tax fairness

GOP's "Pledge" to Rob the Middle Class: No Jobs, No Health Care, No Security

Richard Eskow — Thu, 23 Sep 2010 15:18:43 -0400

Congressional Republicans released their "Pledge for America" today with a press event at a Virginia hardware store, and a hardware store was definitely the right choice: If these policies ever take effect you're going to get screwed.

It was slightly amusing to see these wealthy tribunes in their pricey business-casual clothing, dressed to look the way they must imagine "real people" do. But other than providing some revenue for Dockers pants and Johnston & Murphy shoes, what were the economic implications of the GOP's Pledge?

Once you strip away the rhetoric, the answer is simple: Off the top, their plan is a trillion-dollar giveaway to the rich - at everybody else's expense. Their "pledge" would slash needed spending, kill jobs and end any hope of growing the economy. It declares open season on the public's health and safety with a deregulation agenda that would unleash BP, Goldman Sachs, and every other corporation whose risky behavior endangers us. It would lead to even more financial crashes and environmental disasters. Firefighters, cops,and teachers would be laid off in droves. The deficit would soar. We'd face a permanently stagnating economy. The middle class would wither away.

That's the future they're offering. It's Bush on steroids, fattened up and ready to feast on ... you. If you like today's economy, you'll love the one these guys are cooking up.

If this document wasn't written by lobbyists then it was certainly submitted for their review and approval. And there's a lot for them to love. Here's what the Republicans propose.

The $4 trillion hole

First and foremost, they would make the Bush tax cuts permanent - not just for the middle class, as the Democrats propose, but for the wealthiest Americans, too. The total ten-year cost of their tax proposal alone is $4 trillion, of which $1 trillion would go to this high-earning, Republican demographic. What will they do to offset this giveaway for the rich? They say they'll "roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone."

So, let's see: $100 billion in supposed savings in that first year, versus $400 billion in tax cuts. In the fuzzy math of the GOP, that's called deficit reduction. Their policies would benefit the wealthiest households in the country, with special attention lavished on inherited wealth (call it the "Paris Hilton handout") and hedge fund managers (the "hedge fund handout"). Consider this: The 25 top hedge fund managers earn at least $1 billion a year, and are taxed at 15% (those soon-to-be-unemployed police officers and teachers pay more). By extending those cuts, the GOP plan would cost the rest of us at least $62 billion over ten years, putting it in the billionaires' pockets instead.

The Pledge quotes the adage, "to whom much is given, much is expected." But since they're giving even more to those to whom much has been given, the "much is expected" part must be an unsubtle hint to the ultra-rich to keep those contributions coming.

Where would they cut, exactly? They don't say. David Frum, a former speechwriter for George Bush, explains why: "Here is the GOP cruising to a handsome election victory. Did you seriously imagine that they would jeopardize the prospect of victory and chairmanships by issuing big, bold promises to do deadly unpopular things?"

Deadly unpopular things. At least Frum is honest enough to say out loud what other Republicans won't: They're going to subsidize their tax breaks for the wealthy by doing things the American people will hate. They won't just cut the everyday functions of government that make our lives better. Returning government spending to "pre-stimulus, pre-bailout levels" also means ending the repair work that's currently being done to fix what their policies have broken. That includes getting people back to work, providing loans for small businesses, and cleaning up the Gulf of Mexico.

Fire a cop, buy a banker

But even though they slither past the specifics, the GOP leaders left some broad hints about their defunding priorities. In a graph that lists government spending, for example, the categories aren't listed by size, or alphabetically. The ones at the top are the targets, and which figure prominently? The Departments of Health and Human Services, Agriculture, Education, Justice ... you see where this is going, don't you? (Yes, the Justice Department's on the list. Law enforcement isn't always a convenient thing in their America.)

Their list of 2,050 different assistance programs singles out Federal funding to the states—states that are in desperate need of federal support to keep people working in the fiscal aftermath of GOP policies. They need Federal aid to avoid the kind of cuts they'll be forced to make otherwise: laying off cops and teachers, slashing Medicaid, letting roads crumble, and shutting down emergency services, just to name a few.

Why not rename this pledge the "fire a cop, buy a banker his own private island plan"?

This proposal adds to the clamor of Washington voices calling to slash Social Security. In order to pay for their tax break—a giant handout to the wealthiest among us—they'll need to welsh on the loan the American middle class gave to the government through its payments to the Social Security Trust Fund. That lack of specifics is probably why Rep. Paul Ryan, R-Wis., who wrote a much more specific plan, was notably absent from today's event. Ryan's plan included deep cuts in Social Security benefits and a privatization plan that puts Wall Street gamble with our retirement security.

Ryan also provided the specifics on health care that these guys won't: He wants to convert Medicare into a voucher system, leaving individual seniors to cope with buying health insurance. He'd raise the eligibility age for Medicare, as well as for Social Security, and would raise premiums while cutting benefits. The Ryan plan would eventually cut Medicare by 76%. The GOP would roll back the new coverage provided by this year's health law while adding many seniors to the ranks of the uninsured. And some estimates suggest that half of all seniors would live in poverty under the Ryan plan.

Ryan, like Frum, committed the crime of honesty. Remember: Deadly unpopular things. Ryan's presence would have reminded the public of what they actually intend to do, instead of hiding behind Pledge's weasel words: "We will (require) a full accounting of Social Security, Medicare, and Medicaid ... preventing the expansion of unfunded liabilities ..."

But wait, as the old commercials used to say. There's more.

Not-so-small business

The Pledge also promises to give "small businesses" a tax deduction equal to "20 percent of their business income" - but, as Rachel Maddow and others have observed, their definition of "small business" includes giant corporations like Bechtel and PriceWaterhouseCoopers. That would mean another multibillion-dollar tax break for the wealthiest among us.

This "deficit-conscious" plan wants to expand the "military/industrial welfare state," too. "We are a nation at war," it says, calling to "fully fund" a missile defense system that's already plagued with persistent test failures, laden with cost overruns, and which most experts don't think is needed or can ever wok. What it can do, however, is transfer a lot of middle-class income to Boeing and Northrop Grumman. We've already spent more than $60 billion on the "Star Wars" missile program in the last eight years, in fact. Why, that's nearly as much as the GOP intends to give to the top 25 billion-dollar-a-year hedge fund managers!

They dress their plan up with the usual mumbo-jumbo about government spending that's "crowding out the private economy." That may sound good, Tea Partiers, but think about: How does it do that, exactly? Every government employee buys things from private companies—from supermarkets, pharmacies, auto dealers, and yes, hardware stores. Makes no sense when you think about it.

And while their rhetoric's pretty polished, they tried a little too hard to channel the Founding Fathers with lines like this one: "Whenever the agenda of government becomes destructive of these ends, it is the right of the people to institute a new governing agenda and set a different course." (Note for whichever lobbyist wrote that: "Agenda" is a business word, not an inspirational one. It doesn't fit. It's like writing "When in the course of human events we are called upon to write a Mission Statement ...")

Here's the bottom line: They'll raid your money to make their rich patrons even richer. The middle class will continue to wither away, and those manage to hold on will be worse off than ever. More and more people will slip into permanent unemployment, poverty, and penurious old age. More roads will crumble. More aging pipelines will explode in towns like San Bruno, Calif. This "pledge" is the oldest kind of promise in the world: the promise than con men make to their victims.

Remember, the Republicans made a lot of promises the last time they took control of the Congress. They promised to create more jobs, and their policies led to record unemployment. They promised to limit their own terms, then settled in for a long comfy stay in Washington. They promised that businesses would regulate themselves, and both the Gulf Coast and the Main Street economy were ruined.

It brings to mind the words of Chief Joseph of the Nez Perce: "They made us many promises, more than I can remember, but they never kept but one: they promised to take our land and they took it." Substitute "our wallets" for "our land," and that's what we'll get with the Pledge to America. What they're really promising is this: No jobs, no health care, no security, no future.

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This post was produced as part of the Curbing Wall Street and Strengthen Social Security projects.

April 15: The Issue Is Fairness, Not Taxes

Eric Lotke — Mon, 13 Apr 2009 10:00:00 -0400

Tax day is coming, and people are sad.

But the problem isn’t taxes. The problem is fairness. Who pays taxes, and who gets the benefits.

Today the Institute for America's Future publishes a new report that documents what we already know. The tax code is unfair, tilted in favor of the rich, powerful and represented. Billionaire hedge fund managers pay taxes at lower rates than their receptionists. Corporations get tax breaks for moving jobs overseas. Oil companies with the largest profits in corporate history receive annual tax breaks worth $14 billion, twice the budget of the EPA.

While rich people reap tax breaks, working people struggle just to keep even. Adjusted for inflation, weekly wages were lower in 2007 than they were in 1979.

Our report features a nice X chart. Top-end taxes have declined over the past 30 years. Inequality has risen.

To be precise: Income inequality rose 144 percent — measured by the ratio of after-tax income of the top one percent to after-tax income of the middle sixty percent. Top end taxes dropped 15 percent — measured as the average effective tax rate at the top one percent.

The tax code is one obvious tool that can level the playing field. Progressive taxation has a long and honored history, dating back to Adam Smith, even.

Adam Smith,
The Wealth of Nations (1776)

“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess …. 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.”

The Institute for Policy Studies has taken the lead in showing how the federal tax code can be made more progressive. Close the hedge fund manager loophole, for example. The Progressive States Network helpfully highlights state efforts to raise top brackets.

But the problem may be more than unfairness. Low taxes may be bad for the economy, as well.

When tax rates were steep, executives had more incentive to leave money in the company — investing for future growth, sharing with staff or hiring more people. Money they paid to themselves was wasted. They had to send it to the government.

Nowadays, with taxes so low, CEOs have more incentive simply to pay themselves. They get to keep the money. It’s virtually an act of charity to keep the money in the business or share it with the staff. That’s a recipe for greed, not growth.

Chuck Collins

ccollins — Sun, 09 Dec 2007 17:30:36 -0500

Chuck Collins is a national expert on economic inequality in the U.S. and coordinates a number of public policy initiatives to reduce income and wealth disparities. Based at the Institute for Policy Studies, he directors the Program on Inequality and the Common Good and chairs the Working Group on Extreme Inequality. He is an advisor to Business for Shared Prosperity, a national network of business leaders, which a program of Demos. He co-edits, www.extremeinequality.org, a portal for data, analysis and action.

He is author of several books, including Economic Apartheid in America: A Primer on Economic Inequality and Insecurity (New Press, 2005). He coordinates a national effort to preserve the federal estate tax, our nation’s only tax on inherited wealth. He co-authored with Bill Gates Sr., Wealth and Our Commonwealth, a case for taxing inherited fortunes. His newest book, The Moral Measure of the Economy (Orbis Press, May 2007), examines Christian perspectives on U.S. economic life.

In 1995, he co-founded United for a Fair Economy (UFE) (http://www.faireconomy.org/) to raise the profile of the inequality issue and support popular education and organizing efforts to address inequality. In 1997, he co-founded Responsible Wealth (http://wwwr.responsiblewealth.org), a to bring together business leaders and investors to publicly speak out against economic policies and corporate practices that worsen economic inequality. He was Executive Director of UFE from 1995-2001 and Program Director until 2005.