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Tax Reform, more trickle down shit
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http://www.huffingtonpost.com/robert-l-borosage Huffington Post

Bipartisan Blight:  The Great Tax Reform Mirage

David Brooks is always a good marker of establishment conventional wisdom. Today, in a column grandly entitled, "A Tax Reform Vision," Brooks celebrates the growing beltway consensus on tax reform, suggesting that a bipartisan accord could be built around lowering tax rates, simplifying the code, and erasing most tax deductions and loopholes. He touts a bill put together by Senators Ron Wyden (D-Oregon) and Judd Gregg (R-New Hampshire) that is far more sensible than the more extreme version offered up by the co-chairs of the president's deficit commission. It would lower rates, eliminate loopholes, and end with a tax code that is a bit more progressive and raises a bit more money. If the Republican wingnuts will sign on -- although there is no sign that they will -- progress could be made. Irresistible.

Only we really have played this game before. In the mid 1980s, under Ronald Reagan, civic minded Senator Bill Bradley joined with reformers to fashion a similar deal -- lower rates, eliminate egregious tax loopholes and deductions, in a revenue neutral fashion. The establishment rallied; the bill passed.

Only while the deductions were eliminated, the lobbies that created them were not. They went to work. The loopholes, tax expenditures, various dodges returned. Now the tax code is so riddled with them, that beltway pundits can call for playing the same game once more.

Only while the loopholes returned, the lower rates stayed largely in place. The effect? By 2006, the top 1 percent of Americans (average net worth of about $15 million) pays rates fully one third lower than they did in 1970. The top 0.01 percent -- we're talking multimillionaires here -- pays less than half as large a share of their income. This has had staggering effect. Jacob Hacker and Paul Pierson show in their compelling study, Winner Take All Politics, that in 2000, the top one-tenth of 1 percent of Americans now capture a stunning 7.3 percent of all national after-tax income. If they were paying taxes at the same rate as they did in 1970, they would capture "only" 4.5 percent in after tax income. Over one third of their added after-tax income share comes from lower taxes.

We now suffer the worst inequality we've witnessed since the eve of the Great Depression. This inequality undermines our democracy, as concentrated money becomes concentrated power. But it also undermines our economy -- when the few capture so much, the many are strapped, demand for goods declines, companies have over capacity, workers get laid off, the economy suffers.

Alan Simpson, the egregious co-chair of the President's Commission, postures his plan as courageous in opposition to the "greediest generation" that would make no sacrifice. But his plan for deficit reduction begins by lowering top end tax rates once more, playing the same game again. And it seeks budget balance by cutting spending far more than by raising revenues.

Simpson can't bear to level with Americans about the real deal. The inescapable fact is that we need to be investing more at the federal level, not less. Our core infrastructure is literally falling apart. Our schools are unable even to provide the basics to every child. Our colleges are growing less not more affordable, even as advanced training or education becomes ever more important. We're defaulting in the crucial competition to gain leadership in the new green industrial revolution that will define the growing markets of the world. Our safety net -- support for the poor, training and support for the unemployed, affordable and skilled child care for working mothers, retirement security for the elderly -- is shamefully inadequate.

We need very different priorities, far greater discipline, much less waste, but we also need tax reforms that raise revenue. We need to raise rates on the top, tax the wealthiest Americans as they used to be taxed, and use that money to rebuild the economic infrastructure of this country, generating the growth that is the prerequisite to bringing down the debt.

These are simple truths. They are largely unspeakable in conservative Washington, and certainly among a beltway establishment comfortable with the extremes of wealth and cushioned against the terrors of economic recession and insecurity.

Do we have to fall for the same game again? Charley Brown is a lovable chump. Each year, Lucy promises to hold the ball for him to kick. Each year, he trusts her, runs up and takes a mighty swing. Each year, she pulls it away and he falls on his back. We adore him for his trust, his abiding innocence, and his faith in the good will of others. He's a lovable chump. But he ends on his back. We don't really need to fall for the con again do we?

\Robert L. Borosage is the founder and president of the Institute for America’s Future and co-director of its sister organization, the Campaign for America’s Future. The organizations were launched by 100 prominent Americans to develop the policies, message and issue campaigns to help forge an enduring majority for progressive change in America.


Mr. Borosage writes widely on political, economic and national security issues. He is a Contributing Editor at The Nation magazine, and a regular blogger on the Huffington Post. His articles have appeared in The American Prospect, the Washington Post, the New York Times and the Philadelphia Inquirer. He edits the Campaign’s Making Sense issues guides, and is co-editor of Taking Back America (with Katrina Vanden Heuvel) and The Next Agenda (with Roger Hickey).


Borosage is the founder and board chair of Progressive Majority, an organization devoted to recruiting and training progressive to run for state and local office. He is co founder and chair of ProgressiveCongress.org, an organization that provides a bridge between progressives in the Congress and the progressive community. He serves on the board of Worki

 

 

Why the Obama Tax Deal Confirms the Republican World View

December 8 2010 at Huffington Post at http://www.huffingtonpost.com/robert-reich/post_1408_b_794177.html?utm_source=DailyBrief&utm_campaign=120910&utm_medium=email&utm_content=FeatureMore&utm_term=Daily+Brief

 

Apart from its extraordinary cost and regressive tilt, the tax deal negotiated between the president and the Republicans has another fatal flaw:  tt confirms the Republican worldview.

Americans want to know what happened to the economy and how to fix it. At least Republicans have a story -- the same one they've been flogging for thirty years. The bad economy is big government's fault and the solution is to shrink government.

Here's the real story. For three decades, an increasing share of the benefits of economic growth have gone to the top 1 percent. Thirty years ago, the top got 9 percent of total income. Now they take in almost a quarter. Meanwhile, the earnings of the typical worker have barely budged. {Actually it is about half in buy power of what it was in the 70s.  The accumulative distortion of the rate of inflation hides makes all economic numbers grossly false--see http://www.skeptically.org/eds/id8.html} 

The vast middle class no longer has the purchasing power to keep the economy going. (The rich spend a much lower portion of their incomes.) The crisis was averted before now only because middle-class families found ways to keep spending more than they took in -- by women going into paid work, by working longer hours, and finally by using their homes as collateral to borrow. But when the housing bubble burst, the game was up.

The solution is to reorganize the economy so the benefits of growth are more widely shared. Exempt the first $20,000 of income from payroll taxes, and apply payroll taxes to incomes over $250,000. Extend Medicare to all. Extend the Earned Income Tax Credit all the way up through families earning $50,000. Make higher education free to families that now can't afford it. Rehire teachers. Repair and rebuild our infrastructure. Create a new WPA to put the unemployed back to work.

Pay for this by raising marginal income taxes on millionaires (under Eisenhower, the highest marginal rate was 91 percent, and the economy flourished). A millionaire marginal tax of 70 percent would eliminate the nation's future budget deficit. In addition, impose a small tax on all financial transactions (even a tiny one -- one half of one percent -- would bring in $200 billion a year, enough to rehire every teacher who's been laid off as well as provide universal preschool for all toddlers). Promote unions for low-wage workers.

But here's the obstacle. As income and wealth have risen to the top, so has political power. Money is being used to bribe politicians and fill the airwaves with misleading ads that block all of this.

The midterm elections offered dramatic evidence. NBC news reported shortly after Election Day, for example, that Crossroads GPS, one of the biggest Republican secret-money organizations, got "a substantial portion" of its loot from a group of extremely wealthy Wall Street hedge fund and private equity managers. Why would they sink so much money into the midterms? Because they've been so strongly opposed to a proposal by congressional Democrats to treat the earnings of hedge fund and private equity managers as ordinary income rather than capital gains (subject to only a 15 percent rate).

In other words, the problem isn't big government. It's power and privilege at the top.

So another part of the solution is to limit the impact of big money on politics. This requires, for example, publicly-financed campaigns, disclosure of all sources of political spending, and resurrection of the fairness doctrine for broadcasters.

It's the same power and privilege that got the Bush tax cuts in the first place, and claimed the lion's share of its benefits. The same power and privilege that got the estate tax phased out.

Get it? By agreeing to another round of massive tax cuts for the wealthy, the president confirms the Republican story. Cutting taxes on the rich while freezing discretionary spending (which he's also agreed to do) affirms that the underlying problem is big government, and the solution is to shrink government and expect the extra wealth at the top to trickle down to everyone else.

Obama's new tax compromise is not only bad economics; it's also disastrous from the standpoint of educating the public about what has happened and what needs to happen in the future. It reinforces the Republican story and makes mincemeat out of the truthful one Democrats should be telling.

Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

Biography and bibliography of Reich at http://en.wikipedia.org/wiki/Robert_Reich

 

 

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Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."