Time To Shift the Tax Burdon Back

by Dollars and Sense

A new report from the Institute for Policy Studies shows how the rich have shifted the tax burden onto the backs of workers over the past fifty years, and why we need to reverse the trend.

Download the full report here.

Here are the highlights:

Washington, D.C. - America's highest-income taxpayers, analysts at the Institute for Policy Studies detail in a new Tax Day report, pay a staggeringly smaller share of their incomes in taxes than America's rich did back in the 1950s.

"Since 1955," notes John Cavanagh, director of the Institute for Policy Studies, "we've seen a tax shift of truly epic proportions. Now more than ever, the ultra-rich need to contribute their fair share to help our economy get back on track."

America's top 400 taxpayers in 1955 paid three times more of their income in taxes, the new Institute for Policy studies report points out, than the top 400 of 2006, the most recent year with IRS data available.

If the most affluent 400 of 2006 had paid as much of their incomes in taxes as the top 400 in 1955, the federal treasury would have collected an additional $35.9 billion more in revenue in 2006 just from these 400 ultra-rich individuals.

The report found that the 139,000 U.S. taxpayers who made over $2 million in 2006 averaged $5.9 million in income. If these individuals had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006, an additional $202 billion.

The report, "Reversing the Great Tax Shift: Seven Steps to Finance Our Recovery" offers proposals that would raise $450 billion of revenue to support economic recovery. These include:

* Introducing a modest financial transaction tax that will chill speculation and generate $100 billion a year.

* Implementing an estate tax reform that taxes inheritances over $2 million at progressive rates.

* Setting an emergency tax rate on extremely high incomes that would generate over $60 billion a year.

* Eliminating the tax preference on capital gains and dividend income, generating $80 billion.

* Closing overseas tax havens for individuals and corporations, generating $100 billion.

* Scrapping $18 billion in tax breaks that subsidize excessive CEO compensation.

"By seriously taxing the top, as we did in the 1950s, we could raise the revenues we need to better invest in infrastructure, education, and retrofitting our energy system," says Chuck Collins, an IPS senior scholar and co-author of the new IPS brief. "Appropriately targeted, higher taxes on the top would also serve to dampen the speculative frenzy that has cratered our economy."

Labels: Chuck Collins, Institute for Policy Studies, John Cavanagh, regressive taxation, taxes, wealth inequality

 

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4/09/2009 01:12:00 PM 0 comments

 

But What About the Trust Fund Babies?

by Dollars and Sense

The Senate passed (51-48) a non-binding resolution to lower the estate tax. It's heartening to know that in times of great economic crisis, the US Senate has not forgotten America's future Trust Fund Babies.

From the wires:

By a 51-48 vote, the Senate embraced a nonbinding but symbolically important amendment by Arkansas Democrat Blanche Lincoln and Arizona Republican Jon Kyl to exempt estates up to $10 million from the estate tax. Estates larger than that would be taxed at a 35 percent rate.

Obama is proposing exempting estates up to $7 million and taxing larger ones at a 45 percent rate instead of the $2 million exemption and 55 percent rate slated to take effect in 2011.

The WSJ has, predictably, gone apoplectic:

This controversy dates back to George W. Bush's first tax cut in 2001 that phased down the estate tax from 55% to 45% this year and then to zero next year. Although that 10-year tax law was to expire in 2011, meaning that the death tax rate would go all the way back to 55%, the political expectation was that once the estate tax was gone for even one year, it would never return.

And that is no doubt why the Obama Administration wants to make sure it never hits zero. It doesn't seem to matter that the vast majority of the money in an estate was already taxed when the money was earned. Liberals counter that the estate tax is "fair" because it is only paid by the richest 2% of American families. This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation.

A few problems with this analysis. The tax affects only 0.2% of all estates, according to the New York Times yesterday:

In addition to creating the false impression that the estate tax eventually hits everyone — by mislabeling it a "death tax" - opponents routinely denounce the 45 percent top tax rate as confiscatory. In fact, the rate applies only to the portion of the estate that exceeds the exemption. As a result, even estates worth more than $20 million end up paying only about 20 percent in taxes.

Another misleading argument is that the estate tax represents double taxation. In truth, much of the wealth that is taxed at death has never been taxed before. That’s because such wealth is often accrued in the form of capital gains on stocks, real estate and other investments. Capital gains are not taxed until an asset is sold. Obviously, if someone dies owning an asset, he or she never sold it and thus never paid tax on the gain.

Chuck Collins has previously demolished the myths surrounding the estate tax for Dollars & Sense:

Death Tax Deception includes a handy sidebar detailing the hidden interests behind the campaign to repeal the tax.

In The Estate Tax: A Recycling Program in Disguise, Chuck describes how voters in Washington State pushed back an attempt to repeal the estate tax there.

For more info, check out the Estate Tax FAQ page from United for a Fair Economy.

Labels: Chuck Collins, estate tax

 

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4/03/2009 10:46:00 AM 0 comments

 

Common Security Clubs

by Dollars and Sense

An exciting new project spearheaded by Chuck Collins, D&S Associate, and of the Institute for Policy Studies.

'Common Security Club' as an Organizing Form for the Solidarity Economy

By Chuck Collins

The common security club model was born out of work done in the last few years by people struggling with overwhelming indebtedness. Participants spend some time discussing the root causes of the economic crisis, drawing on readings and materials provided by the network. But they mostly focus on what they can do together to increase their economic security and press for policy changes.

"What becomes clear to participants is we are facing some major economic and ecological changes," said Andree Zaleska from the Boston office of Institute for Policy Studies, who is coordinating clubs in the Northeast. "We are not going back to some golden age of economic growth based on empire, unfettered capitalism, and cheap energy—nor do we want to! We have to prepare ourselves and our communities for transformation."

As theologian Walter Brueggemann writes we need to shift from "autonomy to covenantal existence, from anxiety to divine abundance, and from acquisitive greed to neighborly generosity." Common security club participants are experimenting with ways to make the practical, political, and spiritual changes this entails.

The three main functions of the clubs are:

1) Learn and reflect
Through popular education tools, videos, Bible study, and shared readings, participants increase their understanding of the larger economic forces on our lives. Why is the economy in distress? How did these changes happen? What are the historical factors? How does this connect to the global economy? What are the ecological factors contributing to the changes? What is our vision for a healthy, sustainable economy? What are the sources of real security in my life?

2) Mutual aid and local action
Through stories, examples, Web-based resources, a workbook, and mutual support, participants reflect on what makes them secure. What can we do together to increase our economic security at the local level? What would it mean to respond to my economic challenges in community? How can I reduce my economic vulnerability in conjunction with others? How can I get out of debt? How can I help my neighbor facing foreclosure or economic insecurity? Can I downscale and reduce my consumption and ecological footprint and save money?

3) Social action
The economic crisis is in part the result of an unengaged citizenry and government. What can we do together to build an economy based on building healthy communities rather than shoring up the casino economy? What public policies would make our communities more secure? Through discussion and education, participants might find ways to engage in a larger program of change around the financial system, economic development, tax policy, and other elements of our shared economic life.

Clubs can be autonomous or affiliated with an existing institution, secular or religious. The ideal size is 10 to 20 adults who make a commitment to an initial five meetings with a facilitator. Clubs then decide whether to continue meeting and self-manage. Starter sessions have been developed and include "The Roots of the Economic Crisis," "Personal Re sponses to Economic and Ecological Change," "Things We Can Do Together," and "Actions to Transform the Economy."

Among the things "we can do together," the clubs examine stories and examples of various economic and mutual aid activities. These have included teaming up to help each other weatherize their homes, helping each other rework their personal budgets and reduce debt, and forming food-buying clubs. Faith-based groups weave together reflection, prayer, and action.

"We can't be a bank for each other," said club participant Paul Monroe of Boston. "But there are so many things we can do to support one another and increase our economic security."

One group, convened by a group of Haitian women in the Boston neighborhood of Dorchester, decided to push back against their credit card companies. "Everyone was paying really high fees," observed Charlotte Desire, who coordinated the group. "One of our best moments was when everyone in our group called their credit card company and threatened to cut up their cards unless fees were waived and interest rates were cut." Almost everyone in the group was able to save hundreds of dollars in interest payments and fees.

Gerald Taylor, a veteran congregation-based organizer in Charlotte, North Carolina, has led discussions with several groups about what a healthy and democratic debt system would require. "All our religious traditions have prohibitions on usury for a reason," said Taylor. "So what would a fair and transparent credit system look like?"

"We are piloting about a dozen common security clubs in different places and with very different groups," said Zaleska, describing the efforts in her region. "We're testing out several different curricula. Some clubs are pressing members of Congress to reform the casino economy, stop foreclosures, and pass an economic stimulus package."

Whatever shape or focus members choose to take, common security clubs are pushing against the social isolation that may accompany a recession or depression. "I see the hurt and anxiety in my congregation—and how people privatize their pain," says Cecilia Kingman. "This is a chance for us to be real with each other."

These clubs are also one of many building blocks that can move us toward a "solidarity economy" that affirms our true interconnection with one another. Coming together is a way to remind ourselves of the abundance we have, the wealth of our relationships and networks, and the mutuality of our economic security.

Chuck Collins is an On the Commons Fellow and senior scholar at the Institute for Policy Studies, where he directs the Program on Inequality and the Common Good. He is co-author with Mary Wright of The Moral Measure of the Economy (Orbis, 2007).

This is an excerpt of an article that originally appeared in Sojourners magazine, February 2009. For information on how to start or join a common security club, click here.

Labels: Chuck Collins, Common Security Clubs, financial crisis, recession

 

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3/25/2009 03:22:00 PM 2 comments

 

More Resources on the Bailout--from IPS

by Dollars and Sense

This is from Chuck Collins, of the Institute for Policy Studies, and a D&S Associate:

Handing Wall Street speculators an unconditional check for a $1 trillion should not happen. Any assistance should be tied to placing conditions on runaway CEO pay and on a bailout for Main Street communities. The messed up CEO pay incentive system is one major factor that contributed to the casino economy in the first place.

The Institute for Policy Studies and leaders in the Working Group on Extreme Inequality have been pressing for caps on CEO pay for companies receiving assistance. However, we have strong concerns that Congress may give Treasury Secretary Paulson, a former Wall Street executive, too much power to judge whether executive pay packages at the bailed-out firms are "excessive. See our Talking Points on this subject.

ACTION: STOP THE $700 BILLION BLANK CHECK
Send an Email and Letter to Members of Congress.
Emphasize these points:
1. No deal without clean caps on excessive CEO pay. We cannot leave it up to the Treasury Secretary to decide what is "excessive." Congress needs backbone to stand-up for what is right.
2. "Pay as You Go Bailout" -The speculators who caused the problem should pay the costs, not our children and grandchildren.
Write to your members through Campaign for America's Future email and letter campaign.

For more information, read:

The Bailout and CEO Pay: What's 'Excessive'?
by Sarah Anderson and Sam Pizzigati
Tax the Speculators: A Fair Plan to Pay for Bailout

Chuck Collins suggests that speculators should pay for the bailout, not the next generation. From The Nation.
REPORT: "Executive Excess 2008: How Average Taxpayers Subsidize Executive Pay"
This IPS report describes the five ways that taxpayers subsidize excessive CEO pay to the tune of $20 billion a year.

Progressive Conditions for the Bailout
By Dean Baker.

What Wall Street Should Do To Get Its Blank Check
Robert Reich proposes five key components.

For commentary, analysis and data about extreme inequality, visit www.extremeinequality.org.
To learn more about the Program on Inequality and the Common Good, visit the Institute for Policy Studies.

Labels: bailout, Chuck Collins, financial crisis, Institute for Policy Studies

 

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9/25/2008 08:40:00 AM 0 comments