GOP to American Public: “Don’t Think About It As We Ask You to Bend Over.”

The growing disposition to tax more and more heavily large estates left at death is a … policy [that] would work powerfully to induce the rich man to attend to the administration of wealth during his life, which is the end that society should always have in view, as being that by far most fruitful for the people. Nor need it be feared that this policy would sap the root of enterprise and render men less anxious to accumulate, for to the class whose ambition it is to leave great fortunes and be talked about after their death, it will attract even more attention, and, indeed, be a somewhat nobler ambition to have enormous sums paid over to the state from their fortunes. – Andrew Carnegie on Wealth, 1889


It’s a shame there are few people of great wealth like Andrew Carnegie who shared the values of the capitalism that created wealth and the virtues of charity that felt obligated to dispense vast sums of it to society.  He preferred to do this on his own but should he not be able to give all away that he wanted to and to whom, he was more than willing to accept allowing it to fall to the state upon his death rather than allow his children to inherit the bulk of it.

He would have favored not only the estate tax today but would welcome taxing it at greater rates than many of his wealthy contemporaries would concede today.  Bill and Linda Gates and Warren Buffet are exceptions to this reality. Mostly what we see today is a growing number of very rich people and those who aspire to emulate them do all they can to not only squeeze less fortunate people of their income but remove those benefits that we all help pay for with our taxes – but to the very rich and their fans, is seen more as a monetary drain.  A bucket of quenching water that whose overflow satisfies the thirst of the people below who depend on it for their life’s sake but is cut off with baffles and other devices by the owner of the bucket to keep it all for himself.

The wealthy and corporate-friendly conservatives in this country keep trying to make a comparison between family budgets and the nation’s budget.  When income is scarce, they say, the family is forced to reduce it’s spending.  The same should apply for the federal government.  And while this makes sense for families, especially those who make under $100,000 (about 85% of American households) it is not the same as the U.S. government which can engage it’s wealthier citizens to cover expenditures that the legislature has allowed for the general welfare of all of its citizens.

Budget deficits for families occur when their source of revenue diminishes through no fault of their own.  The Federal government however can sustain a balanced budget by applying it’s constitutional authority in Article I, section 8 that allows it to “lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general Welfare of the United States”,  The law also dictates that such “duties, imposts and excises shall be uniform throughout the United States”.  (all emphasis is mine)

The “general welfare” clause had narrow interpretations by James Madison who authored the Federalist papers but was given a broader view by Treasury Secretary Alexander Hamilton, Associate Justice Joseph Story and later court decisions in U.S. v. Butler and Helvering v. Davis. Acknowledging that they should “be uniform throughout the United States, reflects at a bare minimum that all should be taxed at a rate commensurate to their income.

In today’s terms that means that the wealthy should not have favorable legislation where they in effect pay less than those low and middle-income families in the 85% range of household incomes.  Reducing revenues through tax cuts or special considerations is a slight of hand by the GOP and conservative Democrats to mask a feigned crisis concerning budget deficits.

The top 1% in this country has always maintained levels where they possessed the greatest portion of wealth in America, even when their marginal tax rates were as high as 91%.  According to Rep. Jan Schakowsky (D-Ill.) “the richest 1 percent owns 34 percent of our nation’s wealth — that’s more than the entire bottom 90 percent, who own just 29 percent of the country’s wealth.”

Between 1979 and 2005, the top five percent of American families saw their real incomes increase 81 percent. Over the same period, the lowest-income fifth saw their real incomes decline 1 percent, according to census bureau records.

American CEOs earned 411 times as much as average workers in 2005, up from 107 times in 1990 and according to testimony in hearings before the House Financial Services Committee, Mar 8, 2007, top executives in the U.S. now make about twice the pay of their counterparts in France, Germany and the U.K., and about four times that of the Japanese and Korean corporate chieftain.  Yet the U.S. has extremely generous provisions in the tax code that literally allow the wealthiest in our country pay less than a family of 4 who earns less than $100,000 annually.

On paper their rates are higher than other income brackets but behind this smoke screen are laws and codes that allow many to defer their taxes in special arrangements for individuals with wealthy estates and income from capital gains while for multi-national corporations there are tax avoidance codes like the Offshore Tax Deferral that allows them to delay paying U.S. taxes on overseas profits as long as they keep those profits offshore.  Billions of dollars in tax revenues are lost each year with these exceptions for the wealthy, thus removing the primary capability to balance state and federal budgets; budget deficits that were for many a direct result from tax avoidance legislation favored by Republicans.

Rep. Schakowsky wants to change this arrangement by introducing new legislation that would “create new tax brackets for earners who make significantly more than the baseline for the current top income bracket.  Currently, the top marginal tax rate of 35 percent applies to income starting at $373,650, and the tax code fails to distinguish between earners making a few hundred thousand dollars a year and those making a few hundred million dollars a year.” (Jan Schakowsky Introduces Bill To Raise Taxes For Wealthiest Americans by Lucia Graves, HuffPo, 3/17/11)

Schakowsky’s proposal would create higher brackets for those making over $1 million starting at a rate of 45% and incrementally increasing to a high of 49% for those who make over $1 billion.   These rates are half the amount that existed under Eisenhower in the 1950’s where the wealthiest 1% still owned roughly the same amount of the nation’s wealth as they do today with the lower rate of 35%.

Employment and budget deficits have never suffered under higher tax rates for the wealthiest as Larry Beinhart demonstrates in his article “The Astonishing Stupidity of Not Raising Taxes on the Rich When Budgets Are Tight.  In fact, as the data shows, economic recoveries are not only likely to occur when we raise taxes on the wealthiest but when we increase, rather than decrease, federal spending during periods of economic recessions.

The Obama administration weakly attempted to take these steps to improve our current economic fiasco with its stimulus recovery plan but has bent too easily in favor of Republican and Tea Party obstructionists in Congress.  These conservatives continue to insist that the same failed policies of lower tax rates under Bush/Cheney along with spending cuts for social programs that benefit the economically disadvantaged in this country will somehow miraculous work now.

We can only hope that the Democrats can get some backbone and hold on until the 2012 elections where hopefully those voters who ushered in a Congress and administration that stood for change in 2008 will return with the emphatic message to elected officials to fulfill their earlier promises .  I shutter to think how much worse it can get for the American worker in this country if they continue to listen to the lie by those on the politIcal Right who insist that we do what they say and ignore what the consequences will be.

RESOURCES:

Inequality.org

THE ESTATE TAX: MYTHS AND REALITIES

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One response to “GOP to American Public: “Don’t Think About It As We Ask You to Bend Over.”

  1. Would the person making a billion dollars even miss the other 500 million? I can’t imagine. What the hell do they want all that for anyway? Another great post.

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