The Economist is getting a lot right these days. After dropping some wisdom on celebrity columnist Dana Milbank and torture advocate Marc Thiessen (both of the Washington Post), they’re weighing in on inequality and social mobility in the U.S. They lay out some facts:
"Between 1947 and 1973, the typical American family’s income roughly doubled in real terms. Between 1973 and 2007, however, it grew by only 22%—and this thanks to the rise of two-worker households. In 2004 men in their 30s earned 12% less in real terms than their fathers did at a similar age, according to Pew’s Economic Mobility Project." [emphasis added]
And, “The richest 10% earned nearly half of all income, surpassing even their share in 1928, the year before the Great Crash.” (That’s British for the Great Depression.) They also mention that “parental income is a better predictor of a child’s future in America than in much of Europe,” something we shared with you several months back. And, they even go a step further, citing a study by the Economic Mobility Project, which finds that “those born to black middle-class families are much more likely than their white counterparts to fall in rank.”
Nicely done, but they still missed the mark on a few points. For instance, they write, “[T]he recession came at the end of a period marked by record levels of inequality.” Close, but the recession didn’t end growing inequality, it’s actually making it worse, a fact they point out later in the same article.
"The recession, meanwhile, may have exacerbated trends in inequality. The capital markets, points out Timothy Smeeding of the University of Wisconsin, have recovered more quickly than the housing or labour markets. This is troubling for the poor and the middle class, since homes represent a greater share of their wealth. Unemployment has been concentrated in America’s lower ranks. As the rich recover, poor and middle-class people may lag behind. Young workers may fare badly, too. Those who graduate in recessions have lower incomes in the long term, according to Lisa Kahn of Yale University." [emphasis added]
While it’s good that they corrected themselves, it’s odd that they needed to. As with their premature declaration of the end of a period of record inequality, they also jumped the gun on the end of the Bush tax cuts for the wealthy. We’re still working on that. For the record, President Obama has proposed ending the Bush tax cuts on top incomes while extending them for everybody else, but Congress has not yet taken up his budget proposal. When they do, even Obama’s modest tax proposals will be under withering attacks from America’s angry, but misguided anti-tax movement. That’s why we need as many voices as we can get calling for fairer economic policies.
The Economist has long been the world’s leading journal of laissez-faire economics. So, we weren’t shocked to see a call for “reducing entitlements” in their conclusion. It’s disappointing and wrong, but it’s still refreshing to see them addressing inequality at all.
TFOC on the Radio
The following radio news stories about a recent TFOC report, entitled Solutions that Work for Main Street: Progressive Guidelines for Closing Recessionary State Budget Gaps, explain that budget cuts are not the only answer to widespread state budget deficits.
These stories, originally aired in Virginia, Tennessee, Florida, and New York, were syndicated for broadcast on radio stations across the country, reaching well over 4 million listeners! See below for transcript exerpts and click through to listen to the stories on Public News Service.
April 1, 2010
"Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, points out that Wall Street is one sector of New York's economy that has bounced back from the recession and into record profits. To head off painful state budget cuts, which also will send a negative ripple effect through the state's economy, he urges decisionmakers to consider taxing Wall Street's bonuses and excess profits, instead.
'We've spent trillions to shore up the financial sector, and Main Street basically bailed out Wall Street. So, what we're saying is there are a number of different ways Wall Street could help contribute to helping solve our state's budget gap right now.
The report, issued by the United for a Fair Economy Tax Fairness Organizing Collaborative, also suggests tapping into rainy day funds, scrutinizing existing tax breaks and encouraging more federal revenue sharing.
[...] Karen Kraut, director of the Tax Fairness Organizing Collaborative, says [...] "We're also looking at things like closing corporate loopholes and ending tax breaks for businesses that don't produce the jobs that they say they're going to produce."
Listen to our 4/1/10 New York radio story on Public News Service.
April 1, 2010
"Daniella Levine, president and CEO of the Human Services Coalition, Miami, says legislators need to put politics aside because cutting state spending hurts economic recovery. Instead, she suggests they focus on fine-tuning the tax code so it reflects a progressive structure - meaning those who make the least pay the smallest share and those who make the most pay a larger share to fund critical services.
"We are looking at cutting some of the most basic services - health care and education and senior programs - and what is so worrisome is we are still continuing to reduce taxes for those who are able to pay."
Listen to our 4/1/10 Florida radio story on Public News Service.
March 31, 2010
"While many would argue against raising taxes in tough economic times, Elizabeth Wright, executive director of Tennesseans for Fair Taxation, says the discussion is more complex and needs to focus on getting rid of unsound and unfair taxes.
"Our state economy is based far too heavily on the sales tax. Most states have a more even balance: a sales tax, a property tax and a tax on personal income."
Listen to our 3/31/10 Tennessee radio story on Public News Service.
March 31, 2010
"David Shreve, report co-author and an economist with the Virginia Organizing Project, says legislators need to put politics aside, because cutting state spending hurts the economy. Instead, he suggests states focus on fine-tuning their tax code so it reflects a progressive structure -- meaning those who make the least pay the smallest share and those who make the most pay a larger share.
"This is not only much, much easier to do than anyone would imagine, it's very economically sound to approach it this way. If you're looking for the optimum way to move Virginia more quickly out of the recession, this is it."
Listen to our 3/31/10 Virginia radio story on Public News Service.
"Imagine this: your state has the option of reducing its residents’ combined federal tax bills by hundreds of millions of dollars a year and, at the same time, substantially reducing state taxes for almost 80 percent of its residents ... but then chooses not to do so.
Remarkably, that’s exactly what Wyoming and six other states are doing. Wyoming, Florida, Nevada, South Dakota, Tennessee, Texas, and Washington are opting out of a state tax reform that would make those significant benefits to taxpayers possible.
Like the other six states, Wyoming raises revenue by relying heavily on sales taxes instead of levying a personal state income tax. Those two revenue approaches combined create a lose-lose situation for most Wyomingites.
Low- and middle-income residents lose because they end up paying significantly more of their income in total state taxes than do high-income taxpayers. And residents who itemize their federal tax returns lose the "bang for the buck" on the deduction for state tax payments (the "federal offset"), thereby missing an opportunity to export a more substantial part of their state tax load to the federal government. [...]"
Read the full column by Karen Kraut in the Casper Star-Tribune
Listen to Bill Creighton on The Rick Smith Show.
Highlights from the interview:
Creighton: "We're the folks that the Bush Tax Cuts were designed to help...my tax burden has progressively gone down, since, well actually, since Reagan."
Smith: "So let's say we jump back up to just the Reagan tax cut, which was the top marginal rate at about 50%, would your lifestyle completely change, or would you not even notice it?
Creighton: "It wouldn't affect me a bit. If I were paying what I should have been paying, I would still have enough.
What's ludicrous is that I can go out and swing a sledge hammer and pay 33, 34, 35% for swinging a sledge hammer, or I can sit on my duff and watch my [invested] money grow and pay what actually works out to less than 15%. It's crazy... [Our country] rewards sitting back and doing nothing if you have enough...We penalize work by comparison for what we do for not working.
A bunch of us have signed a pledge which says that we are giving back the tax cuts we've received from Bush. There is a tax calculator on ResponsibleWealth.org where individuals can go...and the calculator will show you what your Bush 'tax gift' was...we have pledged to give that money back to fix this tax code."
This is sad. Despite everything, it’s still hard to believe that anyone would oppose a tax cut on basic food items because for fear that it will lead to "increasing taxes on some taxpayers making more than $200,000 a year."
Back in April, the Alabama House of Representatives voted not to debate House Bill 1, a bill that would have repealed the 4% sales tax on groceries and saved residents upwards of $300 million per year. Why? Because some didn't like that it made up for that revenue with modest tax increases on those making more than $200,000 per year.
Our Alabama TFOC partner waged a noble campaign. There will be victories to come, but, for now, this stings.
"[...] Cambridge was a popular target of Tea Party warm-up acts (the Boston Globe was too, with one speaker bellowing you’ll only read the real scoop “in the Herald.”)
But some from Cambridge didn’t take the liberal ribbing sitting down.
'We share some of the anger,' said Steve Schnapp, 64, of Cambridge. Schnapp works for United for a Fair Economy, a nonpartisan group. 'We feel the target of (the Tea Party) anger is misdirected. The problem isn’t big government, it is the fact that wealthy individuals and institutions have too much power.”
Read the full article from the Boston Herald
Visit UFE's Flickr page for more photos from this event
SORRY! Fox News' embeddable link wasn't so embeddable. Click here or on the image below to watch the video on FoxBusiness.com.
"Nevada's lack of an income tax means state taxpayers are paying more than they should in federal income taxes, according to a study released Monday.
Seven states that rely on sales taxes instead of an income tax could cut sales taxes while implementing an income tax to generate equal amounts of money for state coffers. [...]
Generally, taxpayers can deduct portions of state property, sales and income taxes from their federal returns. The problem with states that rely on sales taxes instead of income taxes is that the people paying a lot of the sales taxes have lower incomes, said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, which co-authored the study."
Read the full article by Alan Choate in the Las Vegas Review Journal.
States that rely heavily on sales taxes instead of levying a personal income tax are imposing billions of dollars in extra federal income taxes annually on their residents, according to a new report from the Institute on Taxation and Economic Policy and United for a Fair Economy’s Tax Fairness Organizing Collaborative.
The new report, “Leaving Money on the Table,” explains the reason behind the larger tax bills and estimates the aggregate federal tax savings for state taxpayers in seven states – Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – that would result from a revenue-neutral “swap” from sales taxes to income taxes.
The report also shows that such a tax swap would substantially reduce state taxes on low- and middle-income families, resulting in significant improvements in the tax fairness climate of each state.
DOWNLOAD THE REPORT (PDF 306KB)