Pushing on a string: Why tax breaks for the rich won’t help
By Brian Miller
Originally posted on The Hill's Congress Blog, November 22, 2010
The future of America’s middle class is at stake as the battle over the Bush tax cuts heats up in Washington. Despite the fact that a strong majority of Americans support ending the Bush tax cuts for the wealthiest, some in Congress are still hesitant. It’s at times like these that we should take a long, hard look at what got us into this economic mess.
On the eve of the Great Recession in 2007, income inequalities in America were at their highest levels since just before the Great Depression. 50 percent of all income went to the top 10 percent in 1928, leaving the bottom 90 percent to vie over the other half. That dropped to just over 30 percent during the Great Prosperity from 1942 to 1979, leaving nearly 70 percent of income for the remaining 90 percent of households, though overt racism barred many from sharing in that prosperity. The purchasing power of that broad and strong middle class became fuel for the roaring engine of our nation’s economy.
in 1980 our nation began to grow apart again – a divergence kicked off
by financial deregulation and tax cuts for the wealthy. The growing
divide was made worse by the assault on organized labor and the
weakening of social safety nets. By 2007, income inequalities had
reverted to pre-Depression levels. Mark Twain once said, “History
doesn’t repeat itself, but it does rhyme.” And so it does.
With so much money in so few hands, high stakes speculation and wild bubble rides on Wall Street destabilized our economy. When the house of cards came down, it fell right on top of middle-class Americans. Communities were ravaged – with the stripping away of jobs, homes and savings – while the Wall Street gamblers sat comfortably in their velvety casino chairs lighting another cigar.
So far the economic recovery has been very one-sided. For low- and middle-income Americans, unemployment continues to be painfully high and millions of homes are in foreclosure. On the other hand, the Dow Jones has largely recovered since it bottomed out in early 2009, while the Wall Street crowd and Big Business execs are once again rolling in extravagant bonuses. For the wealthy, the recession’s storm has passed.
Despite this one-sided recovery, Congressional Republicans are telling us the problem with our economy is that rich people don’t have enough money. They want to make the Bush tax cuts for the wealthiest Americans permanent, adding $700 billion to our national debt over the next 10 years, paid for with more borrowed money. Ironically, these are the same people screaming about deficits. Of course, they claim that this is about creating jobs, but those tax breaks are more likely to sit in a bank or be invested overseas.
More importantly, pouring even more money into the pockets of the wealthy simply won’t get our economy moving again, especially in a recession as deep as this. Such a top down, “supply-side” strategy for economic growth is like pushing on a string. It’s futile and a wasteful use of borrowed money. It simply won’t work without a strong middle class to pull on the other end of that string, with the purchasing power to buy the goods and services produced.
It’s time to rebuild our economic engine by putting middle-class families first. Instead of expensive and wasteful tax breaks for the very rich, we should be focused on strengthening our middle class. Obama is right to target tax cuts to those earning less than $250,000. Even better, let’s use public dollars to create jobs directly for middle-class households while making long-term investments in our communities, such as building light rail for our cities and bullet trains in major corridors, installing green energy retrofits to public buildings, and putting more teachers in our schools.
Funny thing about pulling on a string. It moves even if there’s no one pushing on the other end. That’s the beauty of demand-side economic growth strategies. With a long-term focus on revitalizing our nation’s middle class with good-paying jobs, we can sow the seeds of another – more inclusive – Great Prosperity.
Conservatives in Congress say they are worried about small businesses and farms, so they want to repeal the estate tax at a cost of $700 billion over 10 years, or slash it at a cost of $383 billion. The same officials say they are worried about the deficit, but they want to spend another $700 billion to extend the Bush income tax cuts for the wealthy.It’s outrageous!
Call your two Senators and Representative now, toll-free, at 800-830-5738.
Tell them your name, your city/town of residence, and say:
We don’t need more tax cuts for millionaires. We need a strong estate tax. I’d like the Senator to push for higher estate tax rates for multi-millionaires and billionaires, and vote against unlimited deductions for farms.
I’d also like the Senator to end the Bush tax cuts for the wealthy.
Congress should invest that money in programs that will put Americans back to work, create opportunities for our children and pay down our debt.
Ask: Where does the Senator stand on the estate tax and the Bush tax cuts for the wealthy?
Add a personal statement about who you are and why you oppose cutting the estate tax, such as, “I am a small business person, and it is a myth that the estate tax hurts small businesses,” or “I am wealthy and will gladly pay the estate tax, because I believe it’s an important part of a fair tax system.”
Your calls are important. They make more of a difference than emails, because Congressional offices count the calls.
Let us know how your three calls went by sending an email to firstname.lastname@example.org. Tell us the name of your legislators, and what the staffers told you.
And, about that small business myth -- UFE just held a national press teleconference with four American business owners who strongly support the estate tax. Check out our press release for more. Watch an interview with one of our speakers below!
afternoon a spirited crowd of 150 people showed up at the Bank of
America’s (BoA) main branch in Boston to kick off a campaign called
“Move Our Money" as part of a national effort to reinstate federal usury laws with a 10% cap on credit card interest rates. The event was organized by the Greater Boston
Interfaith Organization, a coalition of over 50 faith-based and secular
organizations (such as churches, synagogues, mosques, unions, and
community development corporations), with whom UFE has provided support
through our popular economics educational program.
With drums, horns, chants, whoops and hollers, the crowd responded to the call to “Move Our Money” by closing credit card, checking and savings accounts with BoA which refuses to go along with the Commonwealth of Massachusetts’ usury law capping interest rates at 18%. During the one-hour demonstration, 121 individuals and organizations divested from BoA.
Bank of America, GBIO literature points out, received a $5 billion taxpayer bailout in 2008 despite earning annual profits of $4.1 billion. In 2009, BoA awarded their investment banking employees bonuses totaling $4.4 billion, an average of $400,000 per employee. Yet they refuse to cap their credit card interest rates at 18%.
While GBIO’s Debt to Assets (D2A) financial literacy program teaches folks how mortgages and other loans work, how to avoid predatory lenders, and how to maintain a high credit rating, they have also invited UFE to provide D2A participants with an accessible big picture analysis of the economy. Together we explore how changes in financial regulations, tax laws, and spending decisions have enabled a relatively small group of wealthy investors and financial sector management to accumulate vast wealth, pushing economic inequality to heights not seen since just before the Great Depression.
The relaxing of the rules that permit banks and credit card companies to raise interest rates to what just a few decades ago would have thrown them in jail for usury, is directly addressed by GBIO’s long term campaign: 10 percent is enough! Since Massachusetts has a law that caps interest rates at 18% for banks chartered in the state, the current phase of the campaign is demanding that BoA (based in North Carolina) agree to abide by the Massachusetts cap.
Shortly after the election, one of our supporters asked me what we as a progressive community needed to be doing now. In addition to things like building capacity to influence the broader media and shape the public dialogue, raising more money for organizing efforts across the nation, and pushing for reform to turn back the effects of the Citizen’s United case, I also suggested three core messages that we need to hammer at every opportunity to build a progressive tax majority. They are:
No man / woman is an island. As communities, our prosperity is bound together and dependent upon each other. The prosperity of others in our community impacts our own wellbeing. The recent foreclosure crisis is a classic example as the collateral damage of large-scale foreclosures in communities took down the value of all the homes in the area, including those who had been paying their mortgage, sending them underwater as well. Similarly, better schools doesn't just help the students, it has positive ripple effects across the entire economy. We rise together and we fall together.
The wealth of the most affluent is because of, not in spite of, the tax system and the public investments it makes possible. As long as people believe that the wealthy in our society achieved their status through hard work, smarts, and entrepreneurship alone, they (including those who are not wealthy) will resist any form of progressive taxation as an affront to their hard work and "American values." We must continually point out the ways in which public investments, including roads, courts, public education, parks, and more, make it possible for businesses in our nation to succeed and the wealth that is created for those at the top. Once this is grasped in a deeper way, people will be more open supporting progressive tax policies.
Inequality is bad for everyone. Our communities are stronger when prosperity is broadly shared. Over the past few years, there has been growing evidence validating what progressives have known intuitively all along, that inequality leads to higher crime rates, disintegration of communities, hopelessness and its spin-offs (poor health, obesity, etc), and more. A more broadly shared prosperity can be achieved on the front end through a higher minimum wage, living wage ordinances, caps on CEO pay, steeply progressive taxes that discourage huge paychecks at the very top, etc. On the back end, it can be achieved through progressive taxation, a strong safety net, etc. However we get there though, our communities will be stronger as a result.
Estate Tax Teleconference - November 2010
On Tuesday, November 16, 2010, United for a Fair Economy brought together the voices of four American small business owners for a national press teleconference to discuss why the federal estate tax is important for small businesses. Our speakers shared personal stories, explained the facts and dispelled the myths about the estate tax.
Our featured speakers:
Dave Eiffert, Snoqualmie, WA (statement)
Co-founder and Co-owner of Snoqualmie Falls Brewery, craft brewery and tap room.
Jerry Fiddler, San Francisco, CA (statement)
Principal of venture capital firm, Zygote Ventures, and Founder of tech company, Wind River Systems.
Jean Gordon, Little Rock, AR (statement)
Co-owner of Frostyaire of Arkansas, agricultural freezing and cold storage company.
John Russell, Portland, OR (statement)
Owner of Russell Development Company, real estate development.
Our speakers are joining us at a critical juncture for the estate tax. The window for legislative action creaks to a close with each passing day before the current law sunsets and reverts back to pre-2001 levels at the start of the new year. After sharing their statements in support of a robust estate tax, the speakers addressed questions from members of both mainstream and alternative media outlets.
IF YOU ARE A MEMBER OF THE PRESS OR A BLOGGER , and would like to speak with UFE staff or one of our guest speakers about the estate tax, please contact Maz Ali at 617-423-2148 x101 or email@example.com.
For other inquiries regarding the estate tax, please contact UFE’s Senior Organizer on Estate Tax Policy, Lee Farris, at firstname.lastname@example.org or 617-423-2148 x133.
Thank you for your interest in this event.
December 11, 2010
"Dave Eiffert, a small business owner who has worked with United for a Fair Economy, said he hoped for a higher estate tax ceiling and deeper tax cuts for the middle class instead of tax cuts for those making $200,000 and more. Eiffert, co-owner of Snoqualmie Brewery in Snoqualmie, Wash., said he is below the $200,000 income level and is opposed to the notion that tax cuts to the wealthiest will trickle down to create jobs for others.
But Eiffert said it is not too late for the public to speak its mind on the various tax issues before the year comes to a close.'I always hold out hope until it is a done deal,' said Eiffert. 'I urge people to contact their legislators and tell them what they want done. And I hope there will be something better than what has been proposed.'"
Read the full column on ABCNews.com
December 10, 2010
"'It’s obscene and unnecessary, and it benefits no one but a handful of heirs of rich parents,' stated Mike Lapham, director for United for A Fair Economy’s Responsible Wealth project, in a release today calling for stronger tax provisions in the deal, and applauding House Democrats for their commitment to strengthening the plan. 'The estate tax is reason enough to reject the deal,' Lapham said. [...]"
Read the full post by Ashlea Ebeling on Forbes.com.
November 29, 2010
"Forging an agreement [on the estate tax] has proven more complicated than splitting the difference on the numbers because this has been cast as a moral issue, said Lee Farris, senior organizer on estate-tax policy for United for a Fair Economy, a Boston-based group that advocates reinstating the estate tax.
“People are more dug in on their estate-tax positions on both sides than they are on the other positions,” Farris said. [...]"
November 19, 2010
UFE's Lee Farris joined Rick Smith – Pennsylvania talk show host and voice of the working class – to discuss the outright betrayal of struggling Americans by Congressional Republicans, who are holding unemployment benefits for millions of people hostage in their misguided push for permanent extension of the Bush tax cuts for the wealthy.
Download an MP3 of Rick's interview with Lee Farris. (37.5 MB)
November 18, 2010
"What do an 84-year-old family-business matriarch in Little Rock, Ark., a beer brewer in Snoqualmie, Wash., a real-estate developer in Portland, Ore., and a Silicon Valley entrepreneur have in common? They’re all calling on Congress to extend the estate tax — even if it takes a bite out of what they leave their heirs. [...]"
November 16, 2010
Andrea Coombes, Personal Finance Editor of The Wall Street Journal MarketWatch blog, talks estate tax with Jerry Fiddler in this video interview. According to Fiddler, a wealthy Silicon Valley entrepreneur, because the strength of our educational systems and success of the private sector depend on public services, he considers it a point of pride – not pain – to be able to pay back into the public good.
November 5, 2010
Responsible Wealth member, Judy Pigott, shares why she considers her good fortune a call to action to help protect the common good in the US, starting with preserving and strengthening the federal estate tax.
Dean Baker, intrepid economist at the Center for Economic Policy & Research (CEPR) who scrutinizes mainstream media reporting on the economy, has this gem about the little-discussed impact of health care costs on the deficit.
"If the United States paid the same amount per person for health care as any of the 35 countries with longer life expectancies, we would be looking at huge budget surpluses for the indefinite future."
Baker points readers to CEPR's "Health Care Budget Deficit Calculator," which allows users to compare baseline federal deficit projections by the Congressional Budget Office (CBO) against the projected deficit under the CBO's "Low Health Care Cost" calculations.
Chart h/t Center for Economic & Policy Research
If you're curious to see how we stack up against the rest of the developed world, CEPR's calculator also lends a glimpse into what our projected deficits would look like if we spent the same amount of money per person on health care as they do in 30 other countries.
The main point here is that, while deficits aren't to be ignored, there are other puzzle pieces that are being brushed aside in the national debate. In this case, we're forgetting that inefficiencies, inequities, and the allure of private profits in health care are doing some major damage to our federal budget. Let's stop forgetting, start learning and sharing the important information that's going to move us in a better direction, and turn our lawmakers' attention to solutions that work for all of us.
Baker's daily posts can be seen in his Beat the Press blog on the CEPR website.
For more good sense on deficit madness, read Robert Kuttner's "What Planet Are Deficit Hawks Living On?"
Tired of hearing politicians' and pundits' lame and divisive arguments about taxes and the economy? Have thoughts and opinions you'd like to get off of your chest? Here are a few examples to get you started.
UFE member and author, Chuck Kelly, is doing his part to keep up the support for a strong estate tax. He recently wrote an op-ed that ran in the Asheville Citizen-Times in North Carolina. You can read it here on his website. He makes a several compelling arguments about why our country needs a robust estate tax.
Another UFE member, Jennifer Ladd, sent a letter to her local paper, The Daily Hampshire Gazette, urging Congress to end the Bush tax cuts for the richest 2 percent. She makes a great point – a point that needs to be made more and more.
Chuck and Jennifer are giving members of their communities the information they need to be more informed and active players in the national tax debate. As former Speaker of the House, Tip O'Neill, once said, "All politics is local." If you're someone who spends a more time in your community than most of the folks on Capitol Hill, you may have a much better handle on what that means.
Your voice matters, so go for it! Get your thoughts about the estate tax and the Bush tax cuts on paper (or computer), and submit to your local newspapers. You never know how many calls and letters to Congress you might spark. How many hearts and minds you might change. How much of an impact you might have at the policy tables. And, ultimately, how big of a difference you might make, not only for yourself, but also for those in your community, state and country.
The estate tax and all of the Bush tax cuts for the wealthy are in the news right now, and will be until Congress takes action. We're working to keep the pressure on our elected officials to end wasteful tax breaks for the wealthy. This isn't an easy fight, so we can use all the help we can get. Speak to your community – write an op-ed or letter to the editor of your local paper today!
If your letter or op-ed gets published, we want to hear about it. We may even feature your piece on our blog. Just email email@example.com with a link to the online version. If your piece doesn't get picked up, don't fret. You can still share with others through online social networks, blogs and comment sections in opposing articles. But, most of all, keep learning, remain hopeful and stay engaged.
Thanks, in advance, for taking action.
Tuesday November 2nd is election day. Make sure that your voice is heard. Get to your polling place and cast your vote. In addition to Congressional elections there are many key local races and critically important ballot initiatives. Citizens for Tax Justice has a good rundown on the basics of tax related ballot initiatives. If you live in California, Colorado, Massachusetts orWashington, click on your state for our take on the tax ballot initiatives in your state.
Image courtesy of Gov Gab.
How the Responsible Wealth project fits within the broader work of UFE
At UFE’s October Board meeting, we had a great discussion about what it’s going to take to build a broad social movement capable of fostering a more widely shared prosperity and a more just economy. We looked at everything from the need for a compelling narrative, a vision for the future, an organized base, an effective means of communication, and more. Part of that discussion came back to who we seek to organize and how, surfacing key questions about how UFE does its work.
One of our Board members, Bill Creighton, used a powerful metaphor that helped put this question, and the work of UFE in context. Imagine a castle that represents the power and privilege our lopsided economic system bestows on a small minority. Those on the inside represent the wealthiest among us, and those on the outside are the families struggling to make ends meet. Much of UFE’s work is focused on organizing and supporting those on the outside of the castle. Our Responsible Wealth project is organizing inside the castle walls.
UFE spends significant resources, through our educational workshops and our Racial Wealth Divide project, to engage low and middle-income households, immigrant communities, communities of color, labor unions, community groups, and others impacted by the vast inequalities created by our economic system. Much of our tax work, especially our Tax Fairness Organizing Collaborative, helps support the grassroots infrastructure of organizing groups working for a more progressive tax system at the state and nation levels.
Through all of this work, we aim to build a movement capable of mobilizing and energizing those outside the castle, to march to the edge of the moat and demand an end of the vast inequalities, including the castle itself and its fortified walls that have divided our nation. However, after banging on the castle door for a while, it becomes clear that a few friends on the inside of the castle could radically change the dynamics of this struggle.
Through UFE’s Responsible Wealth project, we organize high-wealth and high-income individuals who share our vision to join us in this struggle. Responsible Wealth members, like the rest of UFE, believe that an economy so radically tilted to the benefit of the very wealthy, is not in the best interest of our nation or the communities where we live. Responsible Wealth members have spoken out in solidarity against extravagant CEO Pay, predatory lending, and tax breaks for wealthy individuals like themselves.
By engaging allies inside the castle, we stand a better chance of achieving our ultimate goal. Instead of endlessly banging on the outside of the castle door, our Responsible Wealth allies can help us to open the door from the inside. By working across class differences, UFE and our Responsible Wealth project are helping to change the debate about what a fair economy looks like. This is part of what makes UFE so unique, and in the end, effective.
- Cuts state property taxes by 20 percent;
- Eliminates the business & occupation tax for 80% of small businesses;
- Establishes an income tax paid by only the wealthiest 1.2% of Washington State taxpayers (individuals earning $200,000+ or couples earning $400,000+ annually), who are currently paying a drastically lower proportion of their income in state & local taxes than low- and middle-income families;
- And, I-1098 would dedicate $2 billion per year for education and health care.
- Stops tax giveaways to large corporations that won’t create a single job in California.
- Does not raise taxes on businesses – it maintains the current rates.
- Prevents $1.3 billion in budget cuts to schools and public safety, and saves thousands of much needed jobs.
- Repeals a backroom deal between Sacramento politicians and big corporate lobbyists.
- Prop. 24 prevents tax giveaways given to California’s largest corporations with no guarantees that a single job would be created or saved in California. Corporations could still send jobs overseas or to other states.
- Prop. 24 ensures everyone is paying their fair share. Tax giveaways to large corporations put an even bigger burden on California families. When big corporations pay less, you and your family pay more.
- The big corporations that are paying to defeat Prop. 24 and get these tax giveaways made over $65 billion in profits last year and are paying their CEOs over $8.5 billion, while at the same time laying off over 100,000 workers.
- Prop. 24 does not raise taxes on businesses as none of these tax breaks have gone into effect. Voting Yes on Prop. 24 will keep taxes for large corporations at their current level.
- Ninety-eight percent of California’s businesses – especially small businesses – would get virtually no benefit from these tax breaks at all. They only benefit about two percent of California’s largest corporations.
- Prop. 24 prevents more than $1.3 billion from being cut from our public schools, colleges, healthcare, public safety and other services.
- Prop. 24 prevents more than half a billion dollars from being cut from public education every year. California public schools have been cut $17 billion over the last two years. 30,000 educators have were laid off, class sizes have increased, education programs like art and music and vocational education eliminated, and college tuition increased more than 30 percent just last year alone, while corporations received $1.3 billion in future tax breaks.
- Voting Yes on Prop. 24 saves more than 25,000 jobs, by preventing the layoffs of teachers, firefighters, police, paramedics, and nurses in every corner of the state.
- Prop. 24 repeals a $1.3 billion backroom deal cut by Sacramento politicians and corporate lobbyists with no public hearings or input. These same corporations make large campaign contributions to these politicians.
- Instead of cutting taxes for California families or small business, the politicians in Sacramento followed their campaign contributions and voted to cut taxes for the largest two percent of corporations in the state.
- Big corporations get these tax giveaways without creating jobs in California, and can keep the money to spend on CEO bonuses just like Wall Street.
- Prop. 24 ensures tax fairness so big corporations have to play by the same rules as the rest of us.
- QUESTION 1 would remove the Massachusetts sales tax on alcohol, resulting in a $110 million loss of funding for drug and alcohol prevention and treatment services. (Read more below)
- QUESTION 2 would take away opportunities for affordable housing across Massachusetts by repealing a key component of the Affordable Housing Law, which would make homeownership and even renting more difficult for a broad range of people, including seniors, working families, veterans, and people with disabilities. (Read more below)
- QUESTION 3 would reduce the state sales tax from 6.25% to 3%, which would eliminate over $2.5 billion that goes to schools, public safety, parks, roads repairs, human services, programs for youth and seniors, and much more. (Read more below)
The following and more on Question 1 are available at www.DontRepealAlcoholTax.com
- With the state facing a serious budget deficit, Massachusetts should not repeal this mainstream tax on an unhealthy product, particularly when the funds are dedicated to public health programs for residents with behavioral health problems. these revenues are dedicated to addiction prevention, treatment and recovery support service critical to 100,000 Massachusetts residents.
- Those who argue that the tax hurts sales at Massachusetts liquor stores have their facts wrong. Massachusetts revenue department officials reported increased alcohol sales in the five months after the tax was applied, and New Hampshire officials say they did not see any evidence of increased alcohol sales to Massachusetts residents.
- Massachusetts has some of the highest rates of alcohol and drug abuse addiction in the country—the last thing we need is to take money away from prevention and treatment services in order to make alcohol cheaper.
- A Department of Public Health study found that Massachusetts has one of the highest rates of teen drinking in the country, with 40% of those ages 12 to 20 using alcohol. Removing this tax would lead to more teen drinking.
- The alcohol tax literally helps saves lives by reducing teen drinking and funding treatment services to help people beat addictions and getting their lives back on track.
- The Affordable Housing Law has been responsible for 80% of the affordable housing created in Massachusetts over the past decade, outside the major cities.
- Approximately 58,000 homes have been created for seniors and working and middle class families. Approximately 40,000 are apartments and 18,000 are homeownership.
- Of these, 29,000 homes are reserved for households below 80% of area median income (approximately $66,000 for a family of four in Greater Boston).
- The Affordable Housing Law has prompted nearly 100 communities to develop affordable housing plans.
- 51 cities and towns have met the 10% affordable housing threshold, more than double the number in 1997 (24). 40 communities are at the 8% or 9% threshold.
Here’s where some of the pain would be felt.
- Public Education. Our public schools and colleges would have to absorb a huge share of the cuts. There would be massive layoffs, bigger class sizes, disruption of programs and a decline in the quality of education in our schools and colleges.
- Health Care. More cuts will hurt already struggling community hospitals, school nursing services, public health initiatives and community health centers.
- Quality of Life. Local aid to cities and towns would be slashed, affecting public safety, parks and recreation, senior services, libraries, road repair and so much more.
- Economy. By causing the sudden layoff of so many teachers, firefighters, police officers, social workers and others while we are still coping with a recession, a cut of this size could halt – or even reverse – the state’s economic recovery.
- Property Taxes. Cities and towns would be forced to raise property taxes and seek overrides simply to maintain basic services.