Amid all the rightful outrage over Gov. Scott Walker's proposal to do away with collective bargaining rights for public sector unions in Wisconsin, one important point has been neglected: The demise of public sector unions would be most detrimental to women and African-Americans, who make up a disproportionate share of the public sector workforce.
Much has been made of Walker's decision to exempt from his plan firefighter, police and state trooper unions -- conveniently, the only three public sector unions that endorsed him. But as Dana Goldstein points out, not only are the exempted unions largely Republican-leaning, they’re also overwhelmingly male -- over 70 percent of law enforcement personnel are male, as are over 96 percent of firefighters. On the other hand, many of the non-exempt unions represent professions that are disproportionately female -- approximately 80 percent of teachers are women, for example, as are 95 percent of nurses.
African-Americans are also disproportionately employed in the public sector: According to a report by the nonprofit United for a Fair Economy, blacks are 30 percent more likely than the overall workforce to hold public sector jobs. Kai Wright reports that preliminary data from a study by Steven Pitts of U.C. Berkeley's Center for Labor Education and Research shows that 14.5 percent of all public sector workers in the nation are black, compared to 10 percent in most other sectors, and around a quarter of black workers are employed in public administration, as compared to under 17 percent of all white workers.
A Republican proposal that hurts women and people of color? I'm shocked, shocked! All jokes aside, I'm not arguing that Walker intentionally targeted women-heavy professions for union busting, or that he's secretly trying to undermine one of the remaining sources of stable employment for blacks, who are unemployed at nearly twice the rate of whites. But it doesn't need to be intentional to have serious effects.
Some of those effects are economically tangible. Despite high rates of public sector employment, black women working in the public sector make less than others, with a median wage of $15.50 an hour compared to the sector's overall median of $18.38 and a median of $21.24 for white men. Yet weakened public unions will make it more difficult for black women to bargain for better wages. Furthermore, as the Shriver Report finds, "nearly 4 in 10 mothers (39.3 percent) are primary breadwinners, bringing home the majority of the family's earnings, and nearly two-thirds (62.8 percent) are breadwinners or co-breadwinners, bringing home at least a quarter of the family's earnings." Making women's jobs more precarious has serious implications for the well-being of millions of families -- especially for families in the bottom two income quintiles and black and Hispanic families, where female breadwinners are particularly prevalent.
Others are subtler: As Wright points out, the portrayal of public sector employees as overpaid and underworked, taking advantage of hardworking taxpayers, carries echoes of racially charged caricatures -- the welfare queens of the '80s behind a desk in the Capitol. And politically motivated though it may be, the continued elevation of traditionally male professions like public safety and law enforcement over traditionally female ones like public health and public education is part of the reason women still earn only 77 cents for every dollar men do.
The events in Wisconsin are just one example of a larger trend of Republican efforts to make it more difficult for women, and particularly low-income women, to go to work (for example, by proposing significant cuts to childcare benefits and preschool programs) while simultaneously slashing services that women need to care for themselves and their families (for example, proposing to cut nearly a billion dollars from programs aimed at promoting the health of low-income pregnant women and mothers). And if that weren't enough, when public budgets are cut, women often make up for the cuts by volunteering at schools and providing unpaid childcare.
Likewise, public sector unions have garnered especial criticism for their pensions, which Republicans claim are bankrupting the state. Such lack of concern for elderly well-being is sadly consistent with Republicans' efforts to cut funding for programs providing the elderly with support for meals and housing. Incidentally, women make up two-thirds of the poor over age 65, while 60 percent of black seniors rely on Social Security for more than 80 percent of their income. So women and people of color aren't just paying for the cuts once, they're paying over and over again.
Of course, public sector cuts hurt people across the board, but they nearly always end up hitting the most vulnerable members of society the hardest. As Paul Krugman pointed out earlier this week, unions are important in part because they're some of "the few influential players in our political system representing the interests of middle- and working-class Americans." Indeed. But public sector unions are especially important representatives of middle- and working-class black and female Americans, who continue to be vastly underrepresented in every branch of government.
Republicans will surely protest that their efforts to undermine the public sector, whether by busting unions or slashing services, aren't sexist or racist -- they're just what needs to be done to balance the budget. And honestly, I suspect the gender and racial impacts of union-busting never consciously crossed Gov. Walker's mind. But not knowing exactly whom your policy decisions will hurt means you've never thought about the actual people who are affected by political maneuvering. If Republicans don't know who's paying for their attacks on public sector employees, it's because they just don't care.
By Alyssa Battistoni - Originally posted on Salon.com, February 24, 2011
Baby boomers, the oldest just now reaching retirement age, can expect to receive inheritances equaling more than $8 trillion over their lifetime.
It's a record intergenerational transfer of wealth. It also provides a welcome financial boost to the federal government and the 19 states and the District of Columbia that also impose inheritance taxes on the estates of the well-to-do.
Indeed, increasing the estate tax – or introducing one – would be a good way to help ease the budget crises in many states, says Lee Farris, an expert at United for a Fair Economy (UFE), a coalition of national and state organizations that aims for a more equal distribution of wealth and income.
Existing state estate taxes typically raise 1 to 4 percent of total state revenues. State legislators may find raising estate taxes tempting.
The state levy can be substantial. In Massachusetts, an estate worth more than $1 million is subject to the tax. Since a good Boston suburb may have many houses valued at, say, $500,000 to $900,000, it doesn't take too much in other assets to reach $1 million.
And the tax is progressive. It can be as much as 16 percent of the value of a huge estate.
That tax comes on top of any federal estate tax. The deal reached in December by President Obama and Republican leaders set the federal rate at 35 percent for the next two years on estates worth more than $5 million. With Republicans in control of the House, there are already four or so proposals to repeal the estate tax completely.
With new House rules, there would be no need to raise revenues elsewhere to offset that loss of revenue of perhaps $20 billion in the next two fiscal years.
Unless Mr. Obama again makes a deal with Republicans to win another piece of legislation he considers important, the present 35 percent rate is expected to survive until 2012 when the Obama-Republican tax deal expires.
"It will be ripe then for campaign fodder," says Craig Jennings, director of fiscal policy at OMB Watch in Washington.
Democrats will accuse Republicans of trying to legislate to benefit primarily the rich. Republicans will maintain that the estate tax will damage small businesses and farms. These number 65,000, according to a study for the conservative American Family Business Foundation. UFE says only about 100 would be affected.
To Mr. Jennings, the estate tax has the additional benefit of slowing a drift in the United States toward "a modern-day aristocracy."
Over three decades, wealth and income have been accumulating at the very top of the income scale while incomes for the middle class and poor have stagnated. He argues that those who have benefited most from the American economic system should contribute more to its maintenance.
Estate taxes are America's "most progressive" taxes, thereby "leaning against the concentration of wealth," says Joel Slemrod, an economist and tax expert at the University of Michigan Business School. He was one author of a 2001 study that found that the wealthy do tend to move to states with low estate taxes, such as Florida. But the drift is so small that it does not exceed the extra revenues that state estate taxes provide.
As for those baby boomer households, a study by the Center for Retirement Research at Boston College calculates that the two-thirds who can expect an inheritance will receive a median amount of $64,000. That's not enough to retire on.
By David Francis. Originally published in The Christian Science Monitor, February 17, 2011
Select Coverage of State of the Dream 2011: Austerity for Whom?
State of the Dream 2011: Austerity for Whom? surveys the impacts of a tax-cutting, government-shrinking economic agenda – as prescribed by Republican leadership with Tea Party allies – on communities of color.
We find that if such an agenda advances, the dream of a racially equal society, as described by Dr. Martin Luther King, Jr. over four decades ago, will be pushed even further out of reach.
If you are a media representative or blogger on social and economic issues and are interested in covering this report, please contact Maz Ali at 617-423-2148 x101 and/or firstname.lastname@example.org. Scroll down for select media coverage of this report.
February 27, 2011
The nearly 400-year history of black people in America has always been a race to catch up. Recent data shows that history has not changed.
United for a Fair Economy last month released its “State of the Dream Report” showing that African Americans have only 10 cents in net wealth compared with 12 cents for Latinos and a dollar for whites. [...]
Joblessness is a major problem, too, among people of color. This is a “who you know” job market, which embraces white privilege. [...]
The...report also found that...whites are three times as likely as blacks and 4.6 times as likely as Latinos to benefit from the tax breaks for those earning more than $250,000. The report also shows that the benefits of the reduced tax rate for capital gains and dividends flowed “overwhelmingly to whites.”
That and the weakening of the estate tax will continue to widen the wealth gap. Again, this is the disadvantaged history of blacks in America, beginning as people who were property by law.
Read the full column by Lewis Diuguid on KansasCity.com.
February 24, 2011
Look a little closer at who really stands to lose if Scott Walker gets his way: Women and minorities
Amid all the rightful outrage over Gov. Scott Walker's proposal to do away with collective bargaining rights for public sector unions in Wisconsin, one important point has been neglected: The demise of public sector unions would be most detrimental to women and African-Americans, who make up a disproportionate share of the public sector workforce. [...]
According to a report by the nonprofit United for a Fair Economy, blacks are 30 percent more likely than the overall workforce to hold public sector jobs.
Read the full post by Alyssa Battistoni on Salon.com
February 23, 2011
Racism is the salvation of late-stage American capitalism. For hundreds of years, real facts of human existence have been routinely turned on their heads, and non-facts accepted as ultimate truths, all to justify white supremacy. A society so afflicted can believe literally anything. Thus, the Republicans achieve wondrous success by planting the words "We're broke" in the mouths of men and women who are transparently rich, and who in turn serve the interests of the super-rich. [...]
This governmental brokenness coexists with December's Obama-GOP two-year, $850 billion tax giveaway, 40 percent of which goes to the top five percent of income earners, while 25 percent will go to the top one percent, according to the United for a Fair Economy.
Read the full column on OpEdNews.com.
February 19, 2010
When asked recently how they feel about their future, 85 percent of blacks said they are optimistic, with 65 percent indicating they specifically feel secure about their financial situation... [...]
Fifty-six percent of blacks, compared with 44 percent of whites, said the current economic situation is not causing stress in their lives.
The confidence level of blacks in the race and recession survey is in stark contrast to the depressing economic data showing that the economic crisis is still plaguing the African American community. [...]
Read the full column by Michelle Singletary on WashingtonPost.com.
February 10, 2011
Black and Latino families are continuing to disproportionally experience economic hardship, points out another report from the Boston-based research organization United for a Fair Economy. The reason is that they entered the recession with a meager cushion. In 2007, blacks had only a dime and Latinos 12 cents of assets compared to every dollar whites had.
“Very clearly, they don’t have the wealth to withstand and to endure economic hardships in the same way white families are able,” says Mazher Ali, a co-author of the report.
Read the full column by Eva Sanchis on Progressive.org
January 28, 2011
So how is it that this Democratic president has the temerity to deliver a State of the Union address that completely neglects any explicit mention of the calamitous conditions now afflicting his staunchest supporters: the poor? [...]
And things could get even worse for the poor if the president feels the need to cut too many deals with the new Republican-led House in order to appear more centrist.
According to Brian Miller, the executive director of the nonpartisan and Boston-based group United for a Fair Economy and co-author of the group’s report entitled “State of the Dream 2011: Austerity for Whom?” released earlier this month, “austerity measures based on the conservative tenets of less government and lower taxes will ratchet down the standard of living for all Americans, while simultaneously widening our nation’s racial and economic divide.” [...]
Read the full column by Charles Blow on NYTimes.com
January 24, 2011
The world has changed since Dr. Martin Luther King, Jr. shared his dream on the National Mall in 1963. But this year, during Black History Month, we should remember that King's messages remain as powerful--and necessary--today.
Nearly 43 years after King's assassination, the racial economic divide in our country endures. And if the austerity agenda advocated by deficit hawks in Congress succeeds, the state of King's dream is sure to decline.
MLK once said, "I believe that unarmed truth and unconditional love will have the final word." The unarmed truth--or data, in this case--is startling.
Read the full post by Wanjiku Mwangi of United for a Fair Economy.
January 20, 2011
"Them that's got shall get. Them that's not shall lose," as the Billie Holiday song goes. "Yes, the strong gets more while the weak ones fade. Empty pockets don't ever make the grade."
It is a tale of two cities in early twenty-first century America. Wall Street is enjoying hefty bonuses and corporate America is awash in cash. Yet, all you can hear, whether inside the Beltway or around state houses is talk of austerity, the new buzzword that's all the rage. Conservative politicians in Congress and in statehosues around the country rode a wave of Tea Party pseudo populism, funded by Republican philanthropy, corporate lobbyists and the U.S. Chamber of Commerce.
Read the full post by David A. Love.
January 19, 2011
Countries around the globe have gone from implementing stimulus packages to austerity measures as a model for economic recovery. The new Republican-led House of Representatives here in the United States is now mounting up a campaign of its own.
Eliminating social service programs, tax cuts for the rich, and rolling back public sector employees are all on the GOP agenda. But a new report argues that these policies will further widen economic inequalities for U.S. minorities and the public at-large.
The Boston-based nonprofit United For a Fair Economy published the findings last Friday to highlight Dr. Martin Luther’s King vision for economic justice. The analysis is not only a rebuke to the House majority’s policies, but also stands in stark contrast to a recent International Monetary Fund report that suggests countries should continue promoting fiscal austerity.
Read the full column by Akito Yoshikane on InTheseTimes.com
January 17, 2011
Nearly a half century after King's I Have a Dream words the black poor are still just as tightly trapped in the grip of poverty and discrimination that King warned about. On the eve of the King national holiday and Obama's second year in office, the Boston based research and economic justice advocacy group, United for a Fair Economy, released its eighth annual King Day report. It found that the gaping disparities in income, wealth, employment, quality and availability of housing, decent schools, and health care between blacks, minorities and whites has grown even wider.
Read the full column by Earl Ofari Hutchinson on HuffingtonPost.com.
January 17, 2011
Making King Bland: Every year on MLK Day, a bland liberal version of Martin Luther King is celebrated, and leftists take time to point out how radical King was, toward the end of his life, at any rate. Two contributions of note. [...]
Read the full post by Chris Sturr on DollarsandSense.org.
January 17, 2011
January 17, 2011
When judging the state of King's dream for economic justice, the verdict is clear: Black America faces a nightmare.
African-Americans bore the brunt of the Great Recession's job losses and economic slow-down. And it only promises to get worse: The slash-and-burn agenda proposed by the new Congressional House leadership, as well as many state legislatures, will have a uniquely devastating impact in low-income and black and Latino communities.
Just how bad? A new report by United for a Fair Economy offers a valuable survey of the damage that's already happened, and how it will likely get much worse.
Read the full post by Chris Kromm on SouthernStudies.org.
January 17, 2011
Whenever governments cut spending, the pain is uneven.
But African Americans are especially vulnerable, as a disproportionately high number rely on government dollars for crucial services, a new study has found. As black people are more dependant than white people on public safety nets, and are more likely to be on public payrolls, governmental austerity could wound the black community especially severely.
Read the full column by William Alden on HuffingtonPost.com.
January 16, 2011
"[B]ecause we exist in a society that has an infrastructure and legacy of racism, the effect of these policies is the same as explicitly racist ones. For example, if you work at the DMV in your state and you're a minority, it probably will seem very much like racism to have your job eliminated while simultaneously the wealthy White guy at your counter is registering his new Bentley as a result of his brand new tax cut. Especially if half your co-workers are of color and most of the new luxury vehicle registrations are from people who are White."
Read the full post on DailyKos.com.
January 15, 2011
Just the other day, though, one of my more socially liberal friends forwarded a story about how the top 1% has seen massive wealth increases in the last 30 years while the lowest 40% have seen not only a drop, but have fallen into the negative wealth zone (owing more money with very little assets).
Could this finally be a tipping point? [...]
Just in time for that tipping point, my friends at United for A Fair Economy have released their 2011 State of the Dream Report. With the Republican majority in the House demanding “austerity,” and Democracts likely to join them on some of their agenda items, this report shows who will get hurt the worst by “centrist” economic policies.
Read the full post by Craig Wiesner.
January 14, 2011
As we prepare to observe MLK Day Monday, we take a look at the "state of the dream"
The group United for a Fair Economy released a report today that sheds some light on how far we've come in realizing Dr. King's dream.
It shows that current public policies worsens the racial economic gap...hitting African Americans and Latinos hardest.
Read the full post by Nordia Epps on WDEF.com.
January 14, 2011
In advance of Martin Luther King Day next Monday, United for a Fair Economy has released its 8th annual "State of the Dream" report, surveying the economic challenges facing workers of color. The 2011 edition focuses on the impact of economic austerity on African American and Latino workers.
The report documents several ways in which the austerity agenda sweeping Washington hurts the African American and Latino middle- and working-class.
Read the full post by John Schmitt.
The super-rich got an early Christmas gift in the $858 billion tax package that President Obama signed into law on Friday. On top of a two-year extension of Bush-era income tax rates, the wealthiest Americans dodged an estate tax that was set to jump up from zero to 55% for individuals worth more than $1 million. Instead, under a deal Senate Republicans negotiated with the White House, individuals can exempt estates up to $5 million and pay 35% beyond that. The exemption for couples is $10 million.
Official estimates pin the two-year cost of the adjustment at $68 billion, and it will shield all but about 3,600 estates from the levy, according to a projection by the nonpartisan Tax Policy Center.
The windfall for the well-heeled wasn't delivered out of thin air. Indeed, a small band of the richest Americans have acted as their own secret Santas on this issue for years. A 2006 report by Public Citizen and United for a Fair Economy -- both nonprofits opposed to concentrated wealth -- identified 18 families financing a coordinated campaign to repeal the estate tax altogether. Among the leading names behind that push: the Gallos (E&J Gallo Winery), the Kochs (Koch Industries), the Mars' (Mars Inc.), the Waltons (Wal-Mart), and the Wegmans (Wegmans Food Markets). At the time, the report estimated the families' collected net worth to be at least $185 billion, roughly equal to the market cap of Google today.
Several of the families organized their efforts through an association called the Policy and Taxation Group. Lobbying disclosure laws don't require the group to list its members, and as such, it hasn't disclosed any of them since 1999. But disclosures show the group itself remains active, with two hired-gun lobbying firms on its payroll this year. One of those shops, Patton Boggs, separately shills for the Mars and Wegman families on the issue.
Small estates vs. large estates
Proponents of an estate tax repeal make their argument by citing the burden of the tax on people with significantly less money -- namely small business owners and family farmers. And a wide range of trade associations organized under the banner of the Family Business Estate Tax Coalition -- a group that includes the American Farm Bureau Federation and the National Federation of Independent Business -- has stayed active lobbying to scale the tax back. They argue the levy is so onerous that small to middle-sized concerns are frequently forced to sell just to pay the piper.
Independent analysts question the veracity of those claims. The Tax Policy Center, for example, concludes there is "little hard evidence [to suggest] that the impact of estate taxes on family farms and businesses is a major concern." [...]
By Tory Newmyer for Fortune magazine, December 21, 2010
Les inégalités sont-elles responsables de la crise?
By Laura Raim for L'Expansion (French business journal)
Les Etats-Unis sont-ils condamnés à plonger dans une nouvelle crise? Le compromis fiscal conclu entre Obama et ses adversaires républicains a été approuvé jeudi par le Congrès américain. Il s'agit du dernier avatar de l'échec du gouvernement à résorber des inégalités sociales qui ne cessent de se creuser depuis des décennies. Inégalités qui seraient pourtant à l'origine aussi bien de la crise de 1929 que de celle de 2007.Les inégalités sont-elles à l'origine des crises ?
C'est la thèse des économistes Michael Kumhof et Romain Rancière. Dans un article publié fin novembre pour le FMI, ils rapprochent la montée des inégalités de celle de l'endettement des ménages. Pour eux, c'est le point commun entre les décennies précédant la crise économique actuelle et celles d'avant la Grande dépression de 1929. Entre 1910 et 1929 comme entre 1989 et 2008, la part des revenus de la fraction de 1% des ménages les plus riches est en effet passée de 15% à 25%.
"On a étudié comment les agents réagissaient à cette tendance, explique Romain Rancière, professeur associé à la Paris School of Economics. On a constaté que malgré l'érosion de leurs salaires, les Américains 'd'en bas' cherchaient à maintenir un certain standard de vie, comparable à celui des Américains 'd'en haut'. L'expression anglaise 'keeping up with the Joneses' est symptomatique de cette culture où les gens se comparent constamment les uns aux autres et veulent avoir la même maison ou la même voiture que le voisin". Les ménages pauvres ont donc abondamment emprunté pour compenser la stagnation de leurs revenus.
Mais pour emprunter, il faut qu'il y ait des prêteurs. Et justement, les ménages aisés étaient à la recherche de rendements élevés pour placer leur surplus d'épargne. La soif d'endettement des ménages pauvres leur a permis d'investir dans des produits financiers adossés sur ces crédits.
A noter que cette volonté d'emprunter des uns et d'épargner des autres a augmenté les besoins en services financiers et donc gonflé le secteur, dont la taille a doublé entre 1981 et 2007 pour atteindre 9% du PIB.
Le gouvernement a quant à lui encouragé ce processus dans les années 90 en dérégulant le marché bancaire et en poussant Fannie Mae et Freddie Mac à accorder des prêts immobiliers aux ménages les plus modestes. De fait, il est plus facile de masquer les inégalités en encourageant le crédit facile plutôt que de s'y attaquer à travers des politiques de redistribution.
"Le problème, c'est que cet endettement excessif des classes pauvres et moyennes a fragilisé le système financier : quand les prix de l'immobilier ont arrêté de progresser, des emprunteurs ont fait défaut en masse, et cela a déclencé la crise en 2007, poursuit l'économiste. La réduction des inégalités n'est donc pas seulement une question de justice sociale. C'est aussi une nécessité pour empêcher l'éclatement de nouvelles crises financières".La politique fiscale explique-t-elle le creusement des inégalités ?
La croissance des inégalités s'explique surtout par la montée spectaculaire des très hauts revenus. En ce qui concerne la période récente, les raisons pour cette tendance sont multiples : baisse du pouvoir des syndicats susceptibles de négocier des augmentations collectives, augmentation de la part de la rémunération variable...
Mais la politique fiscale mise en place depuis la présidence de Reagan, et accentuée par celle de Bush, a amplifié cet accroissement des inégalités. D'une part, la baisse des taux marginaux supérieurs d'imposition sur le revenu favorise l'accumulation patrimoniale dans le haut de la distribution. D'autre part, "le capital est bien moins taxé que le travail : l'impôt sur les investissements est de seulement 15%, ce qui profite surtout aux riches car ce sont principalement eux qui ont des investissements, explique Lee Farris, spécialiste de politique fiscale chez United for a Fair Economy, un groupe de pression qui lutte contre les inégalités. C'est pourquoi le taux d'imposition effectif des riches est bien plus bas que celui des classes moyennes".
Pour Paul Volcker, ancien président de la banque centrale et conseiller économique d'Obama, les avantages fiscaux concédés par Bush en 2001 et 2003 ont en effet donné lieu à la plus grande redistribution de revenus de l'histoire américaine "depuis la famille américaine moyenne vers un petit groupe de riches".Le compromis fiscal d'Obama aggrave-t-il ces inégalités ?
Pour le moment oui. Pour commencer, Obama n'a pas réussi, comme il le souhaitait initialement, à augmenter à 20% l'impôt sur les investissements pour les 2% des contribuables les plus aisés. Il a également échoué à supprimer les allègements consentis aux ménages gagnant plus de 250.000 dollars par an. Mais ce qui choque le plus les démocrates, c'est qu'il accepté d'accorder des exonérations sur l'impôt sur la succession pour tout patrimoine inférieur à 5 millions de dollars. Soit un paquet fiscal encore plus généreux que celui de Bush ! "L'impôt sur les successions aurait pourtant été l'un des plus juste et facile à augmenter, puisque par définition il est acquitté par un mort qui n'a plus besoin de son argent ! s'indigne Lee Farris. C'est même le républicain Teddy Roosevelt qui l'avait instauré."
"D'autres facteurs non fiscaux devraient malgré tout contrebalancer légèrement cette tendance, relativise Romain Rancière. La réforme du système de santé d'Obama par exemple représente un certain transfert de richesse qui doit permettre aux ménages plus pauvres de moins s'endetter".
An estate tax primer
The estate tax is going to dominate the final arguments over the tax deal, so it's worth quickly running through what it is and how much the various plans will cost us.
The basic insight behind the estate tax is that wealth concentration is a problem. That was true in 1916, when the tax was enacted, and it's true today, when it's being neutered. As Ray Madoff explains, the going theory came from Louis Brandeis, who said, “We can have concentrated wealth in the hands of a few or we can have democracy, but we can’t have both.” Andrew Carnegie himself testified in favor the estate tax's creation.
The way it works is simple enough. There's an exemption level beneath which estates are not taxed, and a tax rate that applies to every dollar the estate is worth above the exemption. In 2001, we had a $675,000 exemption and a 55 percent tax rate. So an estate worth $700,000 would take a 55 percent tax on that final $25,000. The estate tax's levels, however, have been changing because the Bush tax cuts -- as you can see in the table on the right -- have been phasing it out. In 2002, it was $1 million, and 50 percent. By 2009, the exemption was up to $3.5 million, and the rate down to 45 percent. And in 2010, the estate tax was repealed.
But not for long. If no action is taken, it returns in 2011 with an exemption of $1 million and a rate of 55 percent. If that seems like weird tax policy -- a single year in which death carried a huge tax break -- it is. But it was never about tax policy. It was a political strategy: Republicans wagered that Democrats wouldn't be able to bring the estate tax back after it had expired. Public opinion would be against them, and it would be backed by a massive amount of money from the nation's richest residents.
So far, it looks like they were right.
The dominant alternative to the estate tax's return -- which had support from both Republicans and, sadly, Democrats -- was the Lincoln-Kyl bill: A $5 million exemption with a 35 percent rate. This is the language that has been included in the tax deal.
So how much does this cost? With a $1 million exemption and a 55 percent rate -- in other words, what will happen if we do nothing -- the estate tax would raise about $700 billion over the next 10 years. The Lincoln-Kyl version would raise less than $300 billion. And the compromise most Democrats have coalesced around -- which was the 2009 level, with a $3.5 million exemption and a 45 percent rate -- would've brought in a bit less than $400 billion.
It's important to keep in mind the cramped space of this debate: If the tax goes back to its scheduled levels, it'll tax 2 percent of estates, If the Lincoln-Kyl levels are put in place, it'll tax 0.25 percent of estates. But the difference between the hundreds of billions the tax could raise and the miniscule number of estates it would affect explains the immense energy Republicans and some Democrats (notably Blanche Lincoln, who has traditionally raked in campaign money from the Walton family) give to the issue. In a report called "Spending Millions to Save Billions," Public Citizen and United for a Fair Economy estimated that a handful of the country's richest families had spent more than $400 million lobbying for the tax's repeal -- and of they were successful, they stood to save more than $70 billion. [emphasis added]
For the rich, fighting the estate tax is simple [sic] a good investment. And it looks like it's paying off.
Update: It's worth clarifying that the tax gets levied on the estate, not the heir. Technically, the heir pays nothing, and the tax needs to be dealt with before the estate is transferred.
Numbers and table credit: The Center on Budget and Policy Priorities.
Sanders Filibuster Halted By Senate
Tax Deal Fight Now Focuses on House Challenge to Estate-Tax Exemption
By John Nichols
Posted on TheNation.com, December 14, 2010
In a display of how Washington insiders practice bipartisanship, most Senate Democrats voted with most Senate Republicans to deliver for the wealthiest Americans.
Senators from both parties, self-identified liberals and conservatives, united to end a filibuster by Vermont independent Bernie Sanders , who has led the fight to block an Obama administration deal with Congressional Republicans that extends tax breaks for billionaires and establishes estate-tax exemptions for millionaires.
Sanders conducted an eight-and-a-half-hour filibuster Friday, in which he outlined arguments against the agreement to trade a two-year extension of tax cuts for the wealthiest Americans, along with sweeping estate-tax exemptions, for a one-year extension of benefits for unemployed workers.
On Monday, Senate majority leader Harry Reid, D-Nevada, serving as floor manager for the deal cobbled together by the Obama administration and Senate minority leader Mitch McConnell, R-Kentucky, sought a cloture vote to end the filibuster and open debate on the plan.
Sixty votes were needed to end the filibuster. Reid secured an overwhelming eighty-three.
Most of the fifteen votes to support Sanders's filibuster came from Democrats. Senators Jeff Bingaman of New Mexico, Sherrod Brown of Ohio, Russ Feingold of Wisconsin, Kirsten Gillibrand of New York, Kay Hagan of North Carolina, Frank Lautenberg of New Jersey, Pat Leahy of Vermont, Carl Levin of Michigan and Mark Udall of Colorado voted with Sanders.
They were joined by five Republicans: Oklahoma's Tom Coburn, South Carolina's Jim DeMint, Alabama's Jeff Sessions, Nevada's John Ensign and Ohio's George Voinovich.
The lopsided vote provided an indication that the Senate is likely to approve the agreement.
Sanders remained defiant, however, signaling that approval will not come easily—or quietly. "It makes no sense to me to provide huge tax breaks for millionaires and billionaires while we drive up the national debt that our children and grandchildren will have to pay," the Vermonter said. "I further object strenuously to the lowering of rates on the estate tax, which only benefits the top 0.3 percent, the very, very wealthiest people in this country. I also am concerned about a significant precedent which diverts $112 billion in payroll taxes away from the Social Security trust fund. Our goal now must be to strengthen Social Security, not weaken it. Of course we must extend unemployment benefits and the tax breaks that the middle class desperately needs, but in my view we could have and should have negotiated a much stronger agreement."
The Senate vote may not come until Wednesday, and significant debate is expected before it comes.
While Sanders will be expressing broad opposition, there will also be attempts to amend the legislation. As of now, it is unclear whether amendments will be allowed. The White House is opposed at this point. However, Democratic and Republican senators have proposed amendments, with the most significant being a proposal by a group of Democratic senators to limit the extension of Bush-era tax breaks only to Americans earning less than $1 million a year.
One the Senate votes, action will move to the House, where the number-two Democrat, majority leader Steny Hoyer of Maryland, says "significant" amendments might yet be made.
"There certainly seems to me to be some room for a change which may or may not be perceived by some to be significant," said Hoyer.
Hoyer suggested Monday that House Democrats may push to limit exemptions for estates. As the agreement now stands, there's a a 35 percent estate tax with exemptions for the first $5 million for individual estates and the first $10 million for couples.
House Democrats have been advocating for a 45 percent tax exempting only the first $3.5 million of inherited estates.
United for a Fair Economy , which has noisily objected to the estate-tax deal, held out hope for the House to do the right thing.
"The Senate’s decision to approve the ill-conceived tax package negotiated between Obama and GOP leaders is shameful," said UFE executive director Brian Miller. "Fortunately, the buck does not stop in the Senate. We are calling on the House to fight back and win a better deal for the sake of middle- and working-class Americans—those who will be saddled with massive new debt to pay for wasteful tax breaks for millionaires and billionaires." (emphasis added)
If the two chambers pass different versions of the legislation, they will have to be reconciled in a House-Senate Conference Committee. Such a session would provide a last opportunity to alter the agreement between Obama and the Republicans.
By Jim Worth
Posted on The Huffington Post, December 12, 2010
The Tax Reform compromise may be President Obama's Swan Song.
The release of the compromised tax bill, negotiated between the Administration and Republicans, has resulted in acrimony between Obama and the congressional members of his party.
His uncharacteristic display of anger over his tax deal was misdirected at Democrats who feel the agreement struck between the President and the GOP is bad on several levels. His anger should have been leveled at the Republicans who shamelessly held crucial parts of the tax bill hostage.
He insists that this compromise is "a good deal for the American people."
Is it such a good deal; the only deal he could obtain?
It adds nearly a trillion dollars to the deficit over the next two years.
The President referred to Progressive Democrat's dissent as sanctimonious for not embracing the compromise. Sanctimony is defined as 'a show of being morally superior to other people.' But, when has doing the right thing for the American people become sanctimonious?
The President's "sanctimonious" admonition of Democrats who had expected more, should have been directed at the obstruction of the Republicans.
Freshly stung in the last election by unacceptable compromises from positions of strength, one would think that the President would have learned a lesson. His continued acquiescence, ie; giving up on the public option, not taking on the big banks, settling on a lesser amount for the needed stimulus, etc., played right into the Republican's hands and cost the Democrats greatly in both the House and the Senate.
Asking Democrats to concede their position of strength, is asking those still in Congress to put themselves in an intractable position for the 2012 elections.
There are compelling reasons to reject this compromised fiasco.
Yes, the President, in addition to the extension of the bottom four tax brackets, received some good things in the negotiations -- many of them necessary for the country's survival: a 13 month extension of unemployment benefits, earned income tax credit, child tax credit, and the payroll tax cut. These add to the deficit, but will do something to help the economy grow and those in need.
These are all programs the Republicans had to vote for, especially had the President backed them into a corner. They couldn't afford to let these benefits expire for the huge numbers of citizens in their states and districts who relied on them just to survive.
The other two concessions are seen as a gift to the obstructionist party. Extending the tax brackets for the wealthy and the changes to the estate tax are seen, flatly, as giveaways.
Ace Greenberg, on Squawk Box on Friday, stated, "I don't understand why my taxes didn't go up. A few percent is not going to change the way the uber-rich live."
Others have echoed the same sentiment. When the Republicans moved to eliminate the estate tax in 2003 Bill Gates Sr. and Chuck Collins adamantly opposed its elimination, advocating the wealthy giving back for the opportunities this country has afforded them.
Paul Newman, Annie Dillard, Ted Turner, and many others came forward in 2007 to oppose attempts to repeal or reduce the estate tax. One year ago, John Bogle, argued in a press call of United For a Fair Economy, for the preservation of the estate tax prior to the expiration in 2010 saying, "the wealthy owe a large part of their fortune to the country and its government," referring to the opportunities they have been given that helped them amass great wealth.
Read the full column by Jim Worth on HuffingtonPost.com
Democrats not pleased with deal on estate taxes
By Seth McLaughlin
Published in The Washington Times, December 12, 2010
Sen. Bernard Sanders' impassioned eight-hour speech Friday, slamming President Obama's tentative tax-cut deal with Republicans, directed some of his sharpest attacks at the plan's provisions to tax dead people's estates.
Armed with giant charts and statistics galore, the Vermont independent argued that wealthy individuals, including the heirs to the Wal-Mart fortune, are in a better position financially to shoulder more of the national debt and for that reason the estate tax should return to 2009 levels, or higher.
"99.7 percent of American families will not pay one nickel in an estate tax," he told the almost empty chamber. "This is not a tax on the rich. This is a tax on the very, very, very rich."
Though largely overshadowed by a White House press conference in which former President Bill Clinton endorsed the $858 billion deal, Mr. Sanders' oratorical marathon aired a frustration held by many Democrats who argue the level of the estate tax in the tax cut and unemployment insurance package let "the rich" off the hook.
"If someone leaves an estate of a billion dollars, under their proposal, they would gain $100 million over what the Democrats are proposing for the estate tax," Rep. Jan Schakowsky, Illinois Democrat, said on MSNBC's "The Rachel Maddow Show." "Imagine, Paris Hilton will be able to get an extra $100 million under their plan. It's obscene. It's absolutely an offense to us and to most Americans."
A levy on the transfers of big inheritances, the estate tax has become emblematic of philosophical differences that exist on Capitol Hill, where Mr. Sanders and other liberal-leaning lawmakers claim wealthy Americans simply can afford to contribute more to the national kitty and conservatives say the tax does not deliver the bang for the buck that Democrats claim and that the federal government shouldn't have a financial stake in how people pass along their personal fortunes.
Republicans repeated that message Sunday on the political talk shows.
"It's a double tax on death," said Rep. Paul D. Ryan, Wisconsin Republican and the incoming chairman of the House Budget Committee. "Economists will tell you that it's really not a tax that soaks the rich, but it's a tax on capital that deprives business investment there for job creation."
The first Bush cuts began phasing the estate tax out in 2001 from a top rate of 55 percent to 45 percent in 2009 and then to zero in 2010, with the per-person exemption also rising from $1 million to $3.5 million.
As a result, for the first time since the tax was enacted in 1916, transfers of large inheritances are currently free of paying the federal estate tax. In an odd twist of fate, that has led to stories where billionaires, including George Steinbrenner, former owner of the New York Yankees, are said to have saved their families hundreds of millions in taxes by dying this year.
Now with lawmakers scheduled to consider the tax compromise Monday, the estate tax is set to snap back to the pre-Bush administration levels of a 55 percent rate with a $1 million exemption for individuals at the end of the year. Under the deal brokered between Mr. Obama and Republicans, the rate is set at 35 percent with a $5 million exemption for individuals and $10 million exemption for couples.
Mr. Sanders and many Democrats are pushing for the 2009 levels or 2001 levels, while conservatives want a permanent repeal of the tax.
"We are outraged that estates are going to be taxed at 35 percent," said Bill Pascoe, president of Citizens for the Republic, a nonprofit conservative group. "This is a sucker bet for Republicans."
Mr. Pascoe warned that if Republicans vote for the plan, they will have ignored the anti-tax message from the November election, violated promises in the Pledge to America and put the White House in a win-win situation heading in to the 2012 election.
"If Congress accepts this deal, there are two likely scenarios," Mr. Pascoe said. "If the economy improves, Obama will take credit for it and campaign for re-election on it. If the economy worsens, Obama can blame the Republican tax cuts for failing to boost the economy."
Meanwhile, Americans for a Fair Estate Tax Coalition (AFET), a group of 69 organizations, including some of the nation's biggest labor unions, sent lawmakers a letter urging them to "re-establish a permanent, robust estate tax."
"In times of crisis, we pull together and share the sacrifice. While working- and middle-income people are struggling, this deal would gut the estate tax, putting billions more in the pockets of millionaires and billionaires," said Lee Farris, estate-tax policy coordinator of United for a Fair Economy and an AFET member.
Obama-GOP Tax Cut Deal Riles 'Patriotic Millionaires'
Column appeared on ABCNews.com, December 11, 2010
Wealthy, business owners disappointed taxes may go down next year.
While the wealthiest taxpayers will gain financially if Republicans and the president successfully extend the Bush-era tax cuts in Congress, a group of millionaires and business owners said they will be disheartened if they pay less taxes next year. Members of the Patriotic Millionaires for Fiscal Strength, a group of 89 millionaires, petitioned President Obama to allow tax cuts on incomes greater than $1 million to expire at the end of the year, as scheduled. [...]
"I think it's a terrible deal for Democrats," said Guy Saperstein, founding member of the Patriotic Millionaires and a former civil rights attorney. "It's terrible on many levels but the most important one is the tax cuts for the rich."
Adding to the Budget Deficit
Saperstein said the tax cuts for the rich and the estate tax would have helped to lower the national debt instead of costing the government $700 billion or more over the next several years.
Saperstein also was disappointed by the reinstatement of the estate tax at 35 percent for two years starting next year with an exemption of $5 million of one's estate. If the tax breaks expire as scheduled at the end of this year, the estate tax would be 55 percent, with a $1 million exemption.
"It would benefit only the top less-than-1-percent, a huge benefit for them," said Saperstein. "I happen to be in that category, but it's still a bad deal for the public. If this deal goes down, the Republicans are going to demand that those deficits be corrected in some way. The public and working class people will end up paying for those deficits."[...]
Lee Farris, estate tax policy coordinator for the organizationUnited for a Fair Economy, said the tax proposal was "outrageous."
"The deal would make the estate tax even weaker than it was under President Bush, the weakest it's been in more than seven decades," said Farris, whose organization is comprised of business owners and farmers across the country.
Estate Tax Giveaway
Farris said the deal was "unacceptable" because it "gives away too much and gets too little in return," via the extension of unemployment benefits and low-income tax credits.
"The people who already have the most money have said, 'We're going to have a weaker estate tax or you can forget about unemployment.' And to me, that's an immoral position," said Farris. "They're saying that's more important than [helping] someone who has lost their job through no fault of their own."
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.