Pay No Attention to the Politicians Behind the Curtain!
When it comes to telling the story of our dire economy, it seems Republican politicians have lifted their strategy from the Wizard of Oz rather than a political playbook. But rather than accept the line that poor people are to blame for our mounting federal deficit, we should pull back the curtain on the real culprits.
It's an iconic scene: when Dorothy discovers the true identity of the Wonderful Wizard, he frantically exclaims, 'Pay no attention to the little man behind the curtain!' The banter around the federal budget and reducing the deficit is no different. Republicans are the man behind the curtain, blowing smoke and posing as the all-knowing wizards of economic policy. Meanwhile, they have created a mess out of our economy through massive Bush-era tax breaks for corporations and wealthy people; tax breaks that have been a primary cause for the deficit. But rather than acknowledging the role of tax breaks for the wealthy in our economic nosedive, these politicians distract us with smoke and mirror-lies about the strains low-income people have caused on our economy.
There's no denying the irony. Conservatives scream and shout about reducing the deficit, demand cuts in programs that fund services for the poor, and refuse to consider any tax increases for wealthy people and corporations. Yet, these politicians point to low-income folks as the culprits behind our economic mess, even though they’re not the ones cutting jobs across the US, shipping jobs oversees, and evading taxes while making record profits.
Our economic challenges have nothing to do with how the government helps poor people survive ("survive" being a key word; as opposed to a cool word like "thrive," but that’s a discussion for another day). The deficit did not reach this point because of over-spending on programs for poor people. Our budget is in shambles because of ill-informed, selfish decision-making by wealthy people who influence policy. Unlike millionaires and billionaires, normal working folks can't afford hefty election donations, never mind hire high-paid lobbyists dedicated specifically to guard their bank accounts.
All of this financial influence has given wealthy people more access to legislatures. When George Bush Jr. took office he began with a budget surplus. Since 2001, tax breaks have consistently favored the wealthy, allowing them not to have to pay their fair share of taxes- which helps explain why our deficit has ballooned. Today, Republicans continue to fight tooth and nail for tax breaks for their funders, breaks that are meant to somehow “create jobs.” In actuality, these loopholes have done quite the opposite. And now that Republicans have created a mess, all they can do is propose program cuts that will negatively impact poor people; many of whom didn't have have a strong seat at the decision-making table to begin with.
Another example of the 'man behind the curtain' at work? The estate tax. Since passing the Bush tax cuts in 2001, conservatives have waged a war on state and federal estate tax, going to drastic measures to reduce and even eliminate the estate tax completely. Yet, the estate tax only affects the wealthiest 0.27 percent of people, and has the potential to bring in billions in tax revenues. In other words, a tax that would impact very few people and bring in billions seems like a scarecrow (i.e. no-brainer).
Instead, wealthy conservatives are acting all 'cowardly lion'; cutting services for low-income people, fighting to reduce taxes on themselves, and shifting the responsibility for paying taxes to middle and lower income people who can’t afford it.
It's time we pull back the curtain on our elected officials and demand better. We must stop penalizing low-income families who are not the culprits of the demise of our economy. How much longer will we allow Republicans to keep villain-izing poor people while telling America to ignore the true masterminds. Until that happens, they will continue to stand behind the curtain, sneakily licking the federal revenue plate clean.
How the Debt Ceiling Debate Impacts the Estate Tax
The estate tax is quietly under siege in the debt ceiling debate. Since the debt ceiling is the total amount of money that the government is allowed to borrow, you might wonder, what does that have to do with the estate tax?
Put simply, it's a matter of cash flow. If we fail to raise the debt ceiling, the government will default on its obligations for the first time in U.S. history. As of August 2, 2011, we will no longer be able to borrow money to finance existing commitments, such as military salaries and Medicare benefits. Historically, Congress has always raised the debt ceiling when needed without batting an eye. But today, the issue is stuck in a quagmire of political bargaining and conservative catch-phrasing, such as “tax breaks” and “spending cuts.” These so-called “tax breaks” are directed at the wealthy, of course, and often in the form of eliminating the estate tax.
Indeed, Republican politicians are making tough demands in debt ceiling negotiations (perhaps it’s a last-ditch effort to strengthen future candidacies). Many are refusing to pass an increase in the debt ceiling unless there is an agreement to slash federal spending. They claim that the solution to current budget woes comes from spending cuts alone. But how can we expect to improve our financial situation without increased revenue flows? One key source of revenue is a stronger estate tax, which has garnered fierce conservative opposition.
Although we don’t know exactly what the Republican debt-ceiling proposals entail, recent Republican legislation gives us a pretty clear picture of their intentions. One budget plan (that was later rejected) proposed a complete elimination of the estate tax and corporate income tax. Another amendment (to a bill ending ethanol tax credits, no less) would have completely removed the estate tax. In a time of debt, we cannot afford to lose valuable tax revenue from the nation’s wealthiest.
Last week, House majority leader Eric Cantor (R-VA) walked out of bipartisan budget talks led by Vice President Joe Biden because of the stalemate on tax increases and spending cuts between Democrats and Republicans. But how much of a threat do the Republicans actually pose to increasing the debt ceiling?
Vocal support for an increase comes from the International Monetary Fund, which has urged Congress to raise the U.S. debt ceiling to avoid a financial meltdown with international implications, as well as from Chairman of the Federal Reserve Ben Bernanke.
And don’t forget one of the most powerful lobby groups on the Hill: Wall Street. Failure to increase the debt ceiling would greatly harm the U.S. financial system and perhaps lead to the demise of major U.S. banks. Wall Street executives have no intention of letting Republican politicians endanger the international power of the U.S. financial system (or their hefty bonuses).
So, even if the estate tax isn’t in the headlines, it is important to remember that the estate tax is under attack today. Call your congressman and urge him or her to vote for an increase in the debt ceiling without giving into unreasonable Republican demands. We simply cannot afford to eliminate the estate tax.
The Bush Tax Cuts Ten Year Hangover
Ten years ago, the great con known as the Bush tax cuts was signed into law.
We were told that the budget surplus left by the Clinton administration would be better off in the hands of the taxpayers. Those tax breaks were to stimulate the economy, create jobs and lead us all to the American Dream.
Of course, the story of the past decade has been much different:
The lion's share of the tax breaks were stuffed into the pockets of a small percentage of taxpayers. The top 10 percent of earners received 55 percent of the tax benefits; the top 1 percent alone grabbed 38 percent. And, at the tip top of the income scale, the top .01 percent of households snatched an average cut of $520,000, or 450 times the average break for a middle-income family.
The current unemployment rate of 9.1 percent is more than double the rate in the same month a decade ago. In more human terms, 13.7 million people are currently looking for work but can't find a job. And those figures are upwards of 76 percent higher if we include the under-employed and folks discouraged by a still-thin job market.
As for the American dream of white picket fences and a home to call your own, overall home foreclosures were two-and-a-half times above the 2001 rate by the end of 2010. Today, roughly 3.7 million homes are in danger of foreclosure.
Chart h/t U.S. Department of Housing and Urban Development, Historical Data
Policy-makers should be addressing the dire unemployment and foreclosure epidemics that plague our economy instead of focusing on the long run deficit. But it is worth mentioning that, for all the hubbub about the size of government and federal spending, the Bush tax cuts increased the deficit by $1.7 trillion between 2001 and 2008. And they remain the policy change responsible for the biggest share of our projected deficits for the next ten years.
It couldn't be more obvious; if you care about the deficit, end the Bush tax cuts. If you care about the economy, end the Bush tax cuts. If you care about suffering families who can't find a job getting forced out of their homes, end the Bush tax cuts. It's past time to begin getting our economy back on track. Ending a policy that lines the pockets of millionaires is the right place to start.
The results are in. The Bush tax cuts are a massive failure. Ten years is ten years too long. End the Bush tax cuts now.
Take Action - Bush Tax Cuts Anniversary
Do you think it’s time to raise taxes on millionaires and corporate tax dodgers?
June 7, 2011 marks the tenth anniversary of the disastrous 2001 Bush tax cuts. Those irresponsible tax cuts added $2.6 trillion to our national debt and went primarily to the wealthiest households in the country.
But a nationwide tax justice revolution is gaining steam. All over the country, people are demanding to know: If we can pay our taxes, why can't America's wealthy individuals and richest corporations pay their fair share?
Join United for a Fair Economy, Responsible Wealth, and our partners during the week of June 7 to demand that millionaires and billionaires pay their fair share. Here's how you can get involved.
PARTICIPATE IN OUR NATIONAL CALL-IN DAY ON JUNE 7:
Make three (3) calls to 888-907-1485, and ask to be connected with your representative and two senators.
- Tell them: It’s time to end the Bush tax cuts for the wealthy and increase tax rates for millionaires. No more budget cuts until millionaires and corporate tax dodgers pay their fair share.
JOIN A NEARBY EVENT OR CREATE YOUR OWN with the True Majority events database. You can also download an activist tool-kit that includes signs, talking points, Town Hall questions, and sample press releases and op-eds.
PROVIDE AN ORGANIZATIONAL ENDORSEMENT:
- Contact Sarah VonEsch at [email protected] and include your organization's name, contact person and his/her email.
SHARE THIS ALERT:
- Use email and social media to encourage your friends, family and colleagues to get involved.
- Blog about the need to end the Bush tax cuts for the wealthy as a way to raise revenue to stop budget cuts at the federal, state and local levels.
Our economy is still in tatters and the middle class is disappearing. But that's not stopping conservatives in Congress from fighting for more of what led to the economic meltdown in the first place. In fact, they want to give even larger tax cuts to the super-rich—all while slashing essential public services, environmental protections and attacking public employees.
We need to shut down these damaging proposals. Your support and participation are crucial to the advancement of economic justice.
Thank you for taking action!
Lee Farris
Federal Tax Policy Coordinator
United for a Fair Economy
617.423.2148 x133
P.S. For more information on the 10-year anniversary of the Bush tax cuts, see the following analyses:
- Citizens for Tax Justice: The Bush Tax Cuts After Ten Years (includes state-by-state figures)
- Economic Policy Institute: Tenth Anniversary of the Bush-era Tax Cuts
Endorsing organizations of the June 7th Days of Action include:
Business for Shared Prosperity | Every Child Matters | Friends of the Earth
Institute for Policy Studies | MoveOn.org | USAction
Wealth for the Common Good
New Report: Flip It to Fix It
States are facing their largest decline in revenue on record. The response from elected officials has been downright harmful, shortsighted, and economically unsound. Cutting to get out of a deficit is like digging to get out of a ditch. It puts everything we value at risk. And as we state in our new report—Flip It to Fix It: it doesn’t have to be this way.
By design, our state tax structures are designed to fail. Why? Because every state in the U.S. has a regressive tax structure, meaning it takes a greater share of income from low- and middle-income families than from the wealthy. In tough economic times, trying to raise adequate revenue through a regressive tax structure is like trying to squeeze water from a stone.
A new study, released today by the Tax Fairness Organizing Collaborative at United for a Fair Economy, asks the question: What if there was a solution to state deficits that would raise significant revenue, encourage investment, and create jobs—without cutting vital public services? And what if the revenue required by such a solution could be generated solely by making tax systems as fair as most Americans think they ought to be?
As this study demonstrates, this can be achieved by inverting each state’s tax structure. In other words, taking each state’s current distribution of state and local taxes and flipping it, with a pivot point at dead center (the 50th percentile). In this inverted state and local tax model, the wealthiest 20 percent pay the share of state and local taxes currently imposed on the least wealthy 20 percent, and vice-versa, with the fourth quintile also trading places with the second.
Every single state would benefit tremendously by inverting their existing tax structure. All combined, states would generate an additional $490 billion in revenue—immediately eliminating their deficits with cash to spare for investing in job creation and other stimulants to the economy. The flipped structure would be progressive, which is not only more economically sound, but also consistent with the majority of Americans’ perception of “fair.”
Read the full report in our resources section.
Three Books About the Causes & Consequences of Inequality
If you’re looking for a great book to deepen your thinking about the causes and consequences of inequality, here are three of my favorite reads of the last few months.
Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, by Paul Pierson & Jacob Hacker
Many progressives point to the election of Ronald Reagan as the great turning point in our economy, ushering in a new age of inequality, but that misses a much bigger story. In this eye-opening and insightful book, Pierson and Hacker document the dramatic shifts in the political landscape that took place in the decade prior to Reagan’s election. As unions were in decline, corporate America was organizing like never before, hiring armies of lobbyists and filling the coffers of political campaigns. By the late 70s, they were able to stop President Carter’s agenda dead it its tracks, effectively crippling his presidency. Pierson and Hacker’s book goes further by documenting the continuation of this trend through the 80s, 90s, and today. Taken in context, the recent Citizens United ruling and the assault on public sector unions in Wisconsin and elsewhere are the continuation of a long-term pattern that must be turned around. The core take-away from this book is that organizations matter… a lot. If we are to turn the tide back in our favor, we must organize a real movement from the ground up, because being right just isn’t enough.
The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard Wilkinson & Kate Pickett
The negative social consequences of inequality is fairly intuitive, but Wilkinson and Pickett take it to an entirely new level with hard data and great analysis. The book examines the way in which inequality, and the increased social stratification that goes with that, reaches deep down into the human biology, triggering primal fight-or-flight instincts, reducing trust levels, and increasing stress. Using statistical data comparing developed nations around the world and states within the US, they document clear correlations between a wide array of social indicators – including physical and mental health, obesity, crime, bankruptcy, and more – with higher levels of inequality. One clear message from The Spirit Level is that inequality is bad for everyone, including those at the top of the economic ladder.
Aftershock: The Next Economy and America's Future, by Robert Reich
Reich takes on inequality from a different perspective. Instead of arguing the morality or social implications of inequality, he focuses on the economic basics. Without a strong middle class, the economy stalls. Over the past few decades, middle class Americans have used various coping mechanisms to stay ahead despite stagnant wages for the bottom 90%, including shifting to two-income households and taking on debt, but these families have since hit a wall. He proposes numerous policy solutions to reverse the growing inequalities and revive the middle class, including a “reverse income tax” that actually pays out to anyone earning under $50,000, coupled with graduated rates for higher-income households topping out at 55%; taxing capital gains and dividends the same as wage income; and expanding public investments in mass transit, Medicare for all, and more. If you’re looking for a good book that explores the economic trends and growing divide of the last few decades, this may be the book you’re looking for.
Happy reading!
Fighting Bad Budgets with Horse and Buggy
The daunting budget deficits facing states across the U.S. are no joke, particularly when the well-being of our communities is on the line. But members of the Tax Fairness Organizing Collaborative are responding with innovative advocacy, using creativity in the face of potentially devastating slash-and-burn proposals.
Here’s how two states—North Carolina and Rhode Island—have taken matters into their own hands, employing creative approaches to their advocacy that engages people in an otherwise contentious process:North Carolina Goes ‘Back in Time’
In North Carolina, legislators are responding to the state’s revenue shortages with a proposed slash-and-burn budget approach. If passed, the state would lose tens of thousands of state jobs, including teachers, firefighters, and mental health workers.
In response, Together NC organized an innovative street theatre demonstration during the House vote on the budget, complete with a horse and buggy, period costumes, and street theater. Their message? A cuts-only approach will set the state back decades.
You know what they say: when the going gets tough, bring in the horse and buggy.
Together NC organized the protest this week during the House vote on the state budget. Here are the demonstration details from the group’s media release:
A group calling themselves the Back In Tyme Budget Players arrived wearing antiquated dress and traveling in a horse and buggy. While speaking from the steps of the General Assembly, they sent the message that the House budget will push North Carolina backward.
"The props and costumes are fun, but they're meant to convey a very serious message," said Rob Thompson, a coordinator of the Together NC coalition. "If we pass this cuts-only budget, it will set North Carolina back decades in terms of education, public safety and economic prosperity."
The group’s creative action was bold, attention grabbing, and provided a clear visualization of the group’s key advocacy message: North Carolina should take a more modernized approach to balancing the state’s budget.
Rhode Island Calls for Rebalancing
Creating a state budget can be contentious, messy, and downright confusing for those not actively involved in the process. Perhaps this is why Ocean State Action’s smart reframing of the state budget debate captured so much attention.
The group re-stated the state’s complicated budget challenges with a simple question: Would you rather raise taxes on the wealthiest Rhode Islanders or cut critical public services?
Here’s a summary of the group efforts from WBRU:
Ocean State Action wants lawmakers to raise taxes on the wealthiest Rhode Islanders to avoid more cuts to public services. The group pitched the proposal yesterday as an alternative to Gov. Chafee’s sales tax expansion. Executive Director Kate Brock says the state could raise $88 million next year with a 2 percent surtax on incomes over $500,000, and that the revenue could prevent funding cuts to schools, roadwork and public safety.
The group’s smart and simple reframing of the budget debate, combined with a series of rallies and actions in the state capitol, garnered a great deal of media attention in Rhode Island and throughout New England.
With 44 states and the District of Columbia projecting budget shortfalls for fiscal year 2012, the challenges facing state legislators in every corner of the U.S. are daunting. But as these budget battles wage on, it's refreshing to see activists responding with smart and creative advocacy that feels accessible, understandable, and engaging to folks who have the most at stake.
As North Carolina and Rhode Island demonstrate, it’s possible to acknowledge the seriousness of an issue in a way that attracts the public’s attention. Simplicity, common sense, and creativity are never out of order.
Photo credits: NC Justice Center's Photostream and GoLocal Prov
Undocumented Workers Pay More in Taxes than GE
The problem with President Obama's commitment to "comprehensive immigration reform" is that, like George W. Bush's, his measures thus far also antagonize immigrants – documented or not. But why antagonize working immigrants during this severe an economic crisis? Even undocumented workers are significant contributors to the U.S. economy, having paid over $11 billion in taxes last year.
The Immigration Policy Center, in partnership with our friends at the Institute on Taxation and Economic Policy, released data that urges a more cooperative approach – versus a punitive one – to dealing with immigration policy.
[H]ouseholds [headed by undocumented immigrants] paid $11.2 billion in state and local taxes. That included $1.2 billion in personal income taxes, $1.6 billion in property taxes, and $8.4 billion in sales taxes. […]
These figures should be kept in mind as politicians and commentators continue with the...debate over what to do with unauthorized immigrants already living in the United States. In spite of the fact that they lack legal status, these immigrants—and their family members—are adding value to the U.S. economy; not only as taxpayers, but as workers, consumers, and entrepreneurs as well.
Undocumented workers are certainly contributing more to the public coffers than many U.S. corporations, including General Electric, which actually claimed billions in tax benefits last year. All without a single 'thank you' to U.S. taxpayers, including the undocumented.
These revelations prompt larger questions about how we relate to one another in this country. Periods of economic strife inevitably lead to the scapegoating of one group or another, be they immigrants, people of color, teachers or union workers.
It's important to recognize that our "immigration" problem is about much more than immigrants. It's about labor. It's about globalization and foreign policy. It's about race, culture and more. It's a complex tangle of issues that will require careful and holistic consideration. Progress will not be made with finger-pointing policies.
One thing's for sure: this country needs revenue. It makes sense that we avoid making things worse by attacking a population that's clearly supporting that need.
Stay tuned: President Obama will address the nation from the U.S.-Mexico border in El Paso, TX, laying out his framework for comprehensive immigration reform on Tuesday, May 10, 2011 at 3:30 p.m. (EST).
WSJ Columnist Confuses Guilt with Responsibility
In Friday's Wall Street Journal (p. A15 of the print edition), columnist Stephen Moore does his best to marginalize and discredit the growing chorus of high-wealth individuals, including members of UFE's Responsible Wealth project, who support raising taxes on wealthy people like themselves. But his best is little more than a collection of weak arguments and name-calling.
I wish I had a dollar for every time a wealthy liberal has declared he thinks he should pay more taxes. That list includes Warren Buffett, George Soros, Bill Gates Sr., Mark Zuckerberg and even Barack Obama, who now says that not only should rich people like him pay more taxes, they want to pay more. "I believe that most wealthy Americans would agree with me," he said of his tax-hike plan. "They want to give back to the country that's done so much for them."
The idea that the nation's primary wealth and job creators—i.e., the people who carry the bulk of the tax load—aren't doing enough for the country is a bit insulting. But the president is right that there is a seemingly endless number of terribly wealthy, guilt-ridden individuals who want Americans to pay more taxes.
Okay, let's get this much straight. It's not about "guilt." It's about "responsibility" and a deeper understanding of what makes wealth possible. Responsible Wealth members understand that their wealth is not in spite of, but because of our tax system and the investments its makes possible. Abigail Disney made this argument in a USA Today column last summer. Without a taxpayer funded interstate highway system, there would be no Disneyland. Without our courts, no copyright protection for Mickey Mouse. Without our publicly funded education system, no creative artists filling Disney Studios.
The simple fact is, the public investments made possible through our tax dollars are not the enemy of prosperity, but the foundation upon which economic prosperity is built. Bill Gates noted the taxpayer funded investments that led to the creation of the internet, without which, Microsoft would be a very different corporation today. Jerry Fiddler, whose Wind River Systems company made the embedded software for NASA's Mars Rovers, readily acknowledges the role taxpayer-funded investments played in his business success. Judy Pigott, whose family wealth comes from the manufacture of Peterbilt and Kenworth trucks, would be telling a very different story without the federally-funded interstate highway system. The list goes on.
Despite the assertions of Moore and others who hold his anti-government views, taxes raised to fund investments in the common good are not taken out of the economy, but rather moved from one part of the economy to anther to better meet our nation's priorities. Government expenditures, whether it is building a school, investing in high-speed rail, or aiding workers displaced by plant relocations, are just as much a part of the economy – stimulating economic growth and jobs – as a wealthy person deciding to buy a fourth home.
Government, as aptly described by President Abraham Lincoln, is simply a vehicle for doing things together that we cannot as easily do as individuals – whether that is pushing at the outer bounds of our shared knowledge through public research and exploration, leading our nation into a sustainable future through green energy and transportation investments, or sowing the seeds of prosperity for the next generation through a publicly-funded education system available to all, not just those who can afford it.
A clearer view of the symbiotic relationship between public investments and economic prosperity helps us understand how public investments yield so much more economic bang-for-the-buck than tax cuts. In a report from Moody's, Mark Zandi notes that each dollar the federal government gives away by making the Bush income tax cuts permanent yields about 29 cents in economic stimulus. By comparison, each dollar the federal government spends on infrastructure investments yields $1.59 in economic stimulus. Even more, each dollar of unemployment benefits yield $1.64 in economic stimulus, but that's another story (about the importance of a strong middle class to keep our economy going).
Moore spends most of his column though trying to make the weak argument that if these wealthy individuals want to pay more, they're nothing stopping them from writing a check to the IRS. Well, we've heard that one before... Just last month in fact from Sen. Orin Hatch. The short answer is that taxes are not charity. As former Supreme Court Justice Oliver Wendell Holmes once stated so eloquently, "Taxes are what we pay for civilized society." For the long answer, check out the post we wrote in response to Sen. Hatch's comment.
Stop Massachusetts Budget Cuts | May 5 | State House
Please join us in support of legislation that would prevent over one billion dollars in budget cuts in Massachusetts.
WHAT: Joint Revenue Committee Hearing
WHEN: Thursday, May 5, 2011, 10:00 a.m. – 3:00 p.m.
WHERE: Massachusetts State House, Gardner Auditorium
An Act to Invest in Our Communities is a legislative proposal that would increase taxes on only the most financially well-off households, raising $1.2 billion in additional revenue to plug a significant portion of our state's $2 billion budget shortfall.
We can’t cut our way out of this deficit. We need continued investments in our schools, our children and our communities to rebuild our economy. This will require new revenue – raised in the fairest way possible – that will help maintain essential public services relied on by all Massachusetts residents.
A broad and diverse statewide coalition is working together to pass An Act to Invest in Our Communities. Hundreds of supporters are expected to fill the Gardner Auditorium hearing room on May 5, and we hope you'll be there with us.