Why the Rich Paying a Majority of Taxes Should Still Anger the Lower Economic Classes

Another article appeared on CNN Money today telling the same story that has been told repeatedly for quite a few years now: the rich pay the biggest share of taxes to the federal government.  The article does point out there is more to the story than meets the eye but it doesn’t even begin to try to tell it all.  Some points to note:

In fact, the Tax Policy Center found last year that there about 4,000 households with incomes over $1 million that were not paying anything at all…When factoring in state and local taxes, the top 10% pay just under half the tab. And when calculating tax burden as a percent of income, the tax code is even less progressive. The top 10% paid an average of 30% of their income in local, state, and federal taxes in 2011, said McIntyre. That’s not much different than the 25% percent paid by the middle class.

There are two key reasons people should be angry about the idea of the rich paying a higher share of the tax burden.  The first is the simple fact they are paying a higher share because income inequality has exploded over the past three decades.  There is a graph showing the share in taxes paid in the CNN article since 1986.  The graph may be a nice point for the right wing argument on this debate, just so long as you don’t show another graph beside it portraying the increase in income inequality over the same period.  Kind of like the one I’m including.

If you don’t understand what is happening, your math skills may need some sharpening.  Let’s say you have two people, we’ll call them Smonald Frump and Everyday Dude.  Frump makes $250 in 1986 and pays $55 in taxes.  Dude makes $200 and pays $45.  In 2013, Frump makes $30000 and pays $70 in taxes.  Dude still makes $200 and pays $30.  Yes, Dude’s taxes have gone down but so has Frump’s and they have gone down by a bigger percentage (which is what has happened in this time frame).  Dude’s income has also stayed level while Frump’s has skyrocketed (which has also happened when adjusted for inflation, graph included).  Who makes out better in this scenario? 

The second reason for anger is the fact that even if rich people are paying their taxes, corporations are not always playing along and performing their patriotic duty.  There are plenty of articles covering this reality, such as this one giving this fact:

CTJ (Citizens for Tax Justice) calculates that if the companies had paid the full 35 percent corporate tax rate, they would have put more than $78 billion into government coffers.

(You will also see this article notes campaign donations by these companies to politicians.  Plenty of R’s and D’s by those names to go around for everyone.  And by everyone I, of course, only mean the top %1 since that is what matters to them.)

Here’s another article with more juicy bits of info:

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That’s the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008…Companies paid just $181 billion in federal corporate taxes in fiscal 2011, about 8% of the $2.3 trillion in total revenue collected by the federal government. That’s down from 15% of the total in 2007. Individuals, meanwhile, paid $1.1 trillion in income taxes last year.

Delicious!  One more with this example and a pretty slideshow:

The 10 most profitable U.S. companies paid an average federal tax rate of just 9 percent last year…Some of these companies paid more than 9 percent — JPMorgan earned $26.7 billion in 2011, for example, and paid $3.7 billion of it, or 14 percent, to the federal government — and some paid less, like Exxon Mobil, which only sent 2 percent of its $73.3 billion earnings to the IRS.

The argument that the rich pay a higher share of the tax burden now than they did 30 years ago should not make the people on the lower rungs of the economic ladder happy.  It should be infuriating, particularly when the reasons for the change are noted.

But hey, Wall Street is hitting record highs and that will not expand the problem of wealth inequality at all so we are all doing well and the job market is back to normal, right?…Right?

Nope.

Europe Moves to Penalize Those Responsible for Financial Crisis While America Continues to do Nothing

Generally, we are taught when someone does something wrong, they are penalized for their bad actions in some way, whether put into timeout as a child, given a failing grade for a lack of work in school, fired from a job for not showing up, or thrown in prison for violating the law.  Europe is doing just that when it comes to going after the powers responsible for the financial crisis the world is still pulling itself out of nearly five years later.

The CSM reports:

Last week the European Parliament and the European Union Commission agreed on rules which would see bankers’ bonuses capped at a year’s salary, only with explicit approval from shareholders this amount can rise to two years’ pay. It is this deal the finance ministers now have to vote on.

In a separate development, Switzerland, which is not part of the EU, held a referendum on March 3 which brought a resounding approval for limiting executive pay and banning payouts to new and departing managers.

Banning payouts to departing managers?  You mean, they actually think a CEO who runs a company into the ground doesn’t deserve millions of dollars in severance pay and compensation when fired?  Oh, those crazy Europeans and their rational thinking!

The ultimate point here is Europe has decided it’s best to learn from its mistakes and try to do what it can to avoid another economic catastrophe.  And as these policies show, they aren’t concerned about going after what we call in the United States the “job creators”.  They understand their countries are better off in the long run with the right regulations in place to fight income inequality and aren’t swayed by the propaganda machine these corporations release on society in order to keep their CEOs absurdly compensated regardless of whether they are successful or not.

And America is, of course, following the same path by passing laws that regulate what led to the crisis in 2008 and making sure our financial future is secure from this same type of crash.  The members of our great Congress are standing up to these folks at the top and are telling them we will not let you gamble and bet on losing scenarios just so you can make ridiculous profits at the expense of the majority of the population in which these Congresspersons serve.  They are doing their patriotic…what’s that?  They’ve done nothing?  This stuff is just going to happen again?  Fantastic.

In fact, not only is Congress doing virtually nothing to avoid another crisis, we are all standing by and watching corporate profits soar to new heights.  This article in the NYT says it all and is hard to swallow considering the employment climate the country continues to wallow in.  Some vomit inducing points from the article worth quoting at length:

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers…But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits.

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

So, remember the fight over those tax increases on the wealthy the country just had?  Yep, those guys are going to be just fine it seems.  In fact, I’m pretty sure those folks making over 400k a year could give plenty more and still be eating well.

It is rather amazing we can see these facts as a whole and still somehow believe the propaganda about how we can’t hurt the “job creators”.  Considering a little thing called reality, there is a question that needs to be asked here and now to those against the higher taxes on these folks.  If we are seeing these profits at record highs, where are the jobs they are supposedly creating?  Do they require even more money to create jobs?  Are these profits and this level of economic inequality not enough yet?  Do things need to be even more unequal?  Seriously?

And as if that wasn’t bad enough, there was one last ironic knife in the throat at the end of the NYT article.  Know how those same people who were against the tax increases also want to do away with the Fed and want no outside intervention in the economy from any type of government entity?  Well, it seems the Fed helped those same people:

The Federal Reserve has also played a crucial role in propelling the stock market higher, economists and strategists say, even if that was not the intent of policy makers. The Fed has made reducing unemployment a top priority, but in practice its policy of keeping rates very low and buying up the safest assets to stimulate the economy means investors are willing to take on more risk in search of better returns, hence the buoyancy on Wall Street amid the austerity in Washington and gloom on Main Street.

Of the broader market’s 13 percent rise in 2012, about half was a result of the Fed’s actions, Mr. Harris of Bank of America Merrill Lynch estimates.

In other words, the government, the entity the people should turn to when they are being screwed by big corporations, has continued to help those corporations while doing nothing for the people or to protect the majority of the population from further recessions induced by bad behavior.  When we are being deprived by the corporate world and the government is standing by watching this occur, who exactly do we turn to?

Europe clearly knows how this should work.  America (particularly the right wing), however, still doesn’t get it.