Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Are Average Taxpayers Freeloaders?From Sam Pizzigati, at the online weekly Too Much, which is well worth a visit.Have Average Taxpayers Become Freeloaders? Opponents of the proposal for a 5.4 percent health care reform surtax on America's wealthy are getting desperate. They've even turned their fire onto middle-income Americans. By Sam Pizzigati | July 27, 2009 Friends and fans of privilege have been striking their indignant pose the last two weeks. They're shocked, simply shocked, that House Democratic leaders would dare advance a health care reform plan that sets a 5.4 percent surtax on households making over $1 million a year. Affluent Americans, flacks for grand fortune are fuming, already pay the bulk of the nation’s income taxes. They'll pay virtually all of it, these critics charge, if the surtax becomes law and Congress lets the George W. Bush tax cuts for the comfortable expire, as scheduled, after 2010. Amid all this, the most indignant of fortune's defenders now seem to believe, average Americans have become irresponsible freeloaders, ever eager, as conservative columnist Caroline Baum puts it, to "encourage their elected representatives to vote 'yes' on every new benefit that comes down the pike." Fulminates David Harsanyi, a Denver Post columnist outraged by the health surtax notion: "President Barack Obama once promised to spread the wealth. How about spreading the responsibility, as well? Let the everyday citizen feel the cost of these gazillion-dollar legislative miracles." In reality, of course, everyday American citizens are pulling their weight and then some. They actually pay a higher share of their incomes in taxes—total taxes, not just federal income tax—than super rich Americans. Maverick billionaire investor Warren Buffett has been trying to make this point for some time now. He and his fellow billionaires, Buffett notes, pay taxes at a lower overall rate than their receptionists do. Two years ago, Buffett bet a million dollars to back up that proposition. He challenged any billionaire in the Forbes 400 to prove him wrong. So far not one has. Those Forbes 400 billionaires and their cheerleaders live in a fantasy land where average folk who work hard enough can always "succeed" and get rich. In our real world, here early in the 21st century, average people work hard and watch the rich get richer. The latest evidence of this dynamic comes from an enterprising Wall Street Journal analyst who just completed some fascinating crunching of payroll data from Social Security. "Executives and other highly compensated employees now receive more than one-third of all pay in the U.S.," the Journal's Ellen Schultz observed last week, and that's without counting billions in executive pay "that remains off federal radar screens that measure wages and salaries." Schultz defines as "highly compensated" any employed American who this year will take home over $106,800. That income figure represents the 2009 Social Security payroll tax ceiling. Any wage or salary income under that figure faces Social Security payroll tax. Any income above doesn't. Back in 2007, the payroll tax ceiling stood at $97,500. In that year, only 6 percent of Americans collected paychecks over the ceiling. But this affluent 6 percent took in 33 percent of America's total pay. Five years earlier, in 2002, Americans making more than the federal payroll tax ceiling collected only 28 percent of the nation's pay. Over the five years than ended in 2007, the Journal's Schultz goes on to add, earnings for the top 6 percent jumped up twice as fast as earnings for the bottom 94 percent. This growing inequality in the rewards from work has no legitimate justification. Absolutely no evidence exists to indicate that earners currently in the top 6 percent are working more productively than earners in the bottom 94 percent than they did five years ago, or 50 years ago for that matter. This growing inequality in the rewards from work, on the other hand, does have consequences. Here's one: In 2007, America's top 6 percent collected a whopping $1.1 trillion in earnings not subject to payroll tax. The payroll tax break for high-income earners, the new Wall Street Journal analysis estimates, is now costing the federal Treasury $115 billion a year. But the Journal's focus on the top 6 percent doesn't tell the full story. America's most affluent 6 percent haven't all been prospering at the same rate. In fact, most top 6 percent income-earners have more in common with those below them than those above. Between 2000 and 2006, data from economists Emmanuel Saez and Thomas Piketty document, America's top 1 percent saw their incomes increase eight times faster than the next most affluent 4 percent. These particular Saez-Piketty figures don't count income from capital gains, the profits from the buying and selling of stock and other assets. Capital gains income goes overwhelmingly to the richest Americans—and none of it faces Social Security payroll tax. Read the rest of the article. Labels: income inequality, income tax, Sam Pizzigati, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Time To Shift the Tax Burdon BackA 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. Labels: Chuck Collins, Institute for Policy Studies, John Cavanagh, regressive taxation, taxes, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Wealth Gap Gets WiderFrom Meizhu Lui, former executive director of United for a Fair Economy (our next-door neighbors and partners in various projects, including publishing The Wealth Inequality Reader), in Monday's Washington Post:The chips are in.Read the rest here. Labels: Meizhu Lui, race, racial wealth divide, racism, Survey of Consumer Finances, Washington Post, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Scenes from the Class Struggle in the East Village The New York Times recently ran a story about a New York landlord, Alistair Economakis, who is trying to convert the five-story East Village tenement he owns into an 11,000-square-foot mansion for himself and his family. The building formerly housed fifteen rent-stabilized apartments, whose rents ranged from $675 to $1200 per month. So far Economakis has been able to buy off six of the tenants, and has renovated and converted the spaces into a home with which he, his wife, and his two children are making do. But the remaining tenants are fighting back: At its core, the fight involves a law allowing landlords to displace rent-stabilized tenants if the landlords will use the space as their primary residence. The Economakis family has prevailed, thus far, on the principle that the law applies even to a building this large. But the tenants continue to press the notion that given the scope of the proposed home — which calls for seven bathrooms, a gym and a library — the owners are just trying to clear them out so they can sell the building off to become so many market-rate condos. As evidence that they have no such intention, the landlords emphasize how much they love the neighborhood, especially its working-class history: “Once we realized we wanted to make this building our home, nothing else compared,” said Mrs. Economakis, 36, who, along with her husband, works for her father’s company, Granite International Management, which manages about a dozen apartment buildings in Manhattan and Brooklyn. “I love this building, and I love this neighborhood.” In Manhattan, it seems, the super-rich want have the working class and eat it too. The Times's coverage of the struggle is characteristically even-handed, depicting both landlords and tenants as in enviable positions: In a way, each faction is living a version of the New York real estate dream. Anyone might envy the Economakises, who work at a family-owned apartment-management company and lucked into buying the building for $1.3 million — what some one-bedroom condos in the area cost today. They have both the cash and the connections to create a sprawling showpiece. But there are also countless New Yorkers who would sacrifice their firstborns (or at least a beloved pet) for a charming if cramped perch like [tenant] Mr. Boyd’s in a coveted neighborhood where comparable spaces command twice or three times as much. Evidently, the Times regards affordable housing in New York as but a dream, and rent-stabilization as a luxury. Read the whole story here. For information about the tenants' struggle, visit their website. Labels: affordable housing, rent control, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). CEOs of America Unite!Kiwitobes has put together an interesting visual representation of overlapping membership on corporate boards among the largest U.S. corporations. This helps provide one explanation for the astronomical sums paid to CEOs and their lackeys (we get to talk like this on May Day). But as economist Arthur MacEwan explained in our magazine a few years back, the gap in pay between those who own the corporations and those who do the work is much greater in the United States than it is in many other countries that similarly have interlocking corporate boards. The rest of the answer, he concludes, has to do with the relative lack of power of U.S. workers.Over many decades, U.S. companies have created a highly unequal corporate structure that relies heavily on management control while limiting workers' authority. Large numbers of bureaucrats work to maintain the U.S. system. While in the United States about 13% of nonfarm employees are managers and administrators, that figure is about 4% in Japan and Germany. So U.S. companies rely on lots of well-paid managers to keep poorly paid workers in line, and the huge salaries of the top executives are simply the tip of an iceberg.Read the full article here. Labels: Arthur MacEwan, ceo pay, Corporate Boards, May Day, wealth inequality, worker rights Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Toles and The Onion on InequalityTom Toles' recent cartoon in The Washington Post lampoons (most, i.e. orthodox) economists' puzzlement over the growing income and wealth gap. The suggestion made by Toles' alter ego (the tiny cartoonist in the corner) that we "start outsourcing those economists' jobs" reminds us of Dean Baker's suggestion, in The Conservative Nanny State (excerpted in the July/August 2006 issue of Dollars & Sense): "If government policies ensure that specific types of workers (e.g. doctors, lawyers, economists) are in relatively short supply, then they ensure that these workers will do better than the types of [less-skilled] workers who are plentiful."The current issue of Dollars & Sense examines the income and wealth gaps: in John Miller's rejoinder to the editors of The Wall Street Journal that the wealthy are taxed, if anything, too much; in James Cypher's article on the growth of the income and wealth gaps since 2000; and in Ramaa Vasudevan's "Ask Dr. Dollar" column on the alleged "double-taxation" of corporations. See also Chuck Collins's article on Washington State voters' collective decision not to repeal the estate tax. And don't miss The Onion's incisive reportage on the structural issues underlying Sunday's Academy Awards cermony: Oscars Reveal Widening Gap Between Best, Worst Dressed. An excerpt:
Labels: Dean Baker, dividend tax, estate tax, Halle Berry, income inequality, Paula Abdul, Tom Toles, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
