Taxes

The 'Buffett Rule' in History's Grand Sweep

Sam Pizzigati — Mon, 30 Jan 2012 12:47:31 -0500

President Obama has proposed a specific new minimum tax rate for millionaires. Should America's rich feel angry or relieved? We check the IRS tax data archives for an answer.

The most famous secretary in America works “just as hard” as her billionaire boss — according to her boss, investor Warren Buffett — but pays federal taxes at twice the rate her boss does.

Debbie Bosanek, America learned last week, has been working for billionaire Buffett since 1993. In 2010 she paid 35.8 percent of her income in federal income and payroll taxes. Buffett paid his federal taxes at a 17.4 percent rate.

GOP White House hopeful Mitt Romney sits with Buffett in America’s richest 0.006 percent of taxpayers. Romney, America also learned last week, paid his federal income taxes for 2010 at a mere 13.9 percent rate.

At what rate should wealthy Americans like Warren and Mitt pay their taxes? President Obama last week suggested — for the first time — a specific minimum percentage for what he has been calling, since last fall, the “Buffett rule.”

“Tax reform should follow the Buffett rule,” Obama proposed in his state of the union address. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.”

The Obama administration will be advancing legislation that fixes this 30 percent figure into law. In effect, a new 30 percent “Buffett rule” minimum would replace the current “alternative minimum tax,” a levy enacted in 1969 that no longer operates as any sort of effective check on super rich tax avoidance.

Would this new 30 percent minimum have an appreciable real-world impact? The Obama administration last week declined to estimate how much new revenue a 30 percent Buffett rule might raise from America’s millionaires.

But we can get a sense of what that impact might be by applying a 30 percent minimum to previous years. In 2009, the latest year with IRS data available, taxpayers reporting over $1 million in income paid an average 24.4 percent of their incomes in federal income tax.

If a 30 percent minimum had been in effect that year, these taxpayers would have paid, on average, more than $171,000 additional per taxpayer. Citizens for Tax Justice calculations indicate that a Buffett rule at 30 percent would now raise about $50 billion a year in new revenue.

Would a 30 percent Buffett rule, in and of itself, make the tax code fair? Not by the Debbie Bosanek yardstick. If her boss Warren Buffett had to pay 30 percent of his income in federal income tax, Debbie Bosanek would still be paying total federal taxes at a higher rate than her boss.

The White House seems to understand this reality and, to its credit, is asking for more tax changes than a new 30 percent Buffett rule. For starters, the Obama administration wants to let the 2001 and 2003 Bush tax cuts expire for taxpayers making over $250,000 a year.

That move would raise the top tax rate on capital gains income — the category that includes most of the income that Warren Buffett and Mitt Romney collect every year — from 15 to 20 percent and the tax rate on dividends from 15 to 39.6 percent, the same top tax rate the expiration of the Bush tax cuts would fix on ordinary income from wages and salaries.

The Obama administration also wants to reduce the tax deductions and credits high-income taxpayers can claim.

All these changes would certainly make for a more progressive tax code. But these changes, taken all together, would still leave today’s rich and super rich paying taxes at substantially lower overall rates than America’s rich and super rich used to pay decades ago.

A half-century ago, in 1962, Americans making over what today would be $1 million, after taking inflation into account, paid 42.8 percent of their total incomes in federal income tax. Ten years earlier, they paid even more. In 1952, millionaires — in today’s dollars — paid federal income tax at a 55.2 percent rate, show IRS historical data.

And those rich in 1952 were actually getting a good deal, compared to their counterparts ten years earlier. In 1942, the first full year of World War II, taxpayers who would be millionaires in today's dollars paid their federal income taxes at an overall effective rate that hit 68.9 percent.

Just a reminder: We won that World War II, and the economic boom during the war years would raise millions of Americans into the middle class.

These days, billionaire Warren Buffett notes in another reminder, we’re fighting another war. A class war. In this class war, Buffett adds, his side has awesomely more weaponry than his secretary’s side.

“We have K Street,” Buffett explained last week. “We have Wall Street. Debbie doesn’t have anybody. I want a government that is responsive to the people who got the short straw in life.”

So should we all.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up at Inequality.Org to receive Too Much in your email inbox.

President Puts American Manufacturing Front And Center In State Of The Union

Dave Johnson — Wed, 25 Jan 2012 14:59:42 -0500

President Obama put American manufacturing literally at the front and center of his State of the Union speech. American manufacturing was at the front of the speech and at the center of a "blueprint" for bringing back jobs and strengthening our economy. By placing manufacturing front and center he has taken this conversation further than any President before him.

There is good reason to cheer, but also good reason to ask for even more. He outlined steps to stop the outsourcing and start the insourcing, but there is not yet a comprehensive, overall government strategy to fix trade and capture the industries of the future.

The Speech

Right up front the President talked about building "an America that attracts a new generation of high-tech manufacturing and high-paying jobs." Then,

"Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that's built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

This blueprint begins with American manufacturing."

Bob Borosage, in The Obama State of the Union: A Progressive View,

On the economy, the speech led with more discussion of manufacturing than anyone has heard in years. The president wanted and deserved credit for saving Detroit – a key to his campaign in the Midwest – and wanted to highlight the uptick in manufacturing jobs and “insourcing,” the movement of some jobs back to the US.

Again, his agenda focused on mostly symbolic measures of populist appeal. In addition to the tax on multinationals, he promised a new trade enforcement effort to challenge China and others who trample global trade rules. With Romney promising to cite China for currency violation on day one if elected, the administration seems likely to finally challenge China, at least symbolically.

Steps, But Not An Overall Picture

The President outlined steps to stop the outsourcing and start the insourcing. There are things that the Congress can do right now. These include but are not limited to,

Eliminate existing tax deductions for outsourcing
Big multinational corporations should pay a minimum tax
Use some of the money this brings in to cover the expenses of bringing jobs home
Pass tax cuts for manufacturing here
A trade enforcement unit to look at bringing cases against countries like China that cheat, use piracy, give subsidies
Steps to train skilled workers, with a national commitment to train 2 million with skills that will lead to a job
Do something about the maze of confusing training programs
Turn our unemployment system into a reemployment system
Instead of bashing teachers and laying them off, give schools resources to keep good teachers
Reduce the cost of college. Stop student loan interest rates from doubling in July. Condition federal assistance on lowering tuition.

This "blueprint" has a number of good, solid steps that will help stop the outsourcing and start the insourcing. But it is not a comprehensive national industrial/economic strategy that addresses the overall picture of all of the components of a national manufacturing ecosystem. To begin to address this, the President has established a cabinet-level Office of Manufacturing Policy to coordinate efforts of various government agencies.

Coordinating the efforts of various government agencies to help American exports is important, but this does not address the development of a national plan, like other countries have. We need this, too. A national plan would seek to cover all the elements of a healthy "industrial commons" -- meaning all of the components of a healthy manufacturing ecosystem. These include government efforts to make sure the components are ready, funded and functioning:

The necessary educational components to provide people ready to do all of the jobs an industry requires;
The financing to build factories and obtain inventory;
The modern infrastructure of roads, electrical power, internet, posts and airports, to support the companies;
Trade and tax policies to help these companies locate and export;
R&D facilities and researchers for innovation and design;
Local suppliers to support the companies;
Legal structures and fully-funded and staffed court systems to support the industry;
The entire "chain of experience" located in an area, often around a "cluster" of businesses, required for an industry to develop and thrive.

Countries like China are engaged in national efforts to get all of these components lined up to capture industries like the new green energy revolution that is taking place. China is working to capture solar and wind energy manufacturing. They are working to capture high-speed rail manufacturing. The news about the reasons Apple and other high-tech manufactures have had to locate in China show how hard China has worked to capture that industry -- and not without quite a bit of cheating that we are not stopping.

Our competitors are engaging in national efforts to line up all of these components to capture other new industries as they emerge. We are not.

Ideology Holds Us Back From Competing

This list of components of a national industrial/economic policy describes the kind of national effort that competitors like China are engaged in, and is the reason they are bringing in such a share of new industrial growth. To address this we have to see ourselves as a country, as China does, mutually supporting each other, to be able to embark on an undertaking like this. We have to abandon the "each of us on our own" and selfish, "in it only for ourselves" mentality that has set us apart, preventing national government efforts like other countries engage in.

Some of us hold on to an ideological fantasy that government is only in the way, but other countries do not. So the result is that we keep sending our companies out on their own against national systems. Even our largest companies cannot compete on their own against countries with national efforts to put all of these components in place. It takes a unified government effort.

We have to move to a "we are in this together" understanding of ourselves and our country if we want to bring back the shared prosperity we used to have, and can have again.

Update - White House fact sheet: FACT SHEET: President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing

Why Keep The Capital Gains Tax Break?

Dave Johnson — Thu, 19 Jan 2012 05:29:13 -0500

Mitt Romney's ultra-low tax rate on his ultra-high income is reviving questions about the breaks and perks that the wealthiest of the 1% receive from the rest of us. One of these is a special low tax rate for investments -- as if anyone needed special tax incentives to induce them to make a bundle.

High Incomes At The Top

How much does Romney make? We won't know until we get a chance to see his tax returns -- if we do -- but Romney described his $374,328 income from speaking fees last year as "not very much." If $374K is "not very much" of his income ... well ... at least we can understand why he feels he can casually make $10,000 bets as if he was just pulling a dime from his pocket.

In his post What Mitt's Taxes Could've Paid For (If Not For Those Cushy Tax Breaks), Richard Eskow writes,

1,470 households made more than a million dollars and yet paid nothing -- zero, zip, nada -- in Federal income tax in 2009.

[. . .] The top 25 hedge fund managers in the US made $22 billion in 2010.

Low Taxes At The Top

Mitt Romney's admission that he probably pays a 15% tax rate shows us what is going on. For you or me, when our taxable income passes about $35,000, we start paying a 25% rate, much higher than Mitt pays on his millions on income. (That doesn't mean we pay 25% on money up to $35K, which is what most people think. It means any additional money we make after the $35K is taxed at that higher rate rate. If we make $35,001 we only pay an increase of ten cents. That's how tax brackets work.)

Lots Of Money To Use To Attack The Deficits

This special low tax rate on capital gains is sucking a lot of money out of We, the People's ability to pay for our schools, military, infrastructure, etc, which is part of why we are borrowing so much. How much? Continuing to steal from Richard Eskow's post,

As we wrote earlier, eliminating these tax breaks would add as much as $44 billion to our bottom line in the next ten years. Or to put it another way:

Ending cushy breaks for these 25 billionaires could also reduce the deficit by as much as $44 billion. Paging all deficit hawks!

In 2008 the taxable income of everyone earning above $100,000 was $3.4 trillion. If we concentrate our tax reform on the upper end of that spectrum -- the Romneys, not the folks in the $100-$400 thousand range -- we know that every percentage point in increased collection comes out to another $34 billion per year. That ain't chicken feed.

Why The Low Capital Gains Tax Rate?

The justification for a special tax rate for gains from investing capital is supposed to be to provide an incentive to invest. But there is already a really good incentive to invest: to make a bundle of cash. Piling a special "incentive" on top of making a bundle of cash creates market distortions - moving investors away from deciding where to put their money based on the value and merits of the investment and toward tax-reduction schemes.

The necessary precondition for investing capital is having capital. So a tax break on the return from investing capital is by definition a break for the well-off. Here is the reality: capital gains are taxed at a lower rate because most of the income of the 1% is from capital gains, and most of the income of the 1% is from capital gains because the tax rate is lower. The "incentive to invest" should be making a good investment, period.

I'll bet you $10,000 that getting rid of this tax break helps fix the deficit, and leads to a saner investment climate. (Of course, I'm kidding, I think that is a lot of money.)

Behold and Beware Our New 'SWAG' Economy

Sam Pizzigati — Sat, 07 Jan 2012 15:19:29 -0500

Today's swaggering rich are increasingly stuffing their dollars into investments that do America's 99 percent not one whit of good.

Your pop quiz for today: Define “art.”

Wait, you don't need to panic here. You don’t need to go fumbling in the deep recesses of your mind for some wisdom about “beauty” or “imagination” or “form.” You just need to repeat after Michael Plummer and Jeff Rabin, the two principals behind the midtown Manhattan-based Artvest Partners LLC.

“Art,” their maxim goes, “is an asset class.”

ArtVest Partners, the trendy financial firm Plummer and Rabin run, helps wealthy people invest in works of fine art. The firm is doing a bang-up business.

America’s wealthy — and deep pockets everywhere else for that matter — have been pouring epic sums into artwork. Christie's and Sotheby's, the two big fine art auction houses, are reporting a 35 percent gain in the prices paid for Gainsboroughs, Picassos, and other blue-chippers over the past 12 months.

The Artprice Global Index, a broader tally of the prices works of fine art are fetching, has art values up 120 percent over the last decade.

Why the surge? Higher prices reflect no greater appreciation — on the part of the wealthy — for the aesthetically pleasing. They do reflect a greater appreciation of art, within high-income circles, as a high-return investment. And bankers are appreciating, too. Financial institutions are making art-based loans. They're letting mega millionaires use their artwork as collateral for business deals.

“We now can start talking,” an arm of Deloitte, the global consultancy firm, reported last month, “about the early stages of an Art and Finance industry.”

The continuing Great Recession in regular, old-fashioned industry, analysts at ArtInfo explained last week, is helping this new art-and-finance combo along.

“International high-net-worth individuals,” the analysts point out, “are looking for somewhere to put their money besides the anemic stock market.”

But the art world hasn’t been the only “asset class” to benefit from this yearning for larger and safer returns. Dollars and euros and pounds are also flowing to other “hard” assets that share all the attractions that fine art offers. Silver, wine, and gold have all been ratcheting up steadily over recent years.

This past September, Investment Week’s Joe Roseman gave all these hot asset classes a memorable new handle.

“Everyone,” Roseman advised his well-heeled readers, “needs some SWAG.”

The elements of SWAG — silver, wine, art, and gold — have “all appreciated quite sharply” over the past decade, notes Roseman, despite “two global recessions, a severe global banking crisis, a credit crunch, and (generally speaking) highly volatile and mostly negative equity market performance.”

Fine wines, the Liv-Ex wine index shows, have jumped about 300 percent since 2000. Gold has appreciated at an even higher rate, as has silver.

The Standard & Poor’s 500 stock index, by contrast, rose just 0.04 percent in 2011, returning only 2.1 percent with stock dividends included.

The SWAG elements have plenty in common. Silver, wine, art, and gold all rate as scarce, transportable, long-lasting physical assets. They also make for wonderful tax shelters. They throw off no income stream and, consequently, create no annual tax liability for wealthy investors.

The profits SWAG assets generate at sale, meanwhile, count as capital gains and receive preferential tax treatment over ordinary income.

These tax benefits from SWAG ought to create obvious concerns for those of us in America’s 99 percent. The less the nation’s wealthy pay in taxes, after all, the greater the tax burden on everyone else.

But our cause for concern ought to go deeper than the tax games the swaggering rich can play with SWAG assets. SWAG just may symbolize the ultimate folly — and sheer irrationality — of our staggeringly unequal, top-heavy economy.

In today's troubled economic times, we desperately need investments in products and services that translate into jobs and paychecks. We need dollars for renewing our society. We need dollars for everything from replacing crumbling infrastructure to developing sustainable new energy technologies.

The last thing we need? We don’t need billions of valuable dollars sunk into SWAG that hangs on the walls of manses or ages in high-tech wine cellars or sits in locked safes. But in a deeply unequal United States, where wealth remains concentrated in a precious few pockets, that’s exactly what we have.

Many of those dollars pouring into SWAG today would have gone yesterday to Uncle Sam. In the middle decades of the 20th century, America’s wealthiest faced income tax rates that reached up over 90 percent on income over $400,000.

In that high-tax-on-high-income environment, wealthy Americans routinely plowed their wealth into tax-free municipal bonds. In the 1950s, for instance, the widow of automaker Horace Dodge invested her entire $56 million legacy from the Dodge auto fortune in municipals.

Those municipals didn't help Anna Dodge much. They paid only 3 percent in interest. But the dollars invested in municipals paid off handsomely for the mid-century 99 percent. Those dollars financed the schools and sewage plants and waterworks that created the foundation for the classic American middle class.

Those mid-20th century days did, to be sure, hold certain charms for America’s deepest pockets. They could pick up works of art for a song. In 1960, banker David Rockefeller only had to shell out $10,000 for painter Mark Rothko’s White Center. In today’s SWAG world, White Center now carries a $72 million price-tag.

The Alchemy of Our Awesomely Affluent

Sam Pizzigati — Sun, 27 Nov 2011 21:05:53 -0500

Today's super rich can't turn tin into gold. But they can get Uncle Sam to loan them free money. At the expense, of course, of America's bottom 99 percent.

How much money is pouring into the pockets of America's richest 1 percent? How much of this income are America's richest paying in taxes?

Major media outlets have been asking questions like these ever since the Occupy Wall Street movement first started gaining traction earlier this fall. But the numbers in their answers, suggests a groundbreaking new analysis from Bloomberg reporter Jesse Drucker, aren’t telling the full story.

America’s mega rich are actually taking in much more in income, Drucker shows, than their tax returns indicate. Hundreds of millions more. And this hidden income has reduced their effective tax rate — a figure already lower than the rate average Americans pay — even lower.

We’re not talking patently illegal tax evasion here. We’re talking complex financial transactions that would do medieval alchemists proud.

Those alchemists long ago struggled mightily to turn common metals into gold. Lawyers and money managers for today’s mega rich can routinely pull off a trick almost as lucrative: They can make money off unrealized capital gains.

This trick carries various arcane labels like “variable prepaid forward contracts.” But the goal always remains simple and straightforward: to grab as much tax-free cash as possible out of assets that have increased in value.

How does the trick work? Imagine yourself a major corporate CEO. You hold a huge stash of stock in your company. That stock has appreciated. If you sold your shares, you could clear a quarter billion dollars in personal profit. But you would also immediately face a capital gains tax on that quarter billion.

Now that prospect shouldn’t leave you particularly upset. The capital gains tax you face, after all, only runs 15 percent. That’s less than half the 35 percent you would be paying if capital gains were taxed at the same rate as ordinary income.

Some super rich in this situation do indeed just take their capital gain, pay Uncle Sam his 15 percent, and buy a bigger yacht. Others get creative. They don’t pay Uncle Sam. They get Uncle Sam to pay them.

These super rich go ahead and sell their shares — for colossal sums — but don’t deliver them to the buyer until a few years after they cut the deal.

At delivery time, these mega rich do report the income from the sale on their tax returns and pay the capital gains tax upon it. But in the meantime they’ve enjoyed what amounts to an interest-free loan from Uncle Sam.

Setting these deals up can cost the super rich millions in dollars in fees. But the returns make that outlay to accountants and tax lawyers well worth the expense. The rich, observes former New York State Bar Association tax section chair David Miller, “can use complex transactions not available to most Americans to get cash from their appreciated stock without paying any taxes at all.”

Dole Food chairman David Murdock, notes Bloomberg’s Jesse Drucker, played this game in 2009 when he pocketed $228.6 million for his Dole shares. He won’t “deliver” them until next November. Hank Greenberg, the former CEO at insurance giant AIG, parlayed a “prepaid forward agreement” into $278.2 million. Clear Channel Communications founder Red McCombs grabbed $259 million.

“Prepaid forward” deals first became all the rage for the wealthy about a decade ago, the New York Times reports. The IRS is still playing catch-up. An IRS crackdown of sorts did start in 2008. But the super rich haven't flinched much.

One reason: The odds of getting audited remain low. Another: Even if wealthy taxpayers do get challenged on prepaid forwards, notes New York tax analyst Robert Willens, they can count on a tax court settlement that lets them keep a hefty chunk of whatever the prepaid forward helped them make.

“Who wouldn’t want that?” asks Willens.

Maybe the 99 percent. And what could protect the 99 percent from the continuing super-rich drive to exploit appreciated assets? David Miller, the New York State Bar Association tax expert, wants the super rich to have to pay a tax on the annual increase in the value of their immense stock holdings.

Such a tax, even if only levied on America’s richest 0.1 percent, could raise as much as three-quarters of a trillion dollars over a decade’s time. At that prospect, even the super rich might have to flinch.

How Wealthy Companies Like Verizon Avoid Taxes

Dave Johnson — Wed, 16 Nov 2011 12:42:41 -0500

Verizon needs to open a call center, which means a few new low-paying jobs. They get local governments bidding against each other, offering all kinds of tax breaks if only they'll bring those jobs there. Before the bidding war these jobs will be in the economy somewhere, but local schools, police, etc. will be funded. After the bidding war the same number of jobs open up but schools, police, etc. are not funded -- and the 1% are that much richer. Company after company does this. Community after community, desperate for jobs, loses. Schools, police, infrastructure go unfunded. Just who does this help? The 1%.

Earlier this month, the organization Citizens for Tax Justice joined with the Institute on Taxation and Economic Policy to release a report, "Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010." The report looked at 280 corporations, finding that 78 did not pay federal taxes in at least one of the past three years and 30 averaged a less-than-zero tax bill in the last three years. Yes, less-than-zero, meaning they got money from the government instead of paying taxes to the government.

Verizon In Focus

Now a report by Citizens for Tax Justice and Good Jobs First, “"Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies,” looks at one company in particular. I've been writing about how Verizon is very, very profitable, but is trying to force its workers to give up ever more pay, benefits, job security and dignity. The company's workers are engaged in an effort to preserve a middle-class existence.

Yesterday I joined a press call that hilited this Verizon report. The company aggressively manipulated state tax rules, demanded subsidies, and used other methods to end up with a negative federal income tax rate, and receiving state and local tax subsidies in at least 13 states. When setting up call centers, for example, they offer localities the prospect of jobs that that will be created somewhere in US, where the company would have paid taxes to fund schools and infrastructure, but get the localities bidding against each other until they end up making a profit instead of paying taxes.

From the report,

With more than $100 billion in annual revenues and nearly $15 billion in operating profits, Verizon
Communications is a large and prosperous company that should pay a substantial amount in taxes to
federal, state and local governments.

Verizon enjoyed some $14 billion in federal and state corporate income tax subsidies in the 2008-2010 period even though it earned $33.4 billion in pre-tax U.S. income during that time.
At the federal level, Verizon should have paid about $11.4 billion at the statutory rate of 35 percent during the three-year period. Instead, it got $951 million in rebates, putting its federal tax subsidies at $12.3 billion. Its effective federal tax rate was -2.9 percent.
At the state level, Verizon should have paid about $2.3 billion in corporate income taxes during the period but it handed over only $866 million. Its aggregate state rate was only 2.6 percent, far below the weighted state average rate of 6.8 percent. This gave it state tax subsidies of about $1.4 billion.
Verizon also used a special tax loophole called the ReverseMorrisTrust to avoid paying about $1.5 billion in federal and state and local taxes on the sale of its landline assets in various states.
Verizon also aggressively seeks state and local tax subsidies through credits, abatements and exemptions. There is no centralized reporting on these subsidies but in this report we document $180 million in special tax breaks and grants Verizon and VerizonWireless received in 13 states.

Taxes = Democracy

Dave Johnson — Wed, 26 Oct 2011 22:05:44 -0400

Watch this interview on taxes. Watch how fast the argument against taxing the wealthy turns into an argument against democracy.

Below is a Wednesday Newshour with Richard Epstein of the New York University School of Law. In the interview Epstein claims that the enormous inequality we see today is good for us. But as the interview progresses Epstein's arguments against taxing the wealthy turns into an argument against democracy. Funny how that works, isn't it.

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.

Occupy Wall Street Speaks For America: A "Centrist" Hit Job's Polling Data Helps Prove It

Richard Eskow — Tue, 18 Oct 2011 00:45:52 -0400

Thanks to a hit piece by one of those Beltway pseudo-"bipartisans" we can now state conclusively what many of us have long suspected: Occupy Wall Street speaks for the American majority. We've got the polling numbers to prove it. We now know where the real center lies.

It's easy to understand why people like Douglas Schoen are lining up to attack OWS. It shines a spotlight on their cardboard centrism - that think-tank designed, artificially-inseminated, vat-grown corporate ideology so widely rejected by the public at large. OWS represents the real American consensus, and that has them running scared.

But Schoen's Wall Street Journal editorial falls so far short of the mark that it elicits only a soft sense of pity. It illustrates nothing except the intellectual and moral bankruptcy of those out-of-step Democrats who sell themselves to conservatism under the 'centrist' or 'Third Way' banner.

Oh, wait. It also provides enough data to undermine his entire argument - and possibly his entire ideology.  Before we look at the numbers we should take a closer look at these "centrists" and why they're trying to kill Occupy Wall Street.

How to Succeed in ~~Centrism~~ Conservatism Without Really Trying

Douglas Schoen is an excellent case study in the right-wing careerism that masquerades as 'centrism' in Washington today. The formula's simple: First get yourself some Democratic Party credentials. That's easy enough to do inside the party's corporate wing. Next, get a gig with one of conservative media outlets. And after that, start making proclamations 'against type' about how corporate-driven conservatism is the true heart of America. That's when the cash really starts rolling in. Then, like any good syndicate, the centrist Cosa Nostra will tell you it's time to return the favor with a hit job or two.

Schoen followed this easy-cash formula to a T (or "Tea"). Democratic Party credential? Check. He did polling for Bill Clinton, then the company he cofounded with Mark Penn went to work on the Hillary Clinton campaign. Cushy gig with a conservative media outlet? Check. He's a Fox News "analyst." Proclamation "against type"? Check. He co-wrote a book with Republican pollster Scott Rasmussen calledMad As Hell: How the Tea Party is Fundamentally Remaking Our Two-Party System.

Unfortunately for Schoen, the premise of their book required him to promote at least four massive falsehoods. The first was that Fox News is, in fact, "fair and balanced," and the second was that Fox did not aggressively promote the Tea Party. (Karl Frisch of Media Matters decimates these two claims.) The third was that the Tea Party was a spontaneous citizen uprising, not a heavily orchestrated corporate and Koch-founded process directed by Republican operatives. (See here and here, for starters.) The fourth falsehood is the claim that the Tea Party represents the views of most Americans. We'll get to that one shortly.

As for that final rite of "centrism" - the hit job - Mr. Schoen's editorial demonstrates that he'll happily don the ankle holster and squeeze off a round from his derringer whenever the signal's given. Luckily for the country, we're dealing with the gang that couldn't shoot straight.

Red Dawn

Mr. Schoen warns that "President Obama and the Democratic leadership are making a critical error in embracing the Occupy Wall Street movement--and it may cost them the 2012 election." He bases this statement on a survey of demonstrators which he says was conducted by an associate of his. Unfortunately, he doesn't provide either the questionnaire used or the raw data, so we're forced to settle for vague Red-baiting assertions instead of hard information. Fortunately, as with his Fox/Tea Party claims, he quickly undermines his own claims.

Summoning visions of 1970, when Democrats were undone by association with anti-war "hippies," Schoen writes that "the Occupy Wall Street movement reflects values that are dangerously out of touch with the broad mass of the American people--and particularly with swing voters who are largely independent and have been trending away from the president since the debate over health-care reform."

What, exactly, are those values? "What binds a large majority of the protesters together ...," Schoen writes, "is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas."

In other words, they're Commies.

Now We Can Prove It: Occupy Wall Street Speaks for America

But the only actual policy positions Schoen mentions are these:

"Sixty-five percent say that government has a moral responsibility to guarantee all citizens access to affordable health care, a college education, and a secure retirement--no matter the cost. (emphasis mine) By a large margin (77%-22%), they support raising taxes on the wealthiest Americans, but 58% oppose raising taxes for everybody, with only 36% in favor. And by a close margin, protesters are divided on whether the bank bailouts were necessary (49%) or unnecessary (51%)."

Hmmm ... how "dangerously out of touch" are these views with those of the general public - and those all-important independent voters? We've prepared a handy chart illustrating that point, for your convenience (and Mr. Schoen's enlightenment). It's called Occupy Wall Street Represents America: The Polling Data (Unlike some folks, we show our work - even though, as you'll see from the attached, exact comparisons are hard to come by, especially given Mr. Schoen's vague wordings.)

Here are the highlights:

The public agrees with OWS on health care: 65% of protesters believe government should guarantee health care for all. In the last major poll on the subject, 64% of voters said the same thing.

The public agrees with OWS on taxes: 77% of OWS participants want to raise taxes on the wealthy; according to the Marist polling organization, 68% of all voters - including 68% of independents - agree with them.

The public agrees with OWS on a secure retirement: 65% of protesters think the government should guarantee a secure retirement. 70% of all voters - including 73% of independents - agree with them.

Schoen may have tried to hide or skew his information, but he's given us enough to know that the demonstrators are smack dab in the mainstream of American public opinion. Their tax views are supported by an overwhelming majority of the public. Their views receive the overwhelming support of independents and are often supported by a majority of Republicans too.

And what about that Tea Party that Schoen's been pushing as the "new center" in American politics? Does the public agree with them, too? Er, not so much. The latest CNN poll shows that 53% of Americans disapprove of the Tea Party movement and only 28% approve. Those are the lowest numbers since the pollsters began tracking Tea Party popularity last year.

Oops. Looks like Schoen and Rasmussen will need to write a new book.

(One other thing: That CNN poll also shows that Hillary Clinton is still the country's most popular public figure. Just think what she might have accomplished if she hadn't used the firm of Penn, Schoen & Berland to run her last campaign.)

The Real Center

No wonder the faux-centrist/"Third Way" crowd hates OWS. The protests put the lie to phony notion that the "center" agrees with the corporate-funded policies they espouse. And they illustrate the fact that the real "center" holds opinions that are usually stigmatized as "progressive" inside the Beltway . Douglas Schoen characterizes those opinions as "a deep commitment to left-wing policies" --

-- that are frequently supported by most Republicans. A few more revelations like this and their whole scam will be exposed. That's why we're seeing the glint of hatchets swinging in the Potomac sun.

Schoen represents that partnership of pampered elites that is Beltway Bipartisanship, but the OWS protesters represents real bipartisanship. They speak for the genuine American majority, that movement that speaks for the people who have been misused, abused, and refused by powerful insider from both parties.

Schoen speaks as if this were 1970 revisited, but the players have changes places. Occupy Wall Street speaks for this year's Silent Majority - the 99% who have been disenfranchised by the corporate-driven political environment that spawned and feeds Mr. Schoen and his ilk. The moment for the triangulated tactics of the Schoen crowd has passed. The real center is waking up. It's corporatist policies, not the politics of protest, that will hurt a party's electoral chances today.

Politically speaking, they're the hippies now.

The President and his party wouldn't be foolish to adopt the rhetoric of Occupy Wall Street. It would be foolish to think this movement can be co-opted by words that aren't followed up with action. But the most foolish act of all would be to listen to compromised advice from a cadre of failed insiders who are quickly being left behind by the irreversible and irresistible flow of history.

Equity and Sensibility

Leo Gerard — Wed, 21 Sep 2011 12:58:33 -0400

A long time ago, in an historical America, lawmakers determined a progressive tax code to be the fairest and most logical for all.

The legislators asked more of those who had benefitted most from the advantages America provides. They asked less of those who benefitted least.

As time passed, the rich and wealthy corporations perverted the progressive tax code. Now what America’s got is a flip-flop under which the fabulously wealthy pay taxes at rates lower than the middle class.

This week, President Obama proposed returning the tax code to a time closer to equity and sensibility. He asked that millionaires and corporations pay taxes at the same rate as the middle class. Not more, as they once did. But at an equal rate. It’s not revolutionary. It’s retro. And it would help create jobs.

It’s an idea whose time has come – again. And it should be implemented immediately.

Obama called it the Buffett Rule after billionaire Warren Buffett who has written repeatedly that he thinks it’s wrong that he pays taxes at a lower rate than his secretary. He spoke out most recently in a New York Times op-ed on Aug. 14 titled, “Stop Coddling the Super-Rich.” Here’s what he said:

“Our leaders have asked for ‘shared sacrifice.’ But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”

His petition to American lawmakers for a return to fairness has been joined by fellow billionaire Mark Cuban and a large group of Americans calling themselves Patriotic Millionaires for Fiscal Strength. In an open letter to political leaders, these millionaires asked to be taxed more. It says:

“We are writing to urge you to put our country ahead of politics.

“For the fiscal health of our nation and the well-being of our fellow citizens, we ask that you increase taxes on incomes over $1,000,000.”

Cuban wrote on his blog that millionaires may choke when they see the size of their tax bills, but then they should rejoice at having such a “problem.” He also said:

“In these times of ‘The Great Recession’ we shouldn’t be trying to shift the benefits of wealth behind some curtain. We should be celebrating and encouraging people to make as much money as they can. Profits equal tax money. While some people might find it distasteful to pay taxes. I don’t. I find it Patriotic.”

The rich are ready to pay their fair share. It’s not fair now. Buffett and the other richest 399 billionaires in America pay an average income tax rate of 16.6 percent, while a worker earning between $35,000 and $84,000 a year pays a marginal rate of 25 percent.

Obama described the simple math of tax rates in seeking institution of the Buffett Rule. The nation is faced with a massive deficit and a crushing recession. America doesn’t receive sufficient tax revenues to buy everything it wants. So it must make choices. It could continue to give the rich and corporations special tax treatment and pay the country’s debts on the backs of the middle class. That would require slashing the programs that sustain workers – Medicare, Medicaid, food inspection, public education, Pell Grants – and the government programs that kindle the economy and provide middle class jobs such as infrastructure construction.

Or America could ask the rich to pay a tax rate equal to that of the middle class. America could end outrageous loophole for massively-profitable corporations – loopholes that not only enabled GE to pay no taxes at all last year but allowed it to demand the government give it $3.2 billion! Asking the rich to pay an equitable rate would raise enough money to moderate cuts to crucial government services.

The wealthy supporters of increasing taxes on the wealthy recognize another benefit of paying more – it increases their ability to earn more. Government services, from public schools and roads to civil courts and patent protections benefit business. Cutting funding for those services threatens business profits.

In addition, if government spends money to renovate schools and improve infrastructure as Obama has proposed in his jobs plan, it creates jobs. Those workers spend money. And that stimulates demand for products.

Only when corporations experience demand will they begin spending some of the record $2 trillion in cash they are now just sitting on to hire new workers. Those new workers will spend their paychecks, further increasing demand. It’s a virtuous cycle. The rich pay more in taxes and get more in profits.

Tax equity is not radical. It’s basic fairness. In fact, it’s not even progressive. Progressive would be returning to the days when the fabulously wealthy and profit-fat corporations paid higher tax rates than the middle class. Progressive would be charging the rich a “wealth tax” each year, not on their earnings but on the value of their holdings. This tax, suggested for the United States by Yale law professors Bruce Ackerman and Anne Alstott in a Los Angeles Times op-ed, already is collected by France, Norway, Switzerland and five other countries.

Parity isn’t progressive. But it is equitable and sensible.

***

Leo W. Gerard also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee. President Barack Obama recently appointed him to the President’s Advisory Committee on Trade Policy and Negotiations. He serves as co-chairman of the BlueGreen Alliance and on the boards of the Apollo Alliance, Campaign for America’s Future and the Economic Policy Institute. He is a member of the IMF and ICEM global labor federations and was instrumental in creating Workers Uniting, the first global union. Follow @USWBlogger.

10 Years Of Capital Gains Tax Cuts Proves: Rich Win, You Lose

Dave Johnson — Mon, 12 Sep 2011 14:06:36 -0400

Why are "capital gains" taxes so much lower than taxes on other income? The reason capital gains taxes are lower is because most of the income of the rich is from capital gains. And the reason most of the income of the rich is from capital gains is because capital gains taxes are lower.

Our System

"Capital gains" are the gains, or profits, made from the investment of capital -- the big pools of money that a few of us have the great responsibility and burden of being stuck with. The theory is that the few among us who have bundles of money (capital) use that money to start businesses or buy stocks or property (or race horses) and thereby "create jobs." (For more on how businesses and the wealthy "create jobs," click here and then click here.)

If the value of the business or property (or race horses) goes up those wealthy few make even more money (gains). This ability to obtain these huge gains is a benefit offered to those who have lots of money in the first place. Thus the term "capital gains." These gains are differentiated from the gains the rest of us make from ... working ... because the rest of us do not have the intelligence and wisdom of having those huge pools of money to invest.

Incentives

In our system the income gained from these investments by these wealthy few is therefore taxed at a special very, very low rate, because they have the wisdom and intelligence to have large sums of money available to invest, and the rest of us do not. This low rate is considered an "incentive" to those who have these large accumulations of money, to try to persuade them to make these huge profits. They require these "incentives" to make huge profits, because otherwise they might not be interested in making the huge profits that can result from owning most of the property and stock and race horses (and yachts and private jets and multiple homes and million-dollar cars.) So that is why they must be given the incentive of these very special low tax rates - to persuade them to make investments that reap huge profits that they otherwise would not want to make.

Government Interference

Of course, the wealthy usually complain when government gets involved in creating "incentives" and "picking winners and losers" in ways that help We, the People, saying government interference distorts decision-making. But when the "incentive" is special low tax rates to persuade the wealthy to invest and make huge profits, that's different. Because it is, that's why. Shut up. Hey, look over there!

Job Creation

This reaping of huge profits from "efficiencies" like downsizing, laying people off and making the remaining workers do 2 jobs each in the same amount of time, outsourcing, buying companies and firing everyone and then selling off the pieces, offshoring, force reductions, firing people and then bringing them back as "contractors" at half the pay, relocating factories out of the country where people don't have the protections of democracy, replacing workers with machines, etc. is called "creating jobs."

Effect Of Cutting Capital Gains Taxes

In 2001 these special low tax rates for the very rich "job creators" were made even lower. This was done in order to provide even more incentive for them to make even more profits from their large accumulations of property, houses, cars, yachts, private jets and race horses, so that these "producers" - the "job creators" - would produce even more and create even more jobs. (Click here for more on who and what really creates jobs.) The result of these 2001 tax cuts was spectacular: eight years of the lowest economic growth and lowest job-creation rate since WWII, followed by the collapse of the entire financial system and mass layoffs of millions of us.

So the 2000s brought upon us an even greater need to provide incentives for the producers to create jobs! In fact, each time these incentives are increased and jobs do not result there is even greater pressure to provide even more incentives to the "job creators." A great system, this, if you're already rich, no? The worse things get, the more you get, because you had the wisdom and intelligence to be sitting on a huge pile of cash. Brilliant! (See Did The Rich Cause The Deficit?)

So with all this in mind, today the Washington Post looks at these super-low tax rates for those who have large accumulations of money, in Capital gains tax rates benefiting wealthy feed growing gap between rich and poor,

For the very richest Americans, low tax rates on capital gains are better than any Christmas gift. As a result of a pair of rate cuts, first under President Bill Clinton and then under Bush, most of the richest Americans pay lower overall tax rates than middle-class Americans do. And this is one reason the gap between the wealthy and the rest of the country is widening dramatically.

[. . .] Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.

Repeat, "about half of all the capital gains have gone to the wealthiest 0.1 percent."

The Washington Post story explains the strongest reason why it is so important for legislators to pass these lower tax rates to "incentivize" the wealthiest to invest and make huge profits:

Some lawmakers who have backed low tax rates on capital gains have later been hired by the financial industry.

So you see, it is very clear why it is very, very important for members of Congress to make sure that there is a special very, very low rate of taxation for the wealthiest few. And the result?

The 400 richest taxpayers in 2008 counted 60 percent of their income in the form of capital gains and 8 percent from salary and wages. The rest of the country reported 5 percent in capital gains and 72 percent in salary.

Yes, that is the very same 400 wealthist who have more wealth than 60% of all Americans combined. (That's right, I had it wrong when I wrote that it was more than 50%, it is now more like 60%.)

So here is how it is: the rich are rich because they are smarter than the rest of us. And what is the proof that they're smarter than the rest of us? That's easy:

Because they're rich!

Take a moment to browse a collection of pictures of the job-creating results of these special exemptions from taxation enjoyed by these wealthiest, in Nine Pictures Of The Extreme Income/Wealth Gap. And read more about the ideology behind this idea that the wealthy are "producers" who "create jobs."