Two very different federal budgets were considered this month by the U.S. House of Representatives: Rep. Paul Ryan's "Path to Prosperity," which was approved by the House, and the Congressional Progressive Caucus' (CPC) "People's Budget."
While both have their ideological streaks, only the latter assumes a firm and rational position on deficit reduction – without economic gimmicks claiming that lower taxes will miraculously produce additional revenue. And most importantly, the CPC's budget takes aim at extreme economic inequality in the U.S and demands more truly shared sacrifice.
Of course, with a corporatist-conservative majority in the House, we couldn't have expected reason to prevail there. However, since the House and Senate still have to find middle ground on the budget, which will then have to be made official by the President, sensible budget ideas continue to stand a chance.
To help make sense of all the partisan rhetoric, our friends at the National Priorities Project (NPP) defined the 2012 budget debate in clear terms, comparing the savings and expenditures of these proposals at polar ends of the budget spectrum. They point to the three most impactful deficit reduction strategies and explain how each budget deals with them:
- Reducing social safety net costs (e.g., Medicare/Medicaid and Social Security)
- Reducing defense/security spending
- Raising revenue with increased taxes
The CPC's budget would reduce the deficit nearly three times more than the House GOP budget between 2012 and 2021, and it would do so without saddling most of the burden on low- and middle-income families (which the House GOP budget does).
|Cumulative differences from the CBO baseline*, 2012-2021||The CPC's "People's Budget"||House GOP budget|
|Revenue||$3.3 trillion more||$4.2 trillion less|
|Non-security discretionary spending||$1.7 trillion in new spending/investments||$1.8 trillion in cuts|
|Security spending||$2.3 trillion in cuts||$0.8 trillion in cuts|
|Medicare, Medicaid, Social Security, and other mandatory spending||No cuts||$2.9 trillion in cuts|
|Net interest on debt payments||$0.8 trillion less||$0.2 trillion less|
|Deficit reduction||$4.7 trillion less||$1.6 trillion less|
* The CBO baseline assumes that Congress will make no changes to current law over the next decade and that Congress will allow for Bush era tax cuts to expire in 2013.
NPP also provides a generous overview of the components of each budget, as well as each plan's operating mode vis-á-vis the role of government, highlighting three key distinctions:
The fundamental differences between these two budgets revolve around the role of the government in the economy and the workings of the free market. The Ryan plan relies on free market forces to bring prosperity that will eventually “trickle down” to the lower and middle-classes by putting more money in the hands of businesses and wealthy individuals through tax cuts. The CPC proposal assumes there is a need for the government to make up for the failings of the free market system and to provide programs for the less fortunate.
A second distinction lies in the solution to the growing deficit problem. Chairman Ryan believes that the source of the problem is out of control spending and that slashing government programs alone will reduce the deficit. The CPC believes that raising revenues is as important as managing spending when dealing with the deficit because current taxation policies have reduced government income.
A third difference is the role of tax policy. The Ryan plan reduces corporate taxes and personal income taxes for the wealthy in an effort to spur economic growth, while the CPC approach uses taxes as a mechanism to reduce the growing income and wealth gap.
One additional item worth mentioning is that the CPC plan acknowledges the past successes of government investments—thanks to adequate revenue—in creating the circumstances for innovation, job creation and economic growth. Government intervention made possible one of the largest economic expansions in U.S. history after World War II.
On the other hand, the Ryan-GOP budget relies entirely on the impotent and discredited notion of trickle-down economics by calling for more of what we've experienced for the past decade, which has also contributed to historic levels of inequality: tax breaks for the rich and corporations. To this, Paul Krugman scratched his head:
When I listen to current discussions of the federal budget, the message I hear sounds like this: We’re in crisis! We must take drastic action immediately! And we must keep taxes low, if not actually cut them further!
You have to wonder: If things are that serious, shouldn’t we be raising taxes, not cutting them?
It doesn't take a Nobel laureate economist to see the value in such an approach. With the "People's Budget," the CPC has proposed just that – higher taxes, but on the wealthiest among us, who can certainly afford to contribute more to help keep our supposed civil society in working order.
While Congress may seem to work in strange, counterintuitive and angering ways, it's still our job as citizens to barrage them with a mega-dose of reality. The reality here is that we need a budget that serves the people, not just the rich and corporations.
Emily Kawano, UFE board member and director of the Center for Popular Economics, and UFE's Steve Schnapp joined Cynthia Lin of WORT-FM in Madison, WI, the epicenter of recent GOP attacks on public workers, to explain the power of popular economics education in building a movement for economic justice.
They also discuss the role of movement support organizations – like UFE – in supplementing, enhancing and amplifying the work of grassroots social and economic justice groups across the country.
Click here to download the interview (forward to 27:45 to hear from UFE's Steve Schnapp).
“I want to live in America.”
I was twelve years old, shelling peas with my mother in our kitchen in Limuru, Kenya, when I first uttered those words. My mother paused and said to me, “Well, then you better study hard and do well in school. The door will only open for those who knock.”
My mother’s advice was a guiding force for the nine years to follow. I completed high school with excellent scores, and went on to receive my B.A. at the University of Nairobi. Then in 1994, while working as an organizer in my community, I received a scholarship from USAID, which allowed me to build on my local development efforts through a course in Washington, D.C.
Finally, I’d made it to the land of opportunity! America was in many ways true to my imagination: full of kind and generous people who were curious about life in other places, highly resourced institutions that worked efficiently, excellent public transportation, beautiful buildings and fast cars all around me.
But, walking through some of the poorer neighborhoods of D.C., I encountered something I hadn’t imagined. I found that much of this country’s wonderful offerings did not reach all of its citizens. Some of the extremes of poverty I witnessed weren’t much different from those of the Nairobi slums.
It made me wonder: How could so much need exist in this land of plenty?
The poorest D.C. residents clearly had very limited access to productive and meaningful economic opportunities. For some, even the most basic needs went unmet.
I was often asked how it was possible that I, a young woman from Kenya, was able to attend graduate school while so many here are unable to attain even a high school diploma. Many of those baffled by my circumstances were African Americans, who didn’t view a college education as something they could ever reach.
Six months later, I went back home to Kenya, my vision of America significantly altered by the time I had spent here.
More than a decade has passed since my first trip to the U.S. Today, I live here with my family, and have made a career out of understanding the factors that make extreme inequality possible.
If we view economic inequality in the U.S. through a racial lens, it becomes clear that Black Americans have experienced diminished progress in recent decades. For example, from 1947 to 1977 Blacks gained five cents to each dollar of median family income for White workers, but in the three decades since, they have gained only one cent.
The American reality may have been far from a dream for people of color in the 1940's, but upward mobility has since become even more difficult. The stagnation of wages for the lowest earners, depression-like unemployment rates among people of color and increased economic segregation have helped to create racialized pockets of destitution. As a result, people of color depend far more on unemployment insurance and other social safety net programs than do Whites.
This is directly attributable to pre-existing wealth disparities and ongoing economic policies that disproportionately benefit wealthier Americans.
To make matters worse, conservative politicians at all levels of government are calling for drastic and poorly informed budget cuts. Such proposals would be damaging to vital programs such as education, food safety, environmental protection, housing assistance, and community services, to name a few, and would be particularly debilitating to communities of color.
An austerity plan will exacerbate low and middle income Americans’ struggle to make ends meet, causing demand to fall, the economy to contract and the jobs crisis to continue unabated. And, it will only worsen the vast inequalities in our economy.
The American promise certainly beckons, and I am a living testament to the power of its allure. But, without a bold and progressive policy approach to address economic inequality, such a promise will never be fulfilled. Changing this reality will require each of us to join together in a movement for greater equality and justice for all.
Read UFE's report, State of the Dream 2011: Austerity for Whom?, for more on this issue.
This op-ed by Wanjiku Mwangi, UFE's Racial Wealth Divide Initiative Leader, was originally published on April 23, 2011 in The Black Commentator, a magazine that provides insight and analysis on issues affecting African Americans.
UFE's Mazher Ali shares news of Responsible Wealth's "Tax Wealth Like Work" campaign on Workers Independent News' Labor Radio, emphasizing progressive tax policy as a common sense measure to help avoid slash and burn budget measures that exacerbate the economic crisis and hurt the most vulnerable citizens. Taxing investment income the same as wages and salaries would raise more than $80 billion annually.
UFE's Federal Tax Policy Coordinator, Lee Farris, joined Linda Pinkow, host of "What's Left," to spread word about ways people can get involved in the fight for federal tax and budget justice.
Click here to download the interview (forward to 19:15 to hear from UFE's Lee Farris).
Senator Orin Hatch (R-UT) just doesn’t get it – taxes are not charity. His idea that rich people who recognize that their taxes must go up should "write a check to the IRS” is just plain nonsense… nonsense that we’ve heard before.
Eric Shoenberg, a member of our Responsible Wealth project, was quoted in an AP article this weekend. As a high-income American benefitting from the preferential treatment of income from wealth, Schoenberg recognizes that his taxes are absurdly low. Schoenberg, as part of the Tax Wealth Like Work campaign, called for Congress to raise his taxes and that of other high-wealth Americans to restore fairness to our tax system and avert damaging budget cuts. Senator Hatch was quoted in the same article with a much dumber idea:
Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.
"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.
Schoenberg said Hatch's suggestion misses the point.
"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"
Schoenberg’s response hit the nail right on the head. But this isn’t the first time we’ve heard this argument. It came up last year when our 2010 Tax Fairness Pledge garnered national attention. Back then, after columnist Dana Milbank of the Washington Post made a comment to the same effect, The Economist fired back with a great rebuttal.
…Here's the thing: taxes are not charity. It would be a bad idea for wealthy people who feel they should be paying more taxes to instead contribute large amounts of money voluntarily to reduce the national debt. The first, less important reason for this is that any individual's contributions would be meaninglessly small; they can make far more difference by using the same amount of money to advocate for higher taxes, as these millionaires are doing. But the second, more important reason is that even if a million millionaires got together and voluntarily donated money in such quantities that it made a measurable dent in the deficit, it would be even worse, because they would be giving license to other people to continue pay less than their fair share of taxes. It's an invitation to free-riding, with the public-minded rich subsidizing the irresponsible and selfish.
…even if America had a balanced budget, this kind of argument would be illegitimate. At a pragmatic level, you can't run government functions on voluntary donations because voluntary donations aren't sustainable. You can't count on them. …strong modern states need to be able to tax their populations to pay for public goods.
At a more principled level, this kind of argument is asocial and irresponsible. It's the argument of a free-rider. …Government spending is collective spending, and the taxes we pay for it are collective taxes. Like it or not, this is collective action, and the arguments we have about it have to be collective as well…
Click here to read the full response to this argument from The Economist. Now, if only we could get Sen. Hatch to read it.
If you read Sunday's Associated Press (AP) story, "Super rich see federal taxes drop dramatically," you may be left with the false impression that United for a Fair Economy (UFE) is a network of wealthy individuals who support higher taxes on themselves. Well, that's close, but not exactly right. UFE is a cross-class organization with supporters of all financial means who understand that concentrated wealth and power undermine the economy, corrupt democracy, deepen the racial divide, and tear communities apart. We have several program areas where we seek to advance progressive policies and support movements for long-term change.
The AP story was referencing a member of UFE's Responsible Wealth project. Responsible Wealth is a network of 700 business leaders, high-wealth, and high-income individuals who understand that inequality is bad for everyone, including themselves. Through the Responsible Wealth project, high-wealth individuals work to reign in CEO pay through shareholder activism, advocate for progressive tax policies at a national level, and work in cross-class alliances with state groups working to advance progressive policies at a state level.
In addition to the Responsible Wealth network, other projects of UFE include our Popular Economics Education initiative that provides tools for grassroots groups seeking to better understand the forces behind economic inequality, the Racial Wealth Divide project that explores the intersections of race and economic inequality, the Tax Fairness Organizing Collaborative supporting 28 state groups working on progressive tax policies at a state level, and our federal tax advocacy deeply engaged in preserving a strong estate tax, rolling back the Bush tax cuts for top income-earners, and ending the special tax breaks for income earned from wealth.
If this sounds good to you:
- Make a tax-deductible donation to support the work of United for a Fair Economy.
- Sign up on our email list today by filling in your email at the top, right of this page.
- Join our Facebook fan page (click the Like button on the FB page).
- Follow us on Twitter.
- Explore the web site and learn more about the work of UFE.
Note: The later versions of this Associated Press story included a corrected reference to both the Responsible Wealth project and UFE.
It's the week before tax day, and there's been a storm of activity at UFE.
We launched a shiny new website—which you may have already gathered—with interactive features like user comments and social media buttons for ease of sharing. When you're done here, be sure to click around, let us know your thoughts and keep your online networks posted on what articles you liked (or didn't) on our new site.
And, we jump-started our 2011 Responsible Wealth Tax Fairness Pledge. This year's slogan: 'TAX WEALTH LIKE WORK!'
Why? Because money made from money should be taxed at the same rates as hard-earned wages. Taxing capital gains and dividends like work income would largely impact the wealthiest households, raising $84 billion to help keep schools, health care and other community services going.
During his April 13 budget speech, President Obama showed off his political clairvoyance:
[W]ithout even looking at a poll, my finely honed political instincts tell me that almost nobody believes they should be paying higher taxes.
My first thought was that the President was having a psychic off day. Then it occurred to me that "almost nobody" could just be a passive way of calling out the very few, but very rich, corporatist elites—like the Koch Brothers—who throw their political weight around in the name of making more money. A 2010 Quinnipiac poll showed that of those earning more than $250,000 annually, 64 percent supported higher taxes on themselves, and 67 percent supported higher taxes on those with $1 million-plus incomes.
Do you think - raising income taxes on households making more than $250,000 should or should not be a main part of any government approach to the deficit?
Do you think - raising income taxes on households making more than 1 million dollars should or should not be a main part of any government approach to the deficit?
It's truly frightening to imagine the kind of power we're up against; when the overwhelming majority of voters—including many wealthy ones (like Responsible Wealth members)—agree that we should raise taxes on the wealthy for the greater good, but we still have to fight tooth and nail to make it happen.
And fight we will, because our families and communities are at stake. We hope you'll join us in the fight for tax fairness by taking the Tax Fairness Pledge today.
While you're there, check out testimonials from other taxpayers at different income levels. We're still collecting testimonials, so if you're interested in being a part of this project, send an email to UFE's Communications Team at email@example.com, and they'll send you a brief guide.
Responsible Wealth Director Mike Lapham joined Julie Dougherty and Ken Morgan, hosts of Money Radio's "Business for Breakfast" (Phoenix, AZ), to explain the failure of tax breaks for the wealthy, and to urge Arizonans to join RW's "Tax Wealth Like Work" campaign to tax investment income like wages.
Tax Day is on Monday, April 18th! After you file your paperwork, take a stand for tax fairness! Amid the slew of recent and proposed budget cuts to programs that matter deeply to working and middle class families, we must reinforce the point that more revenue can prevent program cuts and reduce the deficit.
Below is an 'activist's digest' of sorts which includes many notable events and resources related to Tax Day 2011!
TAKE ACTION! Demonstrate, Call Congress, or Sign Petitions
United for a Fair Economy and Responsible Wealth: Tax Work Like Wealth Campaign
We are calling on Congress to tax capital gains and dividends at the same rate as income from work instead of the current rate of 15 percent. Sign on to our compaign, calculate your tax cut, donate your tax savings, or just watch the taxpayer testimonials. (You can even submit your own movie!) UFE is also asking people to call Congress to support Rep. Jan Schakowsky's Fairness in Taxation Act, HR 1124, which taxes millionaires' capital gains at the same rate as income from work, and adds higher income tax rates for millionaires and billionaires.
US Uncut Demonstrations: April 15-18th
US Uncut protests corporations like Verizon and FedEx which have dodged all or most of their U.S. income taxes at a time when lawmakers are cutting basic public services to address federal and state budget gaps. Many of these demonstrations will have a creative or fun aspect. Find US Uncut events near you.
U.S. PIRG Events at Post Offices: April 15th & 18th
The U.S. Public Interest Research Group acitivities will be holding events outside of Post Offices on April 15 and April 18 in at least a dozen states. These events will target people whose minds are very much on taxes as they mail off their federal income tax returns. US PIRG will try to get Congress to address tax dodging corporations with report releases and post-carding.
MoveOn Events: April 18th
"On Tax Day, April 18, as millions of Americans patriotically pay their taxes, we will call on corporations and millionaires to pay their fair share. At hundreds of events from coast to coast, we’ll present tax bills to corporate tax dodgers for the billions of dollars their legions of lobbyists helped them avoid. We’ll organize a peaceful, dignified, and powerful day of action to call on corporations to pay their fair share. And we’ll demand that our elected leaders make them pay." (Their events appear to include the US Uncut events.) Find MoveOn events near you.
TAX DAY RESOURCES
Demos' Taxes Matter week provides a fresh outlook on how we think about taxes. Check out "Reclaiming Public Discourse on Taxes," which includes talking points and an informative webinar.
- Who can resist a great infographic? Have a look at Tax Breaks vs. Budget Cuts by the Center for American Progress. Or this comparison of budget cuts vs. tax cuts for the wealthy by the Economic Policy Institute.
- A few other organizations with excellent resources: Citizens for Tax Justice, the Center for Budget and Policy Priorities, and the Tax Policy Center.
Please share this information widely with family and friends, send it to groups you are part of, and promote it via social media.
Mike Lillis writes in The Hill about the challenge President Obama faces as he attempts to play to the center while appeasing ever-rowdier and more extremist Republicans. As he gets ready to unveil his deficit reduction proposal, he risks alienating his base, who if uninspired, may not contribute to his re-election campaign and even stay home in November 2012.
While early reports indicate that Obama may include some good things in his proposal, such as ending some of the tax breaks for the wealthy and reducing military spending as part of his deficit reduction plan, other questions still remain. How strong will those proposals be? And will he include deep Medicare and Medicaid cuts?
...As Obama prepares Wednesday to outline his deficit reduction strategy, liberals worry he’ll embrace Medicare and Medicaid cuts as an olive branch to Republicans in advance of larger fights over the nation’s debt...
..Liberal lawmakers already were irked with Obama’s decision to support upper-income tax cuts he campaigned against and to launch military operations in the Middle East without congressional approval.
Rep. Peter DeFazio (D-Ore.) this week said Obama should start acting like a Democrat, while two left-wing grassroots groups warned their members could withhold funds from the president’s reelection campaign... The criticisms highlight the problem facing Obama, who is trying to lead from the center without alienating his political base. The White House strategy could help the president with independents, but risks leaving liberals at home in the fall of 2012.
In addition to harsh criticisms coming from the Congressional Black Caucus (CBC), the Congressional Progressive Caucus (CPC) released it's own budget, "The People's Budget," to place a flag in the ground to the Left of Obama's centrist position.
The People's Budget includes smart tax proposals: enacting a progressive estate tax, closing corporate tax loopholes, enacting a new set of income tax rates for incomes over a million dollars, and taxing capital gains the same as ordinary income. The plan also includes rolling back military spending and focusing limited federal dollars on job creation programs here at home and upgrading our nation's aging infrastructure.
In addition to the new and stronger push-back coming from progressive in Congress, including the CBC and the CPC, outside organizing is underway to hold Obama accountable to his political base before it's too late.
But the real question is, how hard will progressives push Obama from the Left? Are we willing to push as hard from the Left on Obama as the Tea Party and freshman Republicans are pushing on Rep. Boehner from the Right? In the end, as FDR said after his election and President Obama himself paraphrased, we must "make [him] do it."
When it comes to taxes, not all income is created—or taxed—equal. Despite the time-honored value of rewarding hard work, our tax code gives preferential treatment to income derived from pre-existing wealth instead of income earned from work.
Here are other things you can do:
- Learn more about the special tax breaks for investment income.
- Use the interactive tax calculator, watch videos, and take the Tax Fairness Pledge.
- Read about proposals to end the tax break for capital gains and dividends.
- Read press release announcing Tax Wealth Like Work campaign.
- Follow coverage of our 2011 Tax Wealth Like Work campaign.
- See coverage from last year's Tax Fairness Pledge.