Taxes, government, and the good life
by Linda Beale
Taxes, government, and the good life
In 2012, Ed Asner narrated a cartoon video prepared for the California Federation of Teachers called “Taxing the Rich”. It’s worth watching, given the four-decades-long effort by the GOP to convince ordinary Americans that “trickle down” economic goodies will be coming their way if they only support the fat cats’ desire for even more tax cuts for the rich, elimination of the estate tax paid by the rich, and “corporate tax reform” so that the corporations mostly owned by and benefiting their rich shareholders (and shareholder/managers) pay even less than the paltry amount they now pay in taxes.
This has accompanied the long-term position of the GOP that wants to “shrink government” (see, e.g., Heritage Foundation, Mar. 15, 2005, The Impact of Government Spending on Economic Growth, setting forth the ideological position favoring shrinking government spending as “less efficient[]” than private sector spending)–as though the jointly undertaken endeavors of American citizens working together through government were inevitably less good than private spending (even if that private spending permits a very small portion of the population to grab all the productivity gains from the vast majority of the population). Shrinking government, that is, has been treated as a goal in itself, even though there is no clear evidence supporting the ideology and in fact considerable evidence on the other side–i.e., America’s adhering to spending the same percentage of GDP for public functions now as it did 50 years ago has stifled growth compared to other countries that have wisely invested in human and physical capital through infrastructure and health care and similar public projects.
But the side benefit to the rich of convincing ordinary Americans to vote against interest and support downsizing taxes (with tax cuts mostly to the benefit of the wealthy) while downsizing government functions (with benefit cuts mostly to the detriment of ordinary people) has been the increasing inequality of ownership of assets and power in this country. The wealthy have taken a larger and larger share of the pie, while using their wealth to lobby against decent livable wages for their workers, get laws passed that make it difficult or impossible for their workers to unionize to have some strength to negotiate better contracts to claim a share of the productivity gains, and still telling their workers to be thankful for the tidbits that “trickle down” (as though paying a substandard wage for a hard day’s work is a mark of generosity–no wonder Trump thought he could claim that his “work” to earn “billions” by shortchanging contractors and suppliers, workers and partners was a “sacrifice”).
Here’s the blurb that accompanies the video on YouTube
Tax the rich: An animated fairy tale (Dec. 5, 2012) is narrated by Ed Asner, with animation by Mike Konopacki. Written and directed by Fred Glass for the California Federation of Teachers. An 8 minute video about how we arrived at this moment of poorly funded public services and widening economic inequality. Things go downhill in a happy and prosperous land after the rich decide they don’t want to pay taxes anymore. They tell the people that there is no alternative, but the people aren’t so sure. This land bears a startling resemblance to our land. For more info, www.cft.org. © 2012 California Federation of Teachers
Donald Trump, in all his boasting about his enormous wealth and success, doesn’t even pretend to pay substantial amounts in taxes (and perhaps pays so little that he has decided based on that knowledge not to comply with the longstanding tradition of releasing tax returns so citizens can judge for themselves what kind of citizen the aspirant for high office really is). Trump’s attitude is not really different from the received wisdom of the Republican party. The GOP has worked to achieve tax cuts for the rich for decades, since Reagan began cutting their taxes in 1981 (and raising taxes on seniors and others).
In other words, Trump and the GOP generally seem to view it as patriotic for the rich to pay as little in taxes as possible, even though their riches in large part are owed to wealth-friendly policies gained through intensive lobbying made possible by their immense wealth and cozy relationships with congressmen elected (again with the help of that immense wealth) on right-wing platforms–such as so-called “right to work” laws that really are “elimination of negotiating power with Big Bosses” laws, encouraging nonunionized workers to resent the benefits unions have achieved for unionized workers (rather than realizing they should unionize to fight for those same benefits for themselves), environmental and safety deregulation, grumbling about deficits and telling people “government is the problem” instead of investing in public infrastructure (roads, schools, health research, funding of the arts), and wealth-friendly tax policies (privileged low rates for their main source of income from capital and inherited windfalls with no tax to the heirs and miniscule tax to the deceased whose estate generally escaped tax during life and was subject to a pittance of an estate tax after death).
When facts are examined, it is clear that the U.S. government–at least outside of the military–is now too small for the immense tasks facing us. We have starved the IRS while assigning it more and more functions, meaning it is much harder for the IRS to effectively enforce the laws, allowing wealthy people and big corporations with sophisticated lawyers a better chance to scam the system while ordinary people pay taxes due through withholding. We have cut back substantially on federal support for vital basic research, with the expected consequences that the nation is beginning to fall behind on technological and medical innovations. (Too many of our big pharmacy companies would rather just run the price up on drugs than do the hard research to develop new cures.) Public support for education at the local, state and federal level has failed to keep up with the need for improved school buildings, better paid teachers, and support adequate to maintain good learning environments for all schoolchildren. While regulations should be regularly examined to ensure they still make sense, the U.S. has fallen behind on necessary regulation of commercial enterprises that have substantial impact on sustainable living: environmental infrastructure–from innovative responses to the man-made global warming to programs to counter zika, ebola, and the problem of antibiotic resistance–is underfunded or just plain missing; while companies cheat workers –claiming they are independent contractors, cutting hours and using contingent scheduling that tends to cost more to the worker than they earn in the short time at work, failing to pay overtime due, or failing to remit health insurance premiums deducted from paychecks.
It’s time for Americans to start hearing from more of their leaders, and more from the people they trust in their local jurisdictions who are firefighters and teachers and preachers and social workers and businessmen, about the importance of governmental work and the public infrastructure that taxes support. True patriots know that taxes are the way we work together to build a genuine community.
It’s surprising to me how little talk there is about the estate tax. When Bill Clinton was president, the estate tax rate was 55% on estates over $1.5 million. The Bush tax cuts eliminated the estate tax, but only in the last year of the ten years that the tax cuts were in effect. So, certain high asset taxpayers like George Steinbrenner of NY Yankees fame, paid no estate tax because they died that year.
When the Democratic congress was unable to pass a new tax law in the fall of 2010, with all of the Bush tax cuts expiring, Obama was left to negotiate with Republicans on the new tax rates. The estate tax rate is now 40% on estates over $5 million.
If Democrats ever regain control of Congress, I suggest that they consider a tiered estate tax, similar to the tiered income tax. Let the 40% rate stay for estates from $5 million to say $25 million. Then, move to a 50% rate for estates from $25 to $100 million. Finally, have a 60% rate for estates above $100 million.
“We have starved the IRS while assigning it more and more functions, meaning it is much harder for the IRS to effectively enforce the laws, allowing wealthy people and big corporations with sophisticated lawyers a better chance to scam the system while ordinary people pay taxes due through withholding.”
I’d quibble with the “we” part of this statement, but this was a really good read overall.
I don’t see things getting any better. Both of the presidential candidates are quite wealthy. One was born with a silver spoon in his mouth, and has no idea at all what it’s like to live in the “real world”. The other is nouveau riche, and that mix of relative poverty and newly found wealth has warped her viewpoint of the world.
I’m a hardliner on the estate tax. Anything exceeding some arbitrary point – say $100 million – would be taxed at 95%. Can’t see THAT happening, either. The propagandists for the rich would use extreme examples – What If You Won The Power Ball? And Joe Sixpack would buy it. Just as he has been against his own interests for generations.
ZS,
Nice to see your consistency. Amazing how you can come to an opinion about different topics(like the estate tax) and what Clinton believes without making any effort to find out the truth.
Must be nice to know everything without reading anything.
Why not tax estates like income? The person who inherits the windfall didn’t earn it, I know, but like every taxable transaction, money has changed hands.
Tax inherited income as income. Tax dividend income as income. Why privilege some kinds of income over others?
just an academic kerfuffle.
i was with you until you mentioned supporting the arts.
i mean, i’m all for arts myself. but… maybe after looking at the “artistic” sculptures that grace the campus of my alma mater i am not sure how i’d convince the rich they have a moral obligation to pay for them.
and, just saying (because it’s what i do), i wonder how to convince the rich they have a moral obligation to pay for my retirement (but if wages don’t come up i might change my mind) when FDR made it so easy for me to pay for my own retirement so I can brag “i paid for it myself”… which should mean i get to retire when i want to (when i have paid for it) without bringing a note from my doctor. well, most people won’t understand what i am talking about, but i needed to say it.
and i’d like to say that leaving something for your children is something that used to be a legitimate desire. it is true that vast amounts of inherited wealth can be harmful to a democracy, but just “tax the rich and give me the money” has such an ugly ring to it.
so, yeah, we need to figure out a way to make incomes (and taxes) more fair, get the rich out of making all the laws, and even provide welfare for the unfortunate… but when the left indulges in an orgy of “make the rich pay” for everything that crosses their mind, it makes it hard to get even the honest rich to pay any attention to what might be legitimate arguments.
I don’t see how taxing inheritance like ordinary income is “making the rich pay” any more than the current income tax system is “making the rich pay.” Nor does taxing inheritance like ordinary income prevent people from leaving “something” for your children. There is no tax bracket that taxes income at 100%, nor has there ever been one.
Interesting thoughts all but I like Linda’s non tax ideas the best. For all of the benefits the 1% have received from favorable tax policy, the real money has been in unfair trade, unfair labor practices, and starve the beast/privatization of public services
Joel
everything you say is true. but if you heard what i hear you would understand that the difference is in the way people say it.
Terry
I agree. I think we could make more progress (sic) if we emphasized getting the crime out of big money, rather than threatening “higher taxes” .
at the end of the day the rich will have to pay higher taxes, but it matters how we ask. we are not in a position to win a revolution, even a peaceful one, and i am not sure we’d like what we get if we did. “meet the new boss same as the old boss.”
“[The] rich will have to pay higher taxes, but it matters how we ask.”
ASK?
Taxes are voluntary?
Who knew?
Coberly, that is my favorite song by the Who
Warren
of course taxes are voluntary. this is a democracy.
Terry
and if I remember, while the Beattles didn’t think much of the Tax Man,
they thought less of Revolution.
“[This] is a democracy.”
Really? Did that happen when taxes became voluntary?
And all this time, I thought this was a republic, and taxes were mandatory.
“Why not tax estates like income?
“Tax inherited income as income. Tax dividend income as income. Why privilege some kinds of income over others?”
I have no problem with taxing inherited income as income, but that is different from an estate tax, which is a tax levied on the estate, not on the inheritors.
Dividends and capital gains are not treated like ordinary income because they are already taxed as income to the corporations. Eliminate the corporate income tax (which is stupid and wasteful), and tax all income as ordinary income, with the exception that capital gains be indexed to inflation.
Jesus! Warren
get a new piece of chewing gum. do you think anyone here hasn’t heard this song already?
you knew what the deal was when you bought the stock, so stop whining.
try to think of it this way: the government (us) can tax whatever we want whatever way we want. in the case of corporations there is one rate for corporate income that is not distributed as dividends… perhaps to encourage reinvenstment, i don;t know, and another rate for income that is distributed, perhaps so the tax can be graduated like ordinary income, i don’t know.
but in any case, it’s not “taxed twice.” that’s just a whine that some other rich person’s toady thought up to help him masturbate to his money.
and you lose your soul by worrying about something that “is not.” it you think the tax is unfair join a group and fight for a change… oh? you have. been fighting now for two hundred and forty years?
well, get a new slogan. i get as sick of the rich whining about taxes as do about the left demanding the rich pay “their fair share.”
you are wasting your life with this,
“[In] the case of corporations there is one rate for corporate income that is not distributed as dividends… and another rate for income that is distributed [as dividends].”
I was unaware of that. My understanding was that corporate income, after all deductions, allowances, etc., is taxed at the rates set for that amount of income. I have never never heard that there was another rate for income the is distributed as dividends. Could you show me that in the tax code?
Warren
it’s not in the tax code. it’s a way to think about it that helps avoid insanity.
As Cob pointed out, the price of this infamous “double taxation” thought (not that many corps are paying remotely close to their fair share) is due to the protections the investor receives from the arrangement.
EM
true. and another way to think about it is that contrary to the catechism of the right, YOU are NOT the corporation. The corporation pays a tax on its profits, and then you pay a tax on what the corporation pays you in dividends.
but it helps the rich ease their pain by telling themselves they really are the same as the corporation so “they” are being taxed twice.
what it amounts to is a mostly meaningless string of words that people like Warren can bow down to and worship because they prefer that to living a real life.
Thank you for clarifying that fact of the tax code.
Corporations do not pay income tax on money paid to employees (wages_, do so on money paid to owners (dividends). So it makes sense that the recipients pay different tax rates to reflect that fact.
Corporations are collections of people — owners. If you own a sole proprietorship, a partnership, or LLC, you pay the income taxes yourself, and it is all taxed as ordinary income. Why should the ownership of larger corporations be treated differently?
Warren
you could ponder that question for the rest of your life. and then life would have passed you by.
but here’s a clue: someone voted for someone who voted for it to be that way. life is so unfair. especially to stockholders.
here is another clue:
owners of stock are not like owners of sole proprietorships.
okay, class, see if you can spot the differences between these two pictures.
Well, Perfesser, it’s been more than two weeks. Since no-one in the class has answered, perhaps you can ‘splain it to us.