Relevant and even prescient commentary on news, politics and the economy.

Romney’s CRUT Tax Shelter

by Linda Beale

Romney’s CRUT Tax Shelter\

The Bloomberg press has looked further at Romney’s use of trusts and other arrangements to avoid taxes, using Freedom of Information Act requests to obtain more information than was released by Romney in his meager tax return release. Romney established a charitable trust in 1996 of a type that Congress cracked down on in 1997 (regrettably, a crackdown that grandfathered existing arrangements, which is the way so many rich people get to keep using abusive shelters). See Jesse Drucker, Romney Avoids Taxeds via Loophole Cutting Mormon Donations, (Oct. 29, 2012).

So what did Romney do.  He used a “charitable remainder unitrust” (CRUT) in a way that alllowed him to use the tax-exempt status of the Mormon Church (his primary charitable beneficiary) to defer taxes for more than 15 years.  The trust benefits Romney considerably, by letting him benefit from the tax-free treatment that the charitable beneficiary has when they sell assets for a profit.and leaves the church less than current law requires for a trust.   And it favors Romney over the church, because he gets a guaranteed payout from the trust (which converted most of its assets to cash in 2007) and the church only gets what’s left at the end, if anything.  Current trends suggest there won’t be anything left for the charity at the end.

“The main benefit from a charitable remainder trust is the renting from your favorite charity of its exemption from taxation,” [Jonathan] Blattmachr [, a trusts and estates lawyer] said. Despite the name, giving a gift or getting a charitable deduction “is just a throwaway,” he said. “I used to structure them so the value dedicated to charity was as close to zero as possible without being zero.”

When individuals fund a charitable remainder unitrust, or “CRUT,” they defer capital gains taxes on any profit from the sale of the assets, and receive a small upfront charitable deduction and a stream of yearly cash payments. Like an individual retirement account, the trust allows money to grow tax deferred, while like an annuity it also pays Romney a steady income. After the funder’s death, the trust’s remaining assets go to a designated charity.

Romney’s CRUT, which is only a small part of the $250 million that Romney’s campaign cites as his net worth, has been paying him 8 percent of its assets each year. As the Romneys have received these payments, the money that will potentially be left for charity has declined from at least $750,000 in 2001 to $421,203 at the end of 2011. Id.

Under the 1997 change to the law, Congress required that the present value projected to be left for charity must equal at least 10% of the initial contribution. Romney’s CRUT doesn’t satisfy this requirement but was grandfathered in.  The principal of the CRUT has dwindled to about half what it was.  In the meantime, the Romney’s have enjoyed considerable tax savings due to the way the CRUT works.

This information is revealing for two reasons.  First, it demonstrates yet again that the Romney’s are eager to use whatever mechanisms they can to reduce taxes, even though their millions are due in no small part to the way taxpayers make business possible (from courts to roads to police to the military to “rule of law” to relatively low funding costs for borrowing in the United States, etc.).   One suspects that the reason Romney has stonewalled the public on his tax returns is that there is lots more of this nature shown therein, including possibly his participation in voluntary disclosure regarding offshore accounts (that otherwise might have resulted in criminal tax evasion charges).

Second, it shows that Congress recognized that CRUTs didn’t make sense.  So we have to ask why Congress didn’t eliminate CRUTs altogether, rather than continuing to allow the gambit, and why, if it were going to continue to allow the gambit, it didn’t terminate the favorable treatment of any existing CRUT that didn’t satisfy the minimal funding requirement the new law included (10% of the original contribution has to go to charity before the donor can enjoy the immense benefit of the capital gains deferral thereby).   Congress should allow the estate tax to lapse back to the pre-Bush levels, and it should then buttress the estate tax by legislating the end to the many different devices used by estate lawyers to get around the tax while still providing most of the benefits of the assets to the estate planners–CRUTs and similar estate-planning trusts are prime targets for action by Congress.

cross posted with ataxingmatter

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Growing inequality calls for both "predistribution" and (rightly directed) redistribution

by Linda Beale

Growing inequality calls for both “predistribution” and (rightly directed) redistribution

In putting forward my theme of democratic egalitarianism, I have often noted that there is no such thing as an economically egalitarian society–there will always be differentials among people, those differences often relate to social class and the education, privileged upbringing, and networking connections that ensure success for some and deny success to others as well as to innate abilities, so that those differences inevitably translate into some being better off economically than others.  

Because of those differences, the “powers that be”–i.e., existing concentrations of financial assets, prestige and associated political power among the privileged class at the very top of the income and wealth distribution– result in redistribution upwards from poor and middle class to the upper crust.  And most in that privileged upper-crust think they’ve acquired it all on the basis of their own merit and that the reason others don’t have it is because they are irresponsible, don’t work hard enough, don’t have a good business sense or are just incompetent.

(That is of course the tale told by the like of Mitt Romney at his private fundraiser in Flordia, where he revealed his utter disdain for half of the US population and his self-indulging belief that he got where he is entirely on his own merit .  He can’t even see, much less acknowledge, either his silver-spoon upbringing of class, wealth and connections or the various government-subsidized upwards redistribution from which he has benefited through capital gains preferences, carried interest treatment, disregard of the harm caused by his leveraged-buyout business model, and government subsidies through high-value government contracts and low-cost government loans.)

Therefore, I have argued,  democratic institutions (government, programs, policies) must target achieving a sustainable economy that provides a decent livelihood for all.  They must also prevent inordinate inequality, because huge inequality among the citizenry foils all attempts to achieve either a sustainable economy or sustainable democratic institutions.

That means that government policies must focus on creating paths for redistributiondownwards from the upper crust to the middle and lower classes, undoing the corporatist top-down approach that has supported class warfare and allowed the wealthy to capture most of the productivity gains since Reagan’s presidency.  Two government systems can work, on the margins, to achieve some level of downwards redistribution–benefits and taxes.  Benefits do so by providing a safety net under those most vulnerable who have never achieved a sustainable economic livelihood–the unemployed and unemployable, the sick, the elderly, the children who have poor schools, poor families, and inadequate shelter, nutrition and opportunity.  Taxes do so by taking more from those who have grabbed an inordinate portion of the resource pie and using those revenues to fund benefits as well as infrastructure (human and physical) that supports the efforts by ordinary Americans to achieve sustainable livelihoods.

We have been moving backwards on both of these systems.  The radical right has spent the last 30-40 years pushing an agenda that ultimately wants to (i) dismantle or radically reduce benefits programs (voucherizing medicare, privatizing social security, cutting back on unemployment, allowing states to reduce medicaid and children’s health coverage, etc.) and (ii) eliminate taxes on corporations and the primary source of income of high-wealth individuals through a gradual reduction in progressive rate structure, elimination of the estate tax, elimination of capital gains taxes (and treatment of wealthy people’s wages as though they were capital gains, through provisions like stock options and carried interest).  Paul Ryan’s positions on Medicare and Social Security should be a clarion-call to get out the vote–against the Romney-Ryan ticket– of every person who does not earn more than $300,000 a year.   The Norquist-Koch Brothers-Karl Rove-Ryan-Romney agenda on taxes should similarly cause ordinary Americans who earn less than $300,000 a year to take to the streets and to refuse to vote for any member of the GOP.

 Recall that the beginning of the current trend towards too little tax revenues and especially too little taxation of the ultra rich was radical reduction of rates with purported base-broadening (such as elimination of the capital gains preference, creation and then ramping up of the alternative minimum tax).  As could be expected, lower rates lived on (and were lowered even more by Bush) but much of the base broadening was short-lived:  lobbying by the privileged at the top led to a quick return to a capital gains preference and the undoing of the AMT as an inequality leveler.  The Bush tax cuts rewarded corporate owners and managers and the wealthy class with extraordinary tax relief, while imposing long-term deficits on the country, behind a cheerful facade of “tax simplification” that was irrelevant for the 70% of the population that uses the standard deduction.

There is a third leg to the reduction-of-inequality stool.  Tax reform that restores a truly progressive income tax is one leg.  Benefit reform that builds on the achievements of the New Deal rather than destroying them is another.  The third leg is what some call “predistribution”–paying attention to the means by which the uppercrust has seized all of the productivity gains and reduced the ability of everyone else to have a decent, sustainable livelihood.

British Labour leader Ed Miliband has called for predistribution as a new agenda in Britain.  See Predistribution: A Big New Idea, Noted, The Nation (Oct. 8, 2012), at 5.
The term [predistribution] was coined by US political scientist Jacob Hacker, who in 2011 noted that discussions of government responses to inequality often begin and end with redistribution [downwards]–taxing the rich to provide benefits for the rest.  But that’s only half the equation, Hacker said, uring progressives to pay more attention to ‘the way in which the market distributes its rewards in the first place.’ That includes regulations that protect consumers and empower workers: ‘The regulation of markets to limit extremes and give the middle class more voice is hardly easy. … But it is both more popular and more effective than after-the-fact mopping up.’

Milibrand agrees.  Noting the high human cost of austerity, he said, ‘We need to care about predistribution as well as redistribution.’ After trying ‘to make work pay better by spending more on trasfer payments,’ he argued, government must ‘also make work pay better by making work itself pay.’

These concepts–predistribution (making up for malfunctioning markets to make work itself pay) and redistribution downwards (actual reallocation from market results through taxation and benefit policies)–are closely interrelated.  Successful redistribution downwards augments the ability of workers to afford necessities and small luxuries, and that economic activity empowers workers in the markets and gives workers an opportunity for a voice in the markets and workplaces compared to a position where employers and owners have almost dictatorial control and can garner all the workers’ productivity gains for themselves.  Focus on predistribution, however, reminds us that worker rights are essential to a sustainable, broad-based economy

What kinds of rights are we talking about?  Surely a critical right is the workers’ right to collective bargaining (supported by a “yes” vote on Proposal 2 in Michigan that would put that right in the state constitution where it could not be removed by the radical right legislative block).  Surely the right of the state to build infrastructure (that will create worker jobs) rather than allowing a wealthy tycoon to corner the market on international bridge crossings in Detroit and hog the revenues for himself rather than allow them to be earned by the people (Proposal 6, vote “no” so that Matty doesn’t have veto power allowing him to co-opt public infrastructure for his private profits).

Predistribution pays attention to how much ordinary workers are paid compared to how much the managers at the top get out of a company.  We should be “pushing local employers to narrow the pay ratio between the top and the bottom ranks of their workforce.”  Id.  For too long, we have acted like it is just fine for the “market” to demand that the wealthy be allowed to exploit communities and workers for their own benefit.  We need to say no.

Predistribution pays attention to regulations that protect workers–from worker safety to time off to family leave. It disregards the multinational corporations’ pleas for laws to suit them and instead asks why we should be subsidizing their ability to move active business assets to foreign countries and leave US workers unemployed.  It acnkowledges that we have for too long allowed corporate owners and managers to snow us with their claims that “globalization” and “free trade” worked for our benefit, when in fact these are excuses for offshoring jobs so that the owners and managers can enjoy even higher “rent” profits.  As Milbrand says, “It’s just not true that all the top CEOs will leave the country unless we pay them whatever they demand.”  Id.

cross posted with ataxingmatter

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Romney’s Tax (Mis)Calculations:

by Linda Beale

Romney’s Tax (Mis)Calculations: if your two and two don’t add to four, pretend the Laffer curve gives you more

Anybody watching last night’s presidential debate surely became aware at some point that Romney’s so-called “plan” for economic growth is an empty shell based on the idea that he’s made money for himself so he knows how to run a country.

Romney’s plan is pure market fundamentalism–a mistaken view that the “market” will take care of all problems and vigorously grow to elevate everyone’s livelihood just so long as government regulators stay out of the business of regulating and allow business owners and managers (particularly huge multinational corporate owners and managers) to do whatever they want, including fire workers, outsource business assets, and engage in complex schemes to turn tax laws into tax avoidance bonanzas.  Oh, and the government should provide all kinds of subsidies to aid those businesses at minimal or no (tax) cost–from interstate roadways to easy rights to exploit national lands owned by the public; from localo fire protection to federally funded international security; from state-based contract protection to federal courts that provide handy forum choices to the wealthy and big corporations; from state and local property tax exemptions and waivers to federal intellectual property rights that provide monopoly power and stifle innovation (exactly the opposite of the Founders’ dream).

And when Romney claims that he can “simplify” the tax system and lower everyone’s rates without increasing the deficit, reducing the taxes paid by the upper crust, or increasing the taxes paid by the middle class, while at the same time increasing the military budget and striking more threatening poses a la the Bush neo-cons on Iran?  That’s gibberish, as many respected studies have shown.

So to his rescue comes one of those propaganda tanks in the guise of an intellectual “institute”–the Institute for Policy Innovation (IPI).  The Institute puts out a “Tax Bytes” newsletter/blogpost supporting right-wing, market fundamentalist, Friedman-lite tax policies.  Not surprisingly, the Institute is sanguine about making a Reagan-style across-the-board rate reduction program work even in an economy that is still in transition back from the brink that the Bush market fundamentalist tax and fiscal policies put us in.  That is,  in spite of the fact that Romney-Ryan stand for things like making the Bush tax cuts permanent, eliminating the estate tax, maintaining the preferential rate structure for capital gains and carried interest, and even extending that very low rate preference to all other capital income (like interest) for those earning less than $200,000 (who don’t have much capital income to worry about though, since the vast majority of it goes to the people in the very top 5% who make millions, not thousands)–the Institute says “increased private sector growth” will make the plan work.  See “Of Course It Can Work“, IPI, TaxBytes 9.25 (October 17, 2012).  That’s just the Laffer Curve idea at its worst–the wacky concept that when you cut taxes, there will be more tax revenues because of all the wonderful things that a self-regulated market does for economies.
So IPI thinks you can cut government revenues even more than Bush did (when the Bush tax cuts of 2001-2003-2004 (and the rest) amounted to about one-third of the cause of the Great Recession).  It buys into the fairy tale that has been used by the far right to justify obstructionist, non-realistic policy positions and that has created the fiscal debacle we are still climbing out of.  That fairy tale is the market fundamentalist “pie in the sky” concept that broad economic growth can be magically generated just by letting the rich continue to get richer even if the middle class is falling into poverty and infrastructure is crumbling.

cross posted with ataxingmatter

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The 1964 Tax Cuts and Economic Growth – Paul Ryan Edition

by Mike Kimel

The 1964 Tax Cuts and  Economic Growth – Paul Ryan Edition
During last week’s Vice Presidential debates, Paul Ryan stated: “Jack Kennedy lowered tax rates, increased growth.”
There was some commentary about Biden’s response (“Oh, now you’re Jack Kennedy.”) but just about everyone seems to miss what I think is the important point. Take a look at the graph below:


The so-called Kennedy tax cuts occurred in 1964, the year following JFK’s assassination, and were pushed through by Lyndon Johnson. Now take a look at 1964, and consider the likely outcomes when people who
think events in 1964 “increased growth” determine tax policy.  Data on real GDP from the Bureau of Economic Analysis, the government agency responsible for computing the series.

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If Europe Adds a Financial Transactions Tax, Will We Follow?

by Linda Beale

If Europe Adds a Financial Transactions Tax, Will We Follow?

Has the time come for the US to impose a financial transactions tax?  It would have several positive features.  First, it would raise revenues, which are sorely needed for everything from climate change action to infrastructure improvements to aid for needy families.  Second, it would raise revenues from those who are most responsible for the financialization of the economy–investment bankers, fund managers, and high speed traders interested in bigger and bigger profits no matter the result for ordinary folks.  Third, it would act in some small way to discourage excessive trading that contributes to the volatility of the stock market.

Of course, such a tax (frequently called a “Tobin Tax” after the Nobel economist who recommended it) would be best if applied by all sophisticated nations.  It appears that the European Union is getting closer to making a financial transactions tax a reality in at least some of the participating countries.  See James Kanter, Tax on Financial Trades Gains Support in Europe, New York Times (Oct. 10, 2012).  Britain will remain exempt so the City of London (Europe’s parallel to Wall Street) would continue on its merry way (or even increase the financialization of the UK economy as trades moved from participating countries to London).  Wall Street has lobbied heavily against any tax on its activities, and would fight bitterly if the US were to impose such a tax while London remained exempt.

So my guess is that even if the EU finance ministers approve the measure for some participating European nations, it will take some time before it spreads to Britain and the United States.  Like climate change, we seem determined to put off addressing real problems until they are upon us with such force that we cannot possibly continue as before.  Thus, our financialized economy rocks along pretending that derivatives are safer and banks are fine and life can go on as before, and Congress debates climate change as a “she said, he said” matter rather than looking at the breadth and depth of scientific evidence supporting man-made effects that are reshaping the globe while we watch.

cross posted with ataxingmatter

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Romney’s "revenue neutral" 20% rate cut may not be achievable, Hassett admits

Lifted from Linda Beale’s:

Romney’s “revenue neutral” 20% rate cut may not be achievable, Hassett admits

…For months, many tax experts have been saying that even what is known about Romney’s plan–skimpy as it is on any real information–shows that it is unworkable.  One of Romney’s sometimes advisers finally sort of acknowledged that.  Kevin Hassett (an American Enterprise Institute propaganda tank “expert” who coughs out Friedmania economic assumptions as though they were clearly settled laws of nature) admits that unless there is a “broadening of the tax base” Romney couldn’t reduce rates by 20% across the board in a revenue-neutral way.

Now, “broadening of the tax base” in connection with reduced rates was possible back inn 1986 when we had maximum rates much higher than today.  But most broadening that should be done won’t be done, because there is no political will for it in Washington either because Romney won’t favor it or because the Tea Party crazies won’t.  (We won’t be eliminating the capital gains preference under a Romney administration, for example, or eliminating the tax subsidies that we give to Big Oil and other extractive industries that make oilmen billionaires–like letting them get the “domestic manufacturing deduction”, which they currently are able to use to reduce their US taxes even more.)  Hassett admitted that “if you think the base broadeners don’t add up, if you think that he can’t get [top rates down] to 28%, well then the right thing that would happen, as you know if you’re going to have revenue neutral reform, is that they would have a different change in rates.”  BNA Daily Tax RealTime (Sept 24, 2012 at 7:19 pm)….

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NY AG defends tax-exempt organization probe

by Linda Beale

NY AG defends tax-exempt organization probe

After complaints from some academics about the rationale for a New York investigation of tax exempt organizations and a letter from Congressional Republicans Dave Camp (MI) and Orrin Hatch (Utah)suggesting that the New York Attorney General should not be seeking copies of federal returns from taxpayers but rather through the IRS, AG Schneiderman responded in defense of his rights to investigate based on federalism and the New York AG’s interest in state law enforcement.  See Bernie Becker, New York AG defends efforts on tax-exempt groups, The Hill: On the Money blog (Sept. 24, 2012).

Schneiderman is investigating a group of tax-exempt organizations called “501(c)(4)s” after the Code section that permits them for federal income tax purposes.  Those groups are not required to reveal their donors, and are supposed to conduct social services.  Many of these groups these days are functioning as purportedly independent advertisers for political candidates and parties, funded by big donors who want to remain anonymous.

cross posted with ataxingmatter

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Cactus and his merry band of madmen…and Megan McArdle

I googled the title phrase and ‘Behold!’, here are the three links.  Mike also sent them.

Cactus and his merry band of madmen and Megan McArdle

Megan McArdle has a question

Megan McArdle has a question:

What happens to the cottage industry among Democratic-leaning armchair economists grinding out analyses proving that Democratic presidents are, like, totally awesome for the economy? Presuming that we’re stuck–as seem very likely–in at least a couple of years of really grinding low-to-no growth, Obama is going to destroy their figures. Are we in for a resurgence of belief in exogenous growth factors?

Question answered

Now, of course, it may be that the economy starts growing like gangbusters in the next year.  In which case I expect that Cactus and his merry band of madmen will continue with their arguments.  But if, as most people expect, growth continues to stall for the next few years,  it seems I can look forward to more explanations of why Democrats–and only Democrats–can be thrown out of the sample if they have low growth and betray The Faith; and why the economic results of Democratic presidential administrations–and only Democratic presidential administrations–are sensitive to exogenous starting conditions.

Response to Megan McArdle again

“Going back to 1952 at least, every Democrat, every single one, has increased the tax burden. Every single Republican lowered them.”-McArdle

I had some posts after that, perhaps time to revisit them, that showed that not only did the change in the tax burden correlate with growth, the change in the tax burden in the first two years of an administration’s term correlated with the growth rate in the final six years. And not in the direction McMegan likes to see. Sure, correlation does not imply causality, but it just so happens that Presidents under whom growth in years 2 – 8 was fastest also were the Presidents who found a way to go back in time to years 1 & 2 and raise the tax burden. Or something like that. Go figure.   

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Romney’s Tax Views

by Linda Beale

Romney’s Tax Views Lead to Blooper Comments Denigrating America’s Elderly and Poor

Most of us who follow tax issues in the news and in political campaigns are aware that GOP candidate Mitt Romney has been very secretive about various items.

First and foremost, he has been secretive about his own extraordinary wealth:  he has refused to follow his father’s example in releasing more than a decade of tax returns and he has maintained numerous accounts offshore, including in jurisdictions that are known for banking secrecy.  This secrecy is problematic for many voters, because without those returns it is difficult to evaluate his aggressiveness in using shelters or taking controversial positions on returns to save himself tax dollars –a topic that is surely relevant to his qualification to hold the highest executive office in the land.

Second, he has been secretive about his plans for achieving across-the-board tax cuts of enormous benefit to the uber-rich and multinational corporations while claiming to maintain revenue neutrality.  Respected non-partisan tax analysts have concluded that his plans simply don’t add up–the “arithmetic”, as Democratic speeches noted, is against him.  When he refuses to specify just what programs he would cut while cutting taxes and increasing military expenditures, many voters are naturally suspicious that the cuts will all be taken out of the safety net–voucherization of Medicare, privatization of education funding, and even more of the deregulation that cost us so much in the 2007-8 financial crisis–while continuing the over-spending on military and various lucrative loopholes for the wealthy like the “carried interest” provision for private equity managers.

Third, he has been secretive about his lack of commitment to the disadvantaged in our society.  His failure to describe how he will create jobs (other than through his claim that managing vulture capital “leveraged buy-out” funds is good preparation for the presidency) suggests that he has no ideas other than the long disproven ones being pushed by the Chamber of Commerce and other business lobbying organizations–less regulation, more privatization, more reductions to earned benefits like Medicare and Social Security, and more tax provisions that favor the rich that the GOP labels–without empirical support– as the “job creators”.  But he has nonetheless tried to foster an image of caring about American people who weren’t born to the life of wealth and luxury that he’s enjoyed.

That third point of secrecy was shattered by the revelation of a taped video of Romney comments to major donors (delivered at a May 17 fundraiser at an investment banker’s home in Boca Raton, Florida), in which Romney showed utter disdain for the large segment of the US population who ultimately do not pay any federal income taxes.  Romney called those who pay no federal income tax “dependent on government” and indicated that they see themselves as “victims”.  He concluded he’d “never convince them they should take personal responsibility and care for their lives.”

 See David Corn, Secret Video: Romney Tells Millionaire Donors What He REALLY Thinks of Obama Voters, Mother Jones (Sept. 17, 2012).
See also Chris Miles, Obama vs Romney Polls: How Latest Romney Gaffe May Have Just Lost Him Ohio, Policymic (Sept. 17, 2012); email alert, 47% Video Worsens Romney’s September Nightmare (Sept. 18, 2012); Chris Cillizza, The Fix: Mitt Romney’s darkest hour, Washington (Sept. 17, 2012).

Romney’s 47% comment fairly drips with disdain and scorn for ordinary Americans, casting them, as the Mother Jones article cited above notes, as “a mass of shiftless moochers who don’t contribute much, if anything, to society.” David Corn, Secret Video: Romney Tells Millionaire Donors What He REALLY Thinks of Obama Voters, Mother Jones (Sept. 17, 2012).

It is of a par with comments by a woman that I met at a reception in Boston over the weekend, who spewed scorn as she claimed that anybody that is on welfare or getting unemployment is just a lazy bum that wants the rest of us to hand them a living on a silver platter.  Romney’s and the woman’s comments both show absolute insularity from the real world of povery and near-poverty in America in the aftermath of Bush’s Great Recession, when able-bodied men despair of their situation in being unable to find a job, any job, and young folks grow hopeless as they fill in application after application.  Without government programs to fill in the gaps for these groups, their lives would be truly desperate.  Their non-taxpayer situation has nothing to do with lack of personal responsibility and everything to do with a society in which the economy for too long has favored the uberrich at the cost of ordinary Americans.

Remember that the federal income tax is specifically designed to protect taxpayers in the lower income distributions from paying federal income tax through the use of the standard deduction and personal exemptions.   That’s because Congress has always assumed that there should be a minimum below which the federal income tax does not reach.  And Congress has enacted a number of other exclusions and credits designed to ensure that the federal income tax doesn’t fall too heavily on the more vulnerable amongst us. 

About half of those [46% of households] did’t pay [federal income taxes] because of standard deductions and personal exemptions designed to exclude subsistence levels of income from taxation.  The rest received tax breaks, including the earned income tax credit, the child tax credit and tax benefits for older Americans such as the exclusion of Social Security benefits from income.”  Richard Rubin,Romney’s 47% With Not Taxes Combines Elderly with Poor Workers, Bloomberg Businessweek (Sept. 18, 2012).

Furthermore, most taxpayers who pay no federal income tax do pay other taxes:  state and local income, property and sales taxes eat up a substantial amount of income, as do federal payroll taxes, which often amount to the most significant tax bite for these lower-income taxpayers.  And as the Rubin article also notes, people who don’t pay income tax one year–because of returning for education, job losses, extraordinary medical expenses and other causes–come back on the tax rolls in later years when they finish studies or find work.

Regrettably, Romney’s remarks at the fundraiser mainly reveal an eager player in the class warfare game that the right has engaged in for the last few decades–it reflects a firm support for tax policies that redistribute upwards to the elite, at whatever cost to ordinary Americans who are disdained and even despised as irresponsible and lazy.  With CEOs making 200-400 times what their average workers make and the productivity gains contributed most especially by the workers being siphoned off for increasingly higher pay for the executives, ordinary Americans already are hurting.  Tax policies that continue the rip-off by continuing preferential rates for capital gains, providing even more preferential marginal rates for the uberrich, and eliminating worldwide taxation on multinationals will do even greater harm to ordinary Americans and the sustainability of our economy.

cross posted with ataxingmatter

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An opinion on University Small Business Political Survey

I was forwarded an early look at a survey that was produced by George Washington University’s School of Political Management in conjunction with As some readers know, I am an honest to goodness small business owner. Two business actually and they are as different as say a private practice physician and a florist. So…………I guess this is what has lead to a request of me to opine on this survey’s results.
I googled I had never heard of them. There is some controversy out their regarding their business model. Yet, claims 250K users. The survey was of 6000 plus of their members. They have taken some steps to assure their sampling represents the distribution of small business throughout the nation. I’m going to trust that GW’s school knows how to do and produce a scientifically valid survey. had teamed up with Ewing Marion Kauffman Foundation early this year. This work attempted to come up with a ranking of business friendliness based on the experiences of small business within a given state.
The headline, take away finding is presented as follows:
40% of all small business owners nationwide rate the economy and jobs as the most important factor in choosing a president. Ethics, honesty, and corruption in government is the second-most important factor for small businesses.
Considering ethics, honesty and corruption came in at 15% and the next item to be ranked the top issue was so ranked by 6% with the percentages becoming smaller to 2% for the issue of foreign policy I would say 40%ranking the economy and jobs the number one issue is kind of an intuitively expected finding because every other issue considered in the survey fell so far behind.  After all, we are talking business owners.

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