President Obama has talked about our tax code through the prism of billionaire Warren Buffett and his secretary for years. Last summer, he started talking about a “Buffett Rule” that would keep millionaires from paying a lower tax rate than middle class families. He renewed that call in the State of the Union last week.
In two days, at long last, the Buffett Rule will get its first vote in the U.S. Senate.
Senator Sheldon Whitehouse (D-RI) has wasted no time in getting his “Pay A Fair Share Act” to the floor. As he told the Washington Post’s Greg Sargent, the bill won’t change existing tax rates. It just requires those making more than $1 million annually to recalculate their tax rate, “taking into account all their income and what they pay in taxes.” In other words, include dividends from stocks, which are currently taxed at a much lower rate. “If that amount adds up to less than 30 percent,” writes Sargent, “they would be required to make up the difference.”
Or as Senator Whitehouse put it: “If your income is over 1 million, multiply it by 0.3, and if that number is bigger than you’d otherwise be paying, pay that.”
The bill is currently being scored by the Congressional Joint Committee on Taxation, so we’ll soon find out how much revenue, officially, the bill would raise if passed. But Citizens for Tax Justice (CTJ) predicts the Pay A Fair Share Act would raise $50 billion every year while only affecting 0.08 percent of taxpayers.
(Next Sunday, about 63,000 people will fill Lucas Oil Stadium in Indianapolis to watch Super Bown XLVI. For context, if the CTJ is right, and those 63,000 were a representative sample of Americans, the Pay A Fair Share Act would affect a mere 50 of them.)
We’re all for this legislation, and we all know our country needs the revenue. There are two things not addressed by this bill, however. First, the bill does not address the many loopholes that make our tax code a playground for corporations seeking shelters and exemptions. Second, it does nothing about the Bush tax cuts, which might not even be addressed until after the election; without action from Congress, they will expire on January 1, 2013.
Still, who could have imagined a high-profile vote in the U.S. Senate addressing income inequality even just six months ago? Like with the minimum wage increase in New York, we can certainly give partial credit the Occupy movement for bringing tax fairness and economic inequality to Washington’s front burner.
Tags: income inequality, Rhode Island, taxes
Senator Sheldon Whitehouse (D-RI) is planning to introduce a bill which he calls the “Paying A Fair Share Act.” It would bring the effective tax rate for millionaires up to 30 percent on all their income, whether it’s dividends on investments or their salary. The legislation is based on the “Buffett Rule,” the idea that folks as rich as Warren Buffett shouldn’t get to pay a lower effective tax rate than most middle class Americans.
We welcome this legislation. It’s a long time coming.
Five years ago, I watched then-candidate Barack Obama tell a packed New Hampshire high school auditorium that a famous supporter of his, the super-wealthy Buffett, had made a bet with some of his similarly well-monied friends that none of them paid higher tax rates than their secretaries. As Obama told it, none of them took the bet, because they all knew they wouldn’t win.
Here’s why. People who work for a living, like Buffett’s secretary, pay most of their taxes as income tax. But as you enter the stratosphere of multi-millionaires, you’ll find mostly people who make their money on investments, and therefore pay most of their taxes on capital gains.
However, the way most American workers (dare I say, 99 percent of them) experience this is watching as the government takes about a third of the income they work for, while millionaires can pay half that rate by not working at all. Under our current system, if you have enough money and the right investing knowledge, you can sit back and watch your pile grow. And as we all know, the current tax on capital gains hasn’t stopped the “1 percent’s” share of the American economy from growing from 10 percent in 1979 to 23.5 percent in 2008 – and that inequality has led to big problems for the whole economy.
The public desire to change this system has been stoked by the continuation of the jobs crisis, growing income inequality, and decreasing social mobility. Awareness of the situation was made especially acute when GOP Presidential candidate Mitt Romney reluctantly released tax returns showing that he paid a mere 13.9 percent on $21.6 million of income. And President Obama, aware of Romney as a potential rival later this year, highlighted the “Buffett Rule” in his State of the Union speech, even inviting Buffett’s actual secretary Debbie Bosanek, to sit with the First Lady.
But without legislation, that’s all just politics and perception. Senator Whitehouse is in talks with his Democratic colleagues about bringing the issue to a vote while the State of the Union is still fresh in the public’s mind.
One such colleague, New York’s Chuck Schumer, told the Hill that some Republicans might get on board as well. “Don’t underestimate the chances of Congress to enact parts of the president’s blueprint,” he said Wednesday, “Republicans will not go along out of a desire to cooperate, but they may find they have to out of political necessity.”
Most working class Americans, including Working America members, don’t really care about anyone’s political necessity. Regardless of party or motivation, we strongly urge the passage of this legislation.
Tags: income inequality, taxes
We hear a lot of talk about job creation, and bringing jobs back to America. We hear nothing about the kind of jobs we need the most: jobs that provide decent wages.
From the Los Angeles Times:
While productivity has grown by more than 80% over the last 30 years, wages have effectively been flat for 80% of Americans. So, although we’re making stuff faster and more efficiently, the benefits of that hard work have not trickled into the pockets of the people who do it.
In other words, more work for less pay.
First, companies are coming back to the United States because wages here are dropping, in real terms. At the same time, lower-wage corporate nirvanas such as China are no longer as cheap an alternative as they once were, partly because the sea of people who worked for next to nothing for so long have had enough and are rising up in protest.
The US is becoming the place to outsource low paying jobs to.
Second, most of the jobs coming back are not high-wage, union jobs with full healthcare and pensions. In fact, with concerted efforts by Republican governors in the Midwest to eviscerate union rights, times have never been better for corporate leaders seeking to lower labor costs. With labor costs in the U.S. dropping relative to those in the Third World, the president’s offer of tax incentives to other companies that in-source is unnecessary. As Citizens for Tax Justice points out, using a 2007 Bush administration study, corporations based in the United States already have plenty of tax incentive to locate here because “the United States takes a below-average share of corporate income in taxes compared to other developed countries.”
and
If you add those people to the people who have full-time work at or just above the minimum wage, at least 1 in 5 Americans — 30 million people — does not have a decent job. Which explains why, according to the Census Bureau, 46 million people — or about 15% of Americans — live in poverty, the highest percentage since 1993.
This is a nasty reality that politicians shy far, far away from, when they talk about jobs. Many of us (I’m one of that 15 percent) are relying on part time jobs, or low paying jobs that result in us not having enough to live on. This means more people relying on the shrinking safety net, and the kindness of family and friends.
We need the kind of jobs that will rebuild the middle class.
Tags: income inequality, Jobs
We’re all familiar with the mythos: America is the land of the meritocracy, not the aristocracy. The place where every boy can grow up to be president. Where the janitor can become the CEO.
The reality looks rather different. From the New York Times:
“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”
One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.
To put it a different way:
“The bottom fifth in the U.S. looks very different from the bottom fifth in other countries,” said Scott Winship, a researcher at the Brookings Institution, who wrote the article for National Review. “Poor Americans have to work their way up from a lower floor.”
Poor Americans are working their way up from lower bottom than other countries? Why isn’t this front page news? Why aren’t the presidential candidates currently invading NH talking about this?
Oh, wait. Here’s why:
Perhaps another brake on American mobility is the sheer magnitude of the gaps between rich and the rest — the theme of the Occupy Wall Street protests, which emphasize the power of the privileged to protect their interests. Countries with less equality generally have less mobility.
The privileged have the power to protect their interests. The non-privileged just get trickled on. This is grim news, coming on the heels of the recent report showing that one in every two families has either fallen into poverty or qualifies as low income.
The best way to turn this around is to continue to push for more jobs, better pay, and stronger unions.
Tags: income inequality, Jobs
I’ve seen a number of bloggers address the home ownership rate, which at 66.5% is down to 1998 levels. But Susie Madrak highlights another number: an 11% vacancy rate. According to the CNBC post she points to:
The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as “Held off Market” about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn’t just 200,000, it’s far higher than that.
So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we’re still recovering emotionally from the toll of the housing crash.
Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling.
Like the New York Times article I wrote about yesterday, this is another piece of evidence showing us how profoundly our economy—indeed our country—has been changed by this recession and by the decades of growing income inequality that preceded it.
Enormous income inequality became the new normal. Then came this recession—we haven’t reached a post-recession new normal, but lots of signs suggest that what we’re moving toward is something that just a few years ago seemed unthinkable. That we have unemployment near or over 10% and the government doesn’t treat that as an emergency, that banks are allowed to just throw people out of their homes based on fraudulent paperwork, that the middle class is under a sustained attack.
The question is, where’s the tipping point at which the mass of working people in this country either accept that this is it—that their jobs, health care, and retirement will always be insecure; that they can’t expect to provide a better life for their children—or instead of accepting it, fight back, whatever that fight looks like?
Tags: economy, income inequality
Do you see a pattern?
Increasing income disparity in the US puts us worse than or on par with much of Latin America in that category.
A former economic advisor to George W. Bush and John McCain is advocating lowering the minimum wage.
Someone making $100 million per year pays a tax rate just two points higher than someone making $175,000 per year.
Wall Street bonuses are expected to rise this year.
Businesses with rising profits are not hiring more workers.
CEOs who lay off more workers get paid more.
Senator David Vitter represents a state where the average household income is $43,635, but he looks out at an audience and tells them that a plan to repeal a tax cut for households making more than $250,000 per year would affect “virtually everybody in this audience.”
Senator Jon Kyl is fighting to protect tax cuts to the wealthiest. He also fought to block an extension of unemployment benefits to struggling families in an attempt to get an estate tax bill that would benefit…you guessed it, the very wealthiest families.
55% of all adults in the workforce say that since the recession began they have been unemployed, had their pay cut or their hours reduced, or become involuntary part-time workers.
Former House Majority Leader Tom DeLay says jobless workers don’t go back to work because of unemployment benefits.
JPMorgan Chase pretty much agrees with DeLay.
The pattern I see is working people struggling more and more, wealthy people having more and more, and Republican politicians and Wall Street allied to get more and more from working people and give more and more to wealthy ones.
And they like to say that anyone asking for a living wage, or to close a tax loophole for billionaires, is engaging in class warfare. What they really mean is, that opposes their own war on working people.
Tags: income inequality, minimum wage, unemployment, unemployment benefits extension, Wall Street
In the first of her two excellent recent posts here on the vast chasm of income disparity in America, Susan Bruce examined the increasing share of the nation’s income going to those already making the most between the years 1979 and 2007, the period that has been dubbed ‘The Great Divergence’.
Now the Economic Policy Institute (EPI) shows us what I’ve dubbed the Great Divergence Pie (chart, that is):
As EPI explains:
According to the Congressional Budget Office, between 1979 and the start of the current recession in 2007, the pre-tax incomes of the upper 1% grew 214%, while the incomes of the middle-fifth and lowest-fifth grew, respectively, 25% and 4%. As the Chart shows, this extremely unbalanced growth implies that 38.7% of all of the income growth accrued to the upper 1% over the 1979-2007 period: a greater share than the 36.3% share received by the entire bottom 90% of the population.
Those in the top 10% of the income scale received 63.7% of all the income growth generated over the 1979-2007 period. In contrast, the bottom 20% of all earners saw such a small share of income growth – just 0.4% – that it barely shows up on the included pie chart.
Note: “Upper-middle fifth” (60-80%) refers to those in the income scale who make more than 60% of earners but less than the top fifth. “Lower-middle fifth” refers to those who fall in the lower 20-40% range of the income scale.
The top 5 percent took 54.3 percent of the income growth, while the bottom 60 percent combined received only 11 percent of total income growth during the Great Divergence. And then the Great Recession hit, with millions of working class and lower-income Americans thrown out of work, depressing their incomes further than at any time in the last seven decades.
Tags: income inequality
Wednesday I wrote about the increasing income disparity in the US.
Kevin Hassett of the American Enterprise Institute (a right wing think tank) and an economic advisor to both George W. Bush and John McCain wants you to know that Your Fat Paycheck Keeps Your Neighbor Unemployed:
Hassett’s views on unemployment:
So here comes the leap into ice-cold water: The biggest problem with the labor market right now is that wages are too high.
Yep, wages that have been stagnant for over a decade are the problem. Hassett’s solution?
First, the minimum wage should be scaled back to $5.85, its level when the recession began in December 2007.
and
Second, government policies should induce workers to take the plunge and accept lower wages. These policies could include carrots — tax credits that offset large wage declines, for example — and sticks, such as a reduction in the duration of unemployment insurance benefits.
Finally, unions should be willing to reopen collective bargaining agreements and accept lower wages.
Notice that he makes no suggestions about lowering CEO, or executive pay. He doesn’t mention his own willingness to take a pay cut that would undoubtedly put a couple of folks to work. No – it’s always the people on the lower end of the wage scale who have to take the hit.
Call me crazy, but – it seems to me that in an economy based on consumer spending, trying to make sure that people have less money to spend is idiotic. Housing, energy, and food costs are not going down – therefore taking money away from those folks most likely to spend discretionary income would appear to go against the very idea of economic recovery. I’m certain I know who is overpaid in this scenario – and it isn’t the folks earning minimum wage.
Tags: income inequality, minimum wage, unemployment
At Slate, Timothy Noah writes about what economist Paul Krugman calls “The Great Divergence” – the increasing disparity in US incomes:
It’s generally understood that we live in a time of growing income inequality, but “the ordinary person is not really aware of how big it is,” Krugman told me. During the late 1980s and the late 1990s, the United States experienced two unprecedentedly long periods of sustained economic growth—the “seven fat years” and the ” long boom.” Yet from 1980 to 2005, more than 80 percent of total increase in Americans’ income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.
Remember “trickle down” economics? This is “pouring up.”
Why don’t Americans pay more attention to growing income disparity? One reason may be our enduring belief in social mobility. Economic inequality is less troubling if you live in a country where any child, no matter how humble his or her origins, can grow up to be president.
We’re told that all we have to do is pull ourselves up by our bootstraps and anyone can succeed. Unfortunately, the game is increasingly rigged against those who weren’t smart enough to pick wealthy parents.
This is disturbing:
All my life I’ve heard Latin America described as a failed society (or collection of failed societies) because of its grotesque maldistribution of wealth. Peasants in rags beg for food outside the high walls of opulent villas, and so on. But according to the Central Intelligence Agency (whose patriotism I hesitate to question), income distribution in the United States is more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador. Income inequality is actually declining in Latin America even as it continues to increase in the United States. Economically speaking, the richest nation on earth is starting to resemble a banana republic.
The whole article is worth reading. It’s part 2 of an ongoing series – one that seems to be worth following.
Tags: income inequality
Have you been wondering about the lack of serious coverage by the media of the financial crisis facing the middle class? As David Sirota shows us, the media doesn’t seem to understand who the middle class are:
Last year, the New York Times told us it’s difficult for people to make ends meet on $500,000 a year, and the Washington Post insisted that it’s hard to “squeak by” on $300,000 a year. Now the Denver Post insists that if you make $250,000 a year, you may only be “middle class”
Where does utter disconnect with reality come from? And why does it exist?
Media voices perpetuate these myths of the impoverished wealthy, in part, because many media voices are themselves wealthy — and there’s no more powerful class solidarity than that which exists among the rich.
Indeed, the wealthy don’t just convince themselves they aren’t wealthy, they try to create the perception among themselves, politicians and the public at large that they are “middle class” and thus persecuted by taxes. Put another way, the real danger of the New York Times, Washington Post and Denver Post article floating the idea of the wealthy as not wealthy is in skewing our political debate over economics. If someone making $500,000 is just “getting by,” and someone making $300,000 is barely “squeaking by” and someone making $250,000 is in the persecuted “middle class,” then having any fact-based discussion about tax inequities becomes that much harder.
The Wall St. Journal sings a slightly different tune:
For those wondering why luxury spending is back even as unemployment hovers close to 10%, consider this: unemployment among the affluent is only 3%.
According to a study from Northeastern University’s Center for Labor Studies, unemployment for those in the top income decile–individuals earning more than $150,000 a year–was 3% in the fourth quarter of 2009.
According to the WSJ, those in the top income bracket are earning $150,000+ a year, which flies in the face of the assertions that $250,00 is middle class.
The income gap in the US has been increasing since the 1970′s when wages began to stagnate.
So, either the media is engaging in some misdirection in order to help the wealthy keep from paying their fair share of taxes, OR, the definition of the middle class is changing dramatically, and a whole lot of folks are finding out that they are the new poor.
Tags: income inequality
