Newspaper logo  
 
 
Local Stories, Events

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Books, Films, Arts & Education
Letters

Ref. : Letters to the editor

Health Care & Environment

09.19 Air pollution linked to much greater risk of dementia

09.19 Shell and Exxon's secret 1980s climate change warnings [that capitalists suppressed this for continuing profit is the most unforgivable crime ever]Trump administration rolls back methane pollution rule despite harmful health impacts [continuing in the tradition of stupid capitalism at all costs]

09.18 'I was horrified that children are breathing air this dirty inside the school' [if your government isn't working, change it!]

09.17 California plans to show the world how to meet the Paris climate target

09.16 Universal healthcare was unthinkable in America, but not any more

09.16 Air pollution particles found in mothers' placentas

09.16 Portugal’s radical drugs policy is working. Why hasn’t the world copied it?

09.13 The Guardian view on electric cars: stopped by industry inaction [Vroom Vroom is Dumb Dumb]

09.13 Electric future? Global push to move away from gas-powered cars

09.12 The Secret Drug Pricing System Middlemen Use to Rake in Millions

09.12 Jerry Brown: Trump's 'gross ignorance' main obstacle in climate change fight

09.12 Medicare for All and the Myth of the 40% Physician Pay Cut

09.11 Global hunger levels rising due to extreme weather, UN warns

News Media Matters

09.19 Taibbi: Bernie Sanders’ Anti-Amazon Bill Is an Indictment of the Media, Too

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

09.18 Voters Are Ready for a Green New Deal. Are Democrats?

09.18 'This Election Is Last Chance to Stop Them': Kudlow Confirms Trump and GOP Ready to Gut Safety Net After Midterms [Yes, there are far too many sociopaths]

09.18 You'll miss Trump one day

Justice Matters
High Crimes?

09.19 'Killing a generation': one million more children at risk from famine in Yemen [Does America's government have empathy? Does it understand the concept of morality? The Saudi Air Force would be ineffective without U.S. military assistance...]

09.19 ‘Tied to trees and raped’: UN report details Rohingya horrors

09.16 Merchants of Death Profit from the Bombing of Children as a US-Backed War Goes Largely Ignored

Economics, Crony Capitalism

09.16 If Jeff Bezos wants to help low-income people why not just pay them better?

09.16 Central Banks Have Gone Rogue, Putting Us All at Risk

International & Futurism

09.18 Racist rioting in Chemnitz has reopened Germany’s east-west split [We are all mixed-race after 10,000 generations. Helping suffering people makes us feel good, so become their friends instead.]

09.18 'Unconscionable' and 'Appalling': In Affront to Those Fleeing US-Backed Wars and Persecution, Trump Slams Door on Refugees

09.17 For Whom the Climate Bell Tolls

09.17 How to Humanely Solve Europe's Migration Crisis

09.15 A Warning From Europe: The Worst Is Yet to Come [SCARY]

09.15 Crossing Germany's divide — encounters with far-right protesters

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:
Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581
Google
This site Web
  Print view: Taxes in America: A Long Rightward Lurch
FISCAL ANALYSIS:

Taxes in America: A Long Rightward Lurch

by Gerald E. Scorse
Tuesday, 5 October 2010
The super rich get more than half of their income from capital gains—which are taxed at only 15 percent.

Nothing raises the blood pressure of Tea Partiers faster than taxes. “Taxed Enough Already,” their signs shout. “Taxed alive and again when we’re dead,” they say.

That’s the Tea Party view, and it’s on view nonstop. The facts, though, point the other way. We’re living in a Golden Age of low federal taxes, especially for eye-popping incomes. It’s a great time to be a billionaire in America, or even a measly millionaire.

Warren Buffett, a multi-billionaire, revealed in 2006 that his tax bill was “far, far less as a fraction of my income than the secretaries or the clerks or anyone else in my office.” The numbers shamed him: “There’s class warfare, all right,” he said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

What makes the Tea Party wrong and Buffett right? Several provisions slant the U.S. Tax Code heavily in favor of heavy earners. Taxes may be the bane of the Tea Party, but they’re a relative boon for America’s have-mosts. Let’s look at some of the ways the Code keeps Warren Buffett’s fortune in Warren Buffet’s hands—and even chips in, redistributing income upward.

The major contributor is the 15 percent levy on long-term capital gains and corporate dividends. The top 1 percent of U.S.households owns nearly 40 percent of all privately-held stock. The super rich get more than half of their income from capital gains. The current 15 percent rate on gains is at its lowest since FDR’s first term. For middle-class Americans, the rate on wages is 25 percent. Taxing income from wealth at little more than half the rate of income from work: it’s the perfect way to make sure that Warren Buffett (and all the Buffett wannabes) pay effective tax rates nowhere near what their incomes might suggest.

“How can this by fair?” Buffett asked. “How can this be right?”

The Code also sets marginal rates, which were gutted by President Reagan. He whacked taxes in 1981 and again in 1986, taking the top rate all the way down from 70 percent to 28 percent. He also sent the federal deficit soaring, which modest tax hikes later repaired—until, of course, a double dose of tax-cut elixir from President Bush.

Whose bread do the Bush tax cuts really butter? Dick Cheney knows, and he’s laughing all the way to the bank. Cheney, famously declaring that “deficits don’t matter,” cast the tie-breaking Senate vote adding dividends to the tax-cut bonanza.

Taxes turn progressive when rates rise along with income. Fewer brackets mean less progressivity, and Reagan cut the number of brackets from 15 to four. There are six today.

Fewer tax brackets, coupled with a low threshold for the top bracket, give high incomes another edge. Taxes turn progressive when rates rise along with income. Fewer brackets mean less progressivity, and Reagan cut the number of brackets from 15 to four. There are six today, with the top four at 25, 28, 33 and 35 percent—a narrow spread, easily offset by provisions like the capital gains rate. The top rate kicks in at about $400,000 of taxable income, which author and tax expert David Cay Johnston calls “bizarre.” It’s a long way, he points out, from $400,000 to $1 million, $5 million, $100 million and hedge-fund billions: “Why don’t we have higher rates for those incomes?”

The top rate kicks in at about $400,000 of taxable income—and stays there, no matter how much more you earn.

Even the bottom marginal rates help top earners. A millionaire, filing singly, pays the same 10 percent on the first $8,375 of taxable income as the working poor—and so on, up the income scale. As the Center on Budget and Policy Priorities notes, the real winners from extending Bush’s middle-class tax cuts wouldn’t be middle class: “In fact, a family making more than $1 million will receive more than five times the tax cut benefit, in dollar terms, as a middle-class family making $50,000 to $75,000...” (Italics in original.)

The Tax Code doesn’t overtly discriminate, but it’s hardwired to make every tax break worth more at the top.

The Tax Code is also loaded with deductions that effectively rain dollars down on the rich. The Code doesn’t overtly discriminate, but it’s hardwired to make every tax break worth more at the top. All deductions get written off at 35 percent, starting with personal exemptions and standard deductions. This alone trims $7,315 off the tax bill of a post-65 couple. The serious money goes to itemizers, with Uncle Sam picking up five-figure amounts for mortgage interest on pricy real estate.

President Obama once proposed capping the mortgage deduction at 25 percent, the middle class rate. His idea quickly died, attacked as class warfare. This summer, in a piece titled “The Class War We Need,” conservative columnist Ross Douthat was incensed to learn that the owners of McMansions were defaulting at twice the usual rate. “The rich are different from you and me,” he wrote. “They know how to game the system.”

They also know that Congress always stands ready to tilt the tax laws their way. When the market crashed in 2008, lawmakers rushed to pass a one-year suspension of required distributions from retirement accounts. Only the haves stood to gain. Those who actually needed the distributions had to take them and pay taxes. The haves took a pass and saved thousands. Back to Douthat: “In case after case, Washington’s web of subsidies and tax breaks effectively takes money from the middle class and hands it out to speculators and have-mores.”

It’s taken a fortune in lobbying, but America’s tax laws are bearing golden fruit. As even a conservative can see, they’re redistributing income to the top.


Gerald E. Scorse, who writes from New York City helped pass a bill that tightens the rules for reporting capital gains.

Mr. Scorse's stories are republished in the Baltimore Chronicle with permission of the author.



Copyright © 2010 The Baltimore News Network. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.

This story was published on October 5, 2010.
 

Public Service Ads: