Ireland, or tax breaks that you can pay lobbyists to put into legislation.
McCain ends by saying that rich people are already doing well, and the people who really deserve a tax cut are lower income families who are trying to raise and educate their children.
Personally, I go even farther. Consider that "tax cuts for the rich" is an implementation of supply-side economics, which John Kenneth Galbraith likened to the horse and sparrow theory; if you feed the horse enough oats, some will pass through to the road for the sparrows.
More money for the middle class means more people going out to eat, to the movies, or the mall. It means more people going to the dentist or the eye doctor and buying glasses or contacts. It means deliveries of products to those places doing more business. It means big-screen TVs and surround sound stereo systems and multi-core computers made possible by the economies of scale provided by a large and vibrant middle class.
Ultimately, the owner of the company will make more money because he will have more business from a middle class who has more disposable income. He could make so much more money that it offsets the extra taxes that he's paying. Call it "trickle up" or "demand-side economics".
There is in fact some evidence of this. The table below shows that family income growth, after adjusted for inflation, is greater for everyone under Democrats than Republicans. Further, under Democrats, income inequality narrows, while under Republicans it grows. A growing inequality gap is one of the reasons American cities have economic inequality that rivals African cities.
Finally, I would like to tackle the "wealth creation vs. wealth redistribution" myth that is being peddled right now. Inflation adjusted wages for the lower 50% of Americans are pretty much the same as they were 40 years ago. Inflation is class warfare, allowing companies to give the illusion of higher pay without actually giving their employees more purchasing power, while officers in the company get extravagant pay packages, pensions, stock options, and so on. In order to continue consuming goods the middle class usually takes on huge debts using mortgages and credit cards. Sometimes the lower class (who has no connections with which to get a good job) must buy groceries or pay the electric bill with a credit card just so they can survive. Eventually those lower class citizens slide so far into debt that they must file bankruptcy.
Most of our wealth for the past several years has been "created" using mortgages (sub-prime, alt-A, jumbo, etc) and other debt instruments. How sinister that the "creation of wealth" is a debt owed by the poor to the rich. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. And if you default on your mortgage, they keep the money you've paid so far, and they get the house, too.
How pervasive is our national debt? It's now over $10 trillion. $10,000,000,000,000. That's over $30,000 for every man, woman, and child in America. It grows by $1 million per minute. Last year, it cost $430 billion just to service the interest on the debt. This is what happens when you cut taxes and go to war at the same time - Treasury must sell billions of dollars of Treasury notes, and the biggest purchasers as of August 2008 are countries like Japan ($586 Billion), China ($541 Billion), the UK ($307 Billion), OPEC ($147 Billion), among others.
Someone must pay the debt sooner or later. If not this generation of Americans, then their children. For all of the noise about "tax and spend Democrats", people sure don't mind the "tax your children and spend" policy that pays for the wars in Iraq and Afghanistan. Such behavior is anything but patriotic.
2 comments:
This is a great post but the black background and blue bolds are a bit hard on my youthful boomer eyes.
Also worth noting: The tax credits will hardly pay off the payroll taxes that most poor working folks pay. But then Republicans don't think of payroll taxes as taxes.
Finally we can remember that the original proponent of the Earned Income Tax Credit/Negative Income tax was Nixon. Back in the day when there were still moderate Republicans.
Actually, the Earned Income tax Credit was still a Republican favorite a few years ago when we were working to pass a higher minimum wage. It's a troublesome program, because on one hand it does help people who are working for low wages and on the other hand, it essentially subsidizes low wages, so that we all pay for McDonald's to be able to pay low wages that nobody could possibly live on without the EITC. Of course, the argumant goes that people comming out of prison or off welfare need time to develop their work history to make more later, so the EITC helps smooth that out. Also, an EITC allows us to keep the minimum wage low formiddle class teenagers working part-time who don't need a wage increase.
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