Our current tax system rewards wealth over work by taxing capital gains and dividend income at a much lower rate than salaries and wages. UFE is calling for the restoration of the tax rates on capital gains and dividends to the same rate applied to income earned from work. Various proposals have been put forth to move in that direction.
1. President Obama's proposal to roll back
the Bush income tax cuts for the wealthiest households. His proposal would restore the top income tax rates and the capital gains rate to their pre-Bush levels for those earning over $250,000. If the Obama plan were law, the top rate on regular income would be returned to 39.6 percent, while the top rates for dividends and capital gains would be 20 percent. This is a step in the right direction, but it only partially restores capital gains and dividends to the same tax rate as wages. First, capital gains and dividend income below the $250,000 threshold would still be taxed at a rate much lower than income earned from work. For income over that threshold, capital gains and dividends would still be taxed at nearly half the rate on income from work (20 percent vs. 39.6 percent).
2. Rep. Jan Schakowsky's Fairness in Taxation Act (H.R. 1124). This bill would create a new set of income tax brackets of 45% through 49 percent for income in excess of $1 million. The top rate of 49 percent would apply only to the very exclusive group of Americans with income over $1 billion a year. Capital gains and dividend income under the $1 million threshold would still benefit from the preferential rate, but similar income over that threshold would be taxed at full parity with wage and salary income. The Fairness in Taxation Act, including both the income tax rates and the capital gains and dividend rates, would raise $78 billion.
3. The Congressional Progressive Caucus' “People’s Budget.” This plan includes, among other provisions, taxing capital gains and dividends as ordinary income. The bipartisan Deficit Commission included the exact same measure in its December 2010 recommendations.
What is a loophole? Can you hold one? And if you remove them from state budgets, what could we we actually pay for? Here's a radically moderate perspective on loopholes via video, courtesy of the Washington Bus, an organization that empowers young people through hands-on democracy.
Originally published by OtherWords.
So many governors are hammering their budgets with a “we’re broke” message these days that it’s amazing our country hasn’t shattered into a thousand separate islands. More and more, however, rational voices are correctly asserting that we’re not broke.
The problem isn’t that the United States is out of money. It’s that a tiny sliver of households are under-taxed. The richest 10 percent of Americans own almost three-fourths of the country’s total wealth. Astoundingly, the most affluent 1 percent of Americans own more than one-third of our total wealth.
Many Republican lawmakers, along with governors like Wisconsin's Scott Walker and Ohio's John Kasich, bizarrely think that they can erase deficits with tens of billions of dollars in budget cuts and tax breaks for corporations and wealthy people who don’t need them. They’re ignoring the greatest economic returns available, which are provided by public investments, federal aid to states, and even unemployment benefits. Instead of helping save the middle class, they're propelling us toward a busted, plutocratic disaster.
The GOP's deficit obsession isn't just misguided. It turns a blind eye on the struggles of low- and middle-income Americans. In contrast, Rep. Jan Schakowsky’s sensible Fairness in Taxation Act would raise taxes on millionaires and billionaires, which better serves the American majority.
Currently, families earning $374,000 pay the exact same federal income tax rates as families with multi-million-dollar incomes, or even the handful who earn a billion bucks every year, such as the heirs of Walmart's founder. The lifestyles of the ultra-wealthy wouldn’t change in the least if they had to pay moderately higher income taxes. And it would boost our national economy.
The Fairness in Taxation Act calls for establishing five new tax brackets for incomes between $1 million and $1 billion, with rates ranging from 45 percent to 49 percent.
The Illinois Democrat's bill would also address an absurd aspect of our tax system, which wrongly favors wealth over work. Today, money earned through working nine-to-five or the graveyard shift is taxed at a higher rate than money obtained through windfalls. Capital gains, dividends, and other investment income derived from pre-existing wealth shouldn't be taxed at rates lower than income earned through work.
Three-quarters of all stocks and mutual funds owned by U.S. taxpayers belong to the richest 10 percent of American households. Therefore, some of the most affluent Americans actually pay lower effective tax rates than many middle-class Americans.
Take, for example, a weasel like Lloyd Blankfein, CEO of Goldman Sachs. He raked in just over $13 million in 2010 (excluding his bonus of some $12 million worth of shares in his company). Of that $13 million, only his base salary of $600,000 will be taxed according to the federal income tax rates. The remaining $12.4 million will be taxed at a top rate of 15 percent. Unfortunately, Blankfein is just one example of the kind of gross inequity that exists in the current tax system.
A century ago, tax policies adopted during President Teddy Roosevelt's administration were guided by sound principles that stand in direct contrast to those of today’s Republicans.
“No man should receive a dollar unless that dollar has been fairly earned,” explained Roosevelt in a 1910 speech. “Every dollar received should represent a dollar's worth of service rendered--not gambling in stocks…I believe in a graduated income tax on big fortunes."
The Fairness in Taxation Act takes aim at the same inequities Teddy Roosevelt--a Republican--identified long ago. If it were enacted this year, it would generate $78 billion that could fund jobs and social programs that Americans need now more than ever.
Repeat after me: we're not broke. It’s time to mandate that the wealthiest members of our communities share in the sacrifice of the economic recovery and pay their fair share. The Fairness in Taxation Act offers a clear path in that direction.
When corporations acquire too much power and influence, it threatens the air we breathe, the water we drink, and the health of our democracy. Amid the rising power and political muscle of major corporations in recent decades, the need to counter greedy and harmful corporate practices has grown exponentially.
The Rise of CEO Pay
Executives of corporations receive financial compensation often as a mixture of salary, bonuses, shares of the company stock, etc. Over the past 60 years, executive pay has increased astronomically. In fact, CEO pay in 2009 had more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century. (link: Institute for Policy Studies)
The contrast between executive pay and average worker pay is stunning. In 2009, CEOs of major US companies averaged 263 times the pay of typical American workers. Back in the 1970s, CEOs made 30 times average worker pay. To make matters even more galling, taxpayers subsidize these outlandish executive salaries to the tune of more than $20 billion a year through tax and accounting loopholes.
In 2010, Congress passed major health care and financial reform bills, both of which contained small executive compensation related policies. The health care reform bill capped the tax deductibility of health insurance executive pay, and the financial reform bill required that all firms report CEO-worker pay ratios. Much more needs to be done and there’s no shortage of good ideas to reign in outsized executive compensation.
One of the key tools for speaking out against rising CEO pay and harmful corporate practices is shareholder activism. In addition to legislation, it is one of the most powerful tools for advancing corporate reforms.
Corporations are owned by shareholders, who can be individuals or institutions (such as mutual funds). If certain legal and regulatory requirements are met, shareholders are permitted to offer resolutions that get voted on at a corporation’s annual meeting. Shareholder resolution issues can be financial – e.g., executive compensation, predatory lending practices – or non-financial – e.g., board diversity, divestment from particular countries.
Shareholder resolutions are only advisory, meaning that even if a resolution passes, it is not required to be implemented by the corporation. However, resolutions often put unwanted public attention and pressure on corporate leaders and, thus, are used as leverage to win shareholder demands. Read more about shareholder activism here.
Rep. Jan Schakowsky (D-IL) has introduced a bill that would ensure millionaires and billionaires contribute their fair share toward rebuilding and stabilizing our economy. Now, we need your support to move the bill forward. Please call your Representative and urge him/her to support the Fairness in Taxation Act! (Click here to find your Rep's contact info.)
Income inequality in the U.S. has reached levels not seen since the Great Depression. The policies that made that possible have also created unprecedented disparities of wealth. Today, the top 10 percent of households owns three-fourths of the country's total wealth, and the top one percent alone owns 34 percent!
The Fairness in Taxation Act would generate significant revenue to fund vital public services and infrastructure, while also reducing economic inequality.
Currently, the top tax bracket begins with incomes of $373,000 or more. In essence, households with incomes of several hundred thousand dollars are paying the same rates as those with multi-million or multi-billion dollar incomes.
The Fairness in Taxation Act would add new tax brackets for income starting at $1 million and ends with a $1 billion bracket. The new brackets would be:
- $1 - $10 million: 45%
- $10 - $20 million: 46%
- $20 - $100 million: 47%
- $100 million - $1 billion: 48%
- $1 billion and over: 49%
The bill would also tax capital gains and dividend income as ordinary income for those taxpayers with income over $1 million. If enacted in 2011, the Fairness in Taxation Act would raise more than $78 billion.
This bill makes perfect sense. It's a fair and sensible solution to our budget hardships, as it affects only those who can contribute more toward the greater good of our country without sacrificing their livelihoods. That's precisely why it has garnered the support of many wealthy taxpayers, including members of UFE's Responsible Wealth project.
Here's what some high-wealth supporters of the bill had to say:
This bill has been introduced at a time when conservative officials across the country are calling for drastic cuts to education, health care and myriad other programs that will further affect our social and economic integrity.
American workers have suffered enough. We need the wealthiest members of our communities to share in the sacrifice of the economic recovery. The Fairness in Taxation Act offers a superior alternative to more painful budget cuts.
It's imperative that we speak out, together and as loudly as possible, in support of this bill and other progressive tax initiatives. With your support and the support of others like you, tax justice will always stand a fighting chance.
A strong federal estate tax is a crucial to achieving greater economic and racial equality. The estate tax reduces concentrated wealth by ensuring that a portion of America's greatest fortunes are used to generate needed revenue to fund vital services, instead of being simply passed from generation to generation in predominantly white families.
What is the estate tax?
The estate tax is a tax on the transfer of assets at death. When someone dies, his or her assets (the "estate") are distributed to heirs. If the total value of the estate is larger than the tax-exempt amount (currently $5.25 million for individuals and $10.5 million for couples), an estate tax is imposed on everything above the exemption before the remaining assets are distributed. Any amount of an estate given to a spouse or charity is tax exempt.
Who pays the estate tax?
The estate tax is reserved only for society's wealthiest elite. In 2013, just 0.14% of Americans (less than 2 out of every 1,000 people who die) are expected to owe any estate tax.
How much does the estate tax raise every year?
It's estimated the estate tax will generate about $200 billion in the next 10 years under current law.
What about farms and small businesses?
It's estimated that only 20 small businesses and farm estates nationwide will owe any estate tax in 2013. The Tax Policy Center estimates that these 20 estates will owe only 4.9% of their value in tax, on average. Repeal of the estate tax or exempting farms completely will only encourage further concentration of farm ownership, which reduces competition. An unlimited exemption for farm assets could create a giant loophole from the estate tax because wealthy individuals who expect to owe estate tax could use much or all of their wealth to buy farms before they die.
What makes for a good estate tax?
UFE's Estate Tax Campaign is calling on Congress to stop enriching the inheritors of wealthy millionaires and billionaires by reinstating a robust estate tax. A strong estate tax should raise significant revenue to reduce the deficit and fund vital services. It should only be paid by the top 1% of estates, raising more money from the wealthiest estates through a graduated rate structure. Check out our 2012 Responsible Estate Tax Proposal for more specifics.
Over the past two weeks, we’ve been inspired by the mass mobilization of passionate people in Wisconsin and Egypt. This weekend, the momentum is mounting and progressive rallies are popping up all over the U.S. Here's everything you need to know to get in on the action.
This weekend, progressive groups across the country are staging a series of demonstrations and rallies on Saturday to rail against corporate greed, show solidarity with Wisconsin, and oppose cuts that would harm our communities.
Take a stand this weekend by joining the millions of progressive protesters who will hit the streets in their communities. Here's the breakdown of demonstrations happening this weekend:
Rally to Save the American Dream
Noon on Saturday @ Statehouses across the U.S.
The rallies oppose tax breaks for corporations and the very rich. Protesters are calling for an end to the attacks on workers' rights and public services, investment to create decent jobs for the millions of people who desperately want to work, and that the rich and powerful pay their fair share.
U.S. Uncut Rallies
Saturday in 37 cities and counting
US Uncut is targeting the mega-banks that pay zero taxes, even while they wrecked the economy and accepted billions in taxpayer funded bailouts. Rallyers across the U.S. are calling on corporations to pay their taxes, just as hard-working Americans do.
Worker Solidarity Rallies
Throughout the week in cities across the U.S.
Show your solidarity with Wisconsin workers by attending one of these demonstrations organized by Jobs with Justice.
As our Guide to Political Protests infographic demonstrates, no protester is ever fully dressed without a great visual aid. Here are a few rally-ready printable posters courtesy of UFE. Print, share, and wave with pride.
It’s July 2010, and organizers from 10 state-level grassroots groups have traveled to Washington, D.C. Rob Brown of Opportunity Maine is at the front of the room addressing the crowd. “Firefighters and other local law enforcement are key allies in property tax-cap campaigns,” Brown says, as listeners scribble in notebooks and clack on laptops. “Their perspective tends to be universally appealing to even the staunchest skeptic.”
At the event, Brown shared best practices and lessons from Maine’s successful campaign to defeat a property tax-cap ballot initiative with leaders of grassroots state tax-fairness organizations from across the country. All groups are members of the Tax Fairness Organizing Collaborative (TFOC), a coalition of 28 grassroots groups in 24 states working to promote progressive-tax reform. Progressive taxes, such as the federal income tax, require upper-income people to pay more of their income in taxes than those with lower-incomes. This is different from a flat tax, such as a sales tax, which applies the same tax rate to all individuals regardless of income level. Thus, flat taxes take a higher portion of income from low-income people than from high-income people.
The TFOC is a project of United for a Fair Economy, a national economic-justice advocacy organization. The TFOC operates in stark contrast to the brassy, anti-tax, antigovernment Tea Party. The TFOC believes that government enhances quality of life and that collecting government revenue through taxes is a necessity that should be done fairly, responsibly, and through policies that reflect our society’s values.
In some communities, organizing work to promote tax fairness has taken place for decades. But in early 2000, the movement came to a head, following the bursting of the technology bubble and waning government support for public services. As more people felt the effects of severe budget cuts and imbalanced tax policies, the movement gained momentum. By 2004 the TFOC launched to strengthen state-level efforts and facilitate connectivity across state lines. The TFOC has filled an important role in the progressive movement by providing a national infrastructure for tax-fairness organizers to collaborate, share best practices, problem-solve, and learn the latest in communications from pollsters and researchers. Through the TFOC, grassroots leaders regularly convene in affinity groups to tackle common issues, such as no-income-tax states, conservative states where taxes are limited, and states fighting corporate tax loopholes. The emphasis on grassroots organizing distinguishes the TFOC from other progressive tax-policy organizations and networks.
In the states, the tax fairness movement is firmly in place. And the work is more important than ever. From New York to Nevada, grassroots organizations have led the fight for progressive and adequate revenue to support the schools, bridges, parks, and other public resources that keep our communities strong. To a large extent, these organizations are part of coalitions that include teachers, seniors, human-service associations, community organizations, unions, faith-based organizations, and various nonprofit advocacy groups. A snapshot of the work taking place in states across the country paints a hopeful picture:
- Washington. Washington Community Action Network has led the field campaign to pass I-1098, a November 2010 statewide ballot initiative to cut property taxes and taxes on small businesses to benefit the middle class and establish a high-earners income tax for the wealthiest 1.2 percent of households (that is, families earning more than $400,000 annually, or individuals earning more than $200,000 a year).
- Alabama. Alabama Arise has worked to remove the state sales tax from grocery purchases and to pay for it by eliminating the state tax deduction for federal taxes paid, which benefits primarily the wealthy.
- Colorado. The Colorado Progressive Coalition (CPC) has co-led the fight to defeat three measures on the ballot in November 2010 that would cut state and local taxes, fines, and fees and prevent the funding of long-term infrastructure projects. CPC plays an integral part in the campaign to defeat these initiatives by running the fieldwork operation, coordinat- ing messaging throughout the state, and providing community-level education.
- Tennessee. Tennesseans for Fair Taxation’s overarching goal is to modern- ize the state’s tax system. This includes working to reduce the general sales tax, eliminate the tax on food, and implement a personal income tax with generous exemptions for low-income families.
- Nevada. The Silver State has been hit hard by the recession, unemployment, and the foreclosure crisis, particularly because of its long-standing reliance on gaming taxes and regressive sales taxes. The Progressive Leadership Alliance of Nevada advocates creating new sources of revenue to support critical public services, including extraction taxes on the state’s gold-mining industry.
In communities across the country, great grassroots work is happening, but the challenges remain acute. As more families are having trouble making ends meet, countering the anti-tax rhetoric is particularly challenging. But we all have a vested interest in our government’s tax system, since fair and adequate revenue is critical for our communities to thrive. And through the tax fairness movement, state-level grassroots organizations and their allies are working to rebuild—from the bottom up—a more progressive tax system that reflects values of fairness, responsibility, and sustainability.
Karen Kraut is a coordinator at the Tax Fairness Organizing Collaborative. Shannon Moriarty is the TFOC’s communications director.
Learn more about these TFOC member groups:
By Shannon Moriarty and Karen Kraut. This column appeared in the Fall 2010 issue of The Nonprofit Quarterly.
This week, Massachusetts residents have an opportunity to advance the movement for economic justice in the Bay State by urging their state representatives and senators to support the Higher Education Transparency Act.
Massachusetts' private colleges and universities, which are designated as non-profit organizations, enjoy tax exempt status while also receiving direct federal and state subsidies. That's because of their primary functions—to educate and to provide opportunities and services to their communities.
And yet, we too often witness the same taxpayer-subsidized institutions—some with multi-billion dollar endowments—engaging in profit-motivated behaviors, such as tuition hikes, casino-like investing and layoffs.
Also, as this rececession forces average American workers and their families to "tighten their belts," the leaders of some of these colleges and universities are being paid over a million dollars a year.
Economic recovery requires shared sacrifice.
This bill would strengthen the financial disclosure requirements for Massachusetts’ private, non-profit colleges and universities by mandating more thorough reporting on employee compensation; how endowments are invested; agreements with outside consultants, and the total tax subsidies they receive.
Additionally, it would give the public and the legislature a way to evaluate the financial choices being made by institutions of higher learning, and the values under which they operate.
Here is a summary of the provisions of the Higher Education Transparency Act:
- Affects private, nonprofit colleges and universities and their related organizations who have investments (defined as value of, not interest on) or real property over $10 million dollars;
- Requires the schools to calculate the received benefit from all tax exemptions;
- Mandates individual conflict-of-interest disclosures by trustees or directors of the institution;
- Mandates disclosure of payments of greater than $150,000/year to outside individuals or firms for advice or services;
- Mandates disclosure of payments of greater than $150,000/year from outside individuals or firms for advice or services;
- Mandates disclosure of the names and titles of anyone making more than $250,000 year;
- Requires the Attorney General to set the method and scope by which tax calculations and disclosures are done;
- Requires disclosure of the names, amounts, and descriptions of services provided to and from vendors.
Our friends at SEIU Local 615, which represents janitors, security workers, and other property service workers in MA, RI, and NH, are leaders in the fight for this rule change to hold private, non-profit colleges and universities in Massachusetts accountable. Visit their campaign page for more ways to get involved.
If you want to add your voice to this campaign, be sure to call your elected officials by Friday, February 4th! (Click here to find your elected officials.)
Austerity is the political buzzword these days. As politicians from both parties are jumping on the “starve the beast” bandwagon, few are considering the long-term impacts of the approach. What seems like tightening the belt today will likely cost us much, much more down the line.
On the subway this morning, when I grabbed an issue of the Metro for my half hour ride to work, this headline stopped me in my tracks: "HIV/AIDS funds take steep cuts in proposal."
Deval Patrick, a Democrat, and the only Black Governor in the country, had recently announced his proposed 2012 budget. In it, HIV/AIDS funding takes a whopping $2 million hit. That’s the largest proposed cut to HIV/AIDS funding in 20 years!
To make matters worse, the burden of these cuts would be disproportionately felt by communities of color. The article pointed out that Blacks and Hispanics each make up only six percent of the state's population. Yet, Blacks comprise 28 percent of HIV/AIDS patients and Hispanics 25 percent.
Sadly, this is right in line with the findings of United for a Fair Economy’s 2011 State of the Dream report: "Austerity for Whom?", released just last week. It’s shocking that here, in the liberal Commonwealth of Massachusetts, a proposed roll back of necessary programs will so disproportionally disadvantage people of color.
The most frustrating part of Governor Patrick’s proposed slashing to HIV/AIDS program budget is that, in the long run, it won’t save much money at all. In fact, it will probably cost us more. Emerson Miller, a program manager for AIDS Action, points out in the article that the investment in HIV/AIDS prevention and treatment actually "saved the state millions of dollars in potential health care costs over the last 10 years."
In other words, investing $2 million dollars in the preventative health of Massachusetts residents today will save us millions in treatment over the next decade. Not to mention preventing pain and sickness for a whole lot of people. That seems like a no-brainer.
Instead, deficit hawks in both political parties are supporting the “starve the beast” approach. This, combined with the lack of political will to raise revenue by restoring taxes on the top five percent, means that the rest of us will pay more down the line. And low-income folks—particularly people of color—well, they will just die sooner.
Austerity should mean cutting unnecessary government spending. Not eliminating smart investments in the health of our people and our communities.