Wealth for the Common Good

Published 13 April 2010 in the Metro West Daily News. Linked from dailynewstribune.com.

By Clark Taylor

Think of taxes in taste terms. We’ve been conditioned to think of taxes in disgusting, bitter terms something like bad-tasting medicine to be avoided whenever possible.

But consider another possibility: taxes are the delightful taste of a healthy democratic economy that works well for all of us.

Think about what taxes pay for. Start with life-protecting things we don’t see, like potable water and sewage pipes that keep us physically healthy. Go above ground to roads and bridges. Then think public schools and public universities that compete comfortably with private institutions and make education available for a wide segment the residents in this country. Shift then to the invisible, like the basic research provided by government grants and the military that have made the medical and computer revolutions possible. Add your own ideas and your list will fill pages.

In short, government uses our taxes to create the infrastructure all of us use. In the process of building and maintaining it, government creates thousands of good jobs. Without that infrastructure, private companies couldn’t create their millions of jobs, and they couldn’t bring us the delicious foods that sustain and please us. Nor the furniture and cars and gadgets that provide good flavor to the rest of life.

Just as eating your vegetables is easier when you understand the health benefits, taxes take on a surprisingly fine taste when you think of the necessities they buy that none of us can live without.
People in the United States haven’t always railed at the taste of taxes. Public investment was huge, of course, during World War II. Then after the war tax revenues brought us interstate highways, space exploration, the GI Bill, veterans’ housing, greatly expanded education frontiers and much more. Do we reject these measures that added a lively, positive flavor to our democracy? But then, after the 1970s, we gave in to the oft-repeated mantra that taxes are, at best, bitter medicine. Tax cuts became our favorite junk food.

Ironically, only the wealthy have received substantial tax cuts over the long term. Wealth for the Common Good, reports that since 1960, the richest one percent has seen their effective or actual tax rate go down by half, while middle class Americans have seen their actual tax rate slightly increase. That statement alone is the true bitter, bitter taste for the great majority of us if we let ourselves think about it.

We’ve been wrong about taste before. Cigarettes and cigars were sold on the pleasure of taste alone. Their horrific damage was hidden or denied. And we’ve allowed our taste buds to crave sugar-saturated, empty-calorie snacks that undermine our health. Too many of us suffer from obesity and resulting diseases like diabetes. Our children are increasingly the victims.

But our tastes our changing. As a society, we’ve begun outlawing smoking in public places. We’re learning that, as in the case of smoking, the tastes the advertisers are selling us too often are killing us.

Similarly, we can shift our thinking about the taste of taxes. Think not about what they won’t let you buy, but rather about what they have “already” bought and will buy for you in the future. “Think about the jobs they create. Go back to your menu of what taxes pay for and let your taste buds play over it. The taste of taxes will grow on you.

President Kennedy exhorted us to think about what we can do for our country. One thing that every one of us can do is to shift our thinking about taxes. Paste this on the fridge where we keep our food fresh: “Taxes are the flavor of a healthy democratic economy.” Then call your legislators and share the good news with them.

Clark Taylor of Needham is a retired professor of the College of Public and Community Service,
UMass Boston. He is working on a book called “Seeds of Freedom: Liberating Education in a Guatemalan Village.”

Published in The Hill on 7 April 2010. Linked from On The Money blog.

By Vicki Needham

Increasing taxes on the nation’s wealthiest Americans would collect $450 billion in new revenue, while discouraging financial speculation, strengthen the economy and provide greater transparency, fairness and simplicity to the tax code, according to a new proposal released Wednesday.

During the past 50 years and specifically the past decade, America’s highest earners benefited most from tax cuts, according to a new study released by Wealth for the Common Good, an organization of high-net worth individuals and business leaders calling for tax increases for those with incomes above $250,000.

Letting the Bush tax expire would generate $43 billion more in revenue, according to the group.

During the past 50 years, the share of income paid in federal income taxes the nation’s wealthiest dropped from 51.2 percent in 1955 to 16.6 percent in 2007, while taxes on the middle class have increased slightly, according to the study.

In the past 10 years, Americans making more than $250,000 a year have cost the federal government $700 billion in revenue and it would cost $826 billion more in the next decade if the tax cuts are extended.

“After 50 years of tax cuts by Kennedy, Reagan and Bush II, the middle class is paying the same share of income as they did in 1960,” said Chuck Collins, co-founder of the group. “The richest 3 percent have gotten the gargantuan share of tax cuts.”

The group cites a recent Quinnipiac University poll that found 60 percent of Americans across political parties favor an increase of income taxes on those making more than $250,000 a year.

On its Web page, the group says it’s calling for the Bush tax cuts to expire because “we feel it’s time to rebalance the economy so that it works for everyone, not just the wealthy.”

“Our country is facing unprecedented economic challenges right now: We all need to pay our fair share to resolved these issues and make our long overdue investments in education, health, energy and infrastructure.”

To read the study, click here.

Published in Forbes Online on 07 April 2010. Linked from Forbes.com.

By William P. Barrett

In 1776 the United States became perhaps the only country ever to be founded after a revolution based largely on the explicit issue of tax rates. More than two centuries later the issue still resonates loudly, and not just among right-wing Tea Party activists.

Wealth for the Common Good, a group of left-wing trust fund babies and other wealthy individuals pushing for higher taxes on the rich, released a report Tuesday saying that from 1955 to 2007, the tax rate paid by the 400 highest-income earners fell by two-thirds. Meanwhile the tax burden on the middle class, WCG said, rose by about 1%.

If the top 400 paid the same tax rate today that they did in 1960, the federal government would collect another $48 billion a year, WCG calculates. The group figures the burden on the top 150,000 taxpayers–one out of every 1,000–has fallen by roughly half since 1960. If taxes were levied on them at the same rate today as in 1960, the group calculates, Uncle Sam would collect an extra $281 billion a year. (That includes the $48 billion of the top 400 and makes no allowance for the possibility that the rich might earn less–or cheat more–if their tax rates were higher.)

WCG was co-founded last year by Chuck Collins, an heir to the Oscar Mayer meat fortune. In 2003 he co-authored a book with William Gates Sr., the father of Microsoft cofounder Bill Gates, arguing for retention of the federal estate tax. The WCG Web site calls for “shared prosperity and fair taxation” and declares: “Economic policies in America have slowly but surely shifted to disproportionately benefit the nation’s top earners.”

To that end, the report proposed a number of tax increases, including the following:

–Creation of a new 50% tax bracket on income of $2 million and above. WCG said this would raise at least $60 billion a year.

–Endorsement of President Obama’s proposal to allow the Bush tax cuts to expire at the end of 2010 for those earning $250,000 plus. That would push the top rate on salary and interest from 35% to 39.6% and the top rate on capital gains from 15% to 20%. (In 2013, including a 3.8% Medicare investment surtax that was part of the recently passed health reform, the top rate on interest would climb to 43.4% and the top rate on capital gains to 23.8%.)

–Imposition of a “modest federal tax on every transaction that involves the buying and selling of stock and other financial products.” WCG says this would raise $100 billion a year and “dampen the rapid speculative turnover of stocks.” No details were given.

–Reinstatement of a stiff estate tax on estates of $2 million or more, which WCG said would still only tax one out of every 200 estates. (Under current law the estate tax has lapsed for 2010 and will return in 2011 with a $1 million exemption.)

The WCG study is hardly the only one to note the precipitous drop in taxes paid by the wealthiest. The Internal Revenue Service made much the same point in a recent study of the 400 taxpayers with the highest annual income

The “IRS 400,” an irregularly published study that names no names, was inspired by the Forbes 400 list of America’s wealthiest, naming names since 1982. But there is a big difference: The IRS measures annual adjusted gross income, while Forbes measures net worth. It is thought there is not a great overlap because net worth includes unrealized capital gains not included in taxable income.

WCG isn’t the first to make the point that the rich are paying lower rates these days. No less an authority on wealth than top billionaire Warren Buffett, who runs Berkshire Hathaway, has said his secretary pays a higher tax rate than he does. On the other hand, many conservatives say low tax rates are an incentive for the wealth accumulation they consider to be at the heart of American economic growth and the American dream.

The WCG report notes that the top marginal tax rate was 91% in 1960 before it started dropping during the Kennedy administration. The effective rate (total tax paid on gross income) for the “IRS 400″ dropped from 51.2% in 1955 to 16.6% in 2007. The report says the effective rate on the middle class–defined as the middle 20% of taxpayers–rose from 15.9% in 1960 to 16.1% in 2007.

The authors assert, “Our nation has borrowed money to pay for the tax cuts that have gone and continue to go to America’s wealthy, a reality that will have future generations of mostly middle-income taxpayers footing the bill–with interest–for these tax cuts.”

Published in The Nation on 06 April 2010. Linked from the Editor’s Clut blog on TheNation.com

By Katrina vanden Heuvel

The challenge for progressives and Democrats in these turbulent times is how to consistently and clearly explain the real causes of our current economic condition.

One problem is that we live in a center-left country with a center-right media that consistently misinforms people about the perils of debts, deficits, and tax increases, and purveys misinformation about a good but modest health care bill that rightwing talk radio, tea partiers and GOPsters would have Americans believe is a “socialist” power grab.

It’s against that political backdrop that a just-released report from Wealth for the Common Good–a network of business leaders, high-income households and partners working together to promote shared prosperity and fair taxation–is a welcome and common sense antidote. History is always important, especially in the “US of Amnesia”–as writer Gore Vidal once put it–and this tight, fact-filled report gives us the history we need to understand how enormous tax cuts over the last 50 years have favored the wealthiest Americans at the expense of a strong and secure middle class. Its must-read facts and common sense ideas deserve and demand as much media attention as the tea partiers’ kvetching.

What’s crystal clear in this well-documented report–whose title might have been “The Real Story Behind Today’s Unfair Economy”–is that the middle-class has largely been shafted by both Republicans and Democrats, whose campaign coffers are equally greased by wealthy donors. And the shift in the tax burden has fueled a rising inequality and concentration of wealth that weakens our democracy–as The Nation argued in its June 30, 2008 special issue, “The New Inequality.”

That shift is clear just looking at the tax rates paid by the wealthiest Americans. From 1950 to 1963–even under that radical Republican President Dwight Eisenhower–the federal tax rate on personal income over $400,000 never dropped below 91 percent. Between 1936 and 1980 it never dropped below 70 percent. But today, the top personal income tax rate after the 2001 Bush tax cut is just 35 percent, and you can count on one hell of a fightwith ConservaDems and the GOP just to let that expire at the end of this year so the rate will return to the modest 39.6 percent level of the Clinton years. The tax rate on capital gains–which most benefits those in the highest income brackets–dropped to 15 percent in 2003, down from as high as 39.9 percent in 1977.

With all the fury about the debt and deficits, it’s worth reminding ourselves that if we close a few loopholes for the very rich, then presto, the current deficit would be significantly smaller. The Bush tax cuts for the wealthy between 2001-2008 cost the US Treasury $700 billion, with all of these billions added directly to the national debt. Retaining these tax cuts will cost $826 billion over the next decade. But while Bush exacerbated the tax shift, it was largely a done deal before he took office. Check out these stunning stats:

Between 1960 to 2004, the top 0.1 percent of U.S. taxpayers have seen the share of their income paid in total federal taxes drop from 60 to 33.6 percent. The top 400 income-earners have seen the share of their income they pay in federal income tax alone plummet from 51.2 percent in 1955 to 16.6 percent in 2007.

In 2007, if the top 0.1 percent of taxpayers had paid total federal taxes at the same rate as they paid in 1960, the federal treasury would have collected an additional $281.2 billion. If the top 400 had paid the same rate as it did in 1955 it would have meant an additional $47.7 billion in revenue. (The incomes of the top 400 have multiplied by 27 times–adjusted for inflation–since 1955, yet back then they paid over three times more of their incomes in federal income tax.)

Meanwhile, the middle class has seen their taxes increase. The report lays out that, “Despite all the ‘tax cut’ political rhetoric and action of recent years, average Americans have seen no tax savings at the federal level.”

Taxpayers in the middle–who made more than the bottom 40 percent but less than the top 40 percent–saw an increase in their taxes, paying 15.9 percent of their incomes in total federal taxes in 1960 and 16.1 percent in 2004. Adding insult to injury, “Our children and grandchildren… will be asked to pay back, with interest, the trillions our federal government has been borrowing to offset our loss of tax revenue from wealthy taxpayers.”

The result of this imbalanced, unjust, and out-of-whack tax shift?

A public investment deficit–seen in our crumbling infrastructure, lack of investment in a robust green economy, and rising tuition costs at public universities, to name just a few areas–and a concentration of wealth and power that bought a deregulated casino economy and subsequent economic collapse that the rest of us are paying for.

Yet despite this historic shift in the tax burden, the debate we are having on tax reform is inadequate to say the least.

What’s really shocking is we can’t even manage Tax Reform 101–to tax the hedge fund managers like we do normal working people. They pay a stunning 15 percent on their billions–a lower rate than teachers, cops, even their own assistants! (see here, here, and here.) And a 2008 GAO report found that two-thirds of US corporations paid zero federal income taxes from 1998-2005. Twenty-five percent of the largest US corporations had $1.1 trillion in gross sales in 2005 but paid no federal income taxes. Where is the debate on corporate tax rates and loopholes? If corporations are now people, can’t they start paying taxes like people too? (Not if their new Supreme Court-sponsored campaign ads can help it.)

Here are some examples of what a smart tax reform program would look like as prescribed by the Wealth for the Common Good report: End the income tax cuts for households earning more than $250,000 and raise capital gains and dividend rate from 15 to 20 percent ($45 billion increase in revenues); a progressive estate tax on estates worth over $2 million or $4 million for a couple–taxing no more than one in every 200 estates–generating $40 billion immediately and over $100 billion a decade from now; end overseas tax havens used by the likes of Citigroup and Best Buy ($100 billion per year); a modest financial transaction tax ($100 billion per year); a new 50 percent tax bracket for income over $2 million ($60 billion per year).

This is the kind of common sense, creative thinking that needs to be taken up by elected officials who understand that another generation of this tax madness will lead to ever higher concentrations of wealth, gut an already weakened middle class, and unravel the American Dream.