Making taxation fair and fixing the economy

DISCLAIMER: I am not a Democratic or Republican.  On average I find an equal balance of people and principles that I like or can sympathize with in both parties. However, if you are Republican, you may want to pay close attention to the arguments below and activities carried out in the name of the Republican Party.

I am borrowing facts and figures and text from Robert Reich’s blog. 

The ranks of the millionaires & billionaires in America are swelling, as “rich get richer”, [as they have, on average, in all nations throughout history]. The wealth of the rich comes from corporate profits and these, in turn, come from improved productivity. The problem is that the wealth does not make it down to the “average” folks who in aggregate are supplying the labor to make the wealth.  

Robert Reich recently wrote “The Commerce Department reported Thursday that the economy grew at a 3 percent annual rate last quarter. Americans raked in more than $13 trillion, $3.3 billion more than previously thought.”

“The gains went to the top 10 percent, and the lion’s share to the top 1 percent. Over a third of the gains went to 15,600 super-rich households in the top one-tenth of one percent. ”  In other words, there is enough wealth being generated to improve our infrastructure, build roads, hospitals, schools and feed ghetto children decent meals, but it’s going into the coffers of the wealthy.

The problem is is getting worse because the rate at which “rich are getting richer” is accelerating. In the Clinton-era, the top 1 percent got 45 percent of  economic growth, and during the Bush era, they got 65 percent of the benefits of the economic growth. But now, 2010, according to an analysis of tax returns shows that the top 1 percent pocketed 93 percent of the gains.

Most of the bottom 90 percent lost ground. Their average adjusted gross income was $29,840 in 2010. That’s down $127 from 2009, and down $4,843 from 2000 (all adjusted for inflation). In addition, Home prices which are the major asset for most of the bottom 90%, are down more than a third from their 2006 peak, and they’re still dropping. The median house price in February was 6.2 percent lower than a year ago. 

To further exasperate the downward trend for the middle class, employer-provided benefits continue to decline among the bottom 90 percent, according to the Commerce Department. The share of people with health insurance from their employers dropped from 59.8 percent in 2007 to 55.3 percent in 2010. And the share of private-sector workers with retirement plans dropped from 42 percent in 2007 to 39.5 percent in 2010.

The Republican Party seems to be promoting programs that would make the situation even worse with the reverse-Robin Hood budget plan just announced by Paul Ryan and House Republicans (and endorsed by Mitt Romney)– to dramatically cut taxes on the rich and slash public services everyone else depends on.   

This would allow the millionaires to save another $150,000 a year; and it would cut everything else the middle class and the poor depend on – Medicare, Medicaid, new roads, education, job-training, food stamps, child nutrition, and even law enforcement.

Mitt Romney, which the Republican Party is endorsing, made more than $20 million last year, and paid a tax rate of just 13.9 percent (lower than much of the middle class). This reveals a deep problem with the income tax loop holes.

Romney’s private-equity firm, Bain Capital, made fortunes by buying up small companies, firing workers, and loading the companies up with debt to make them more interesting to the stock market. As is standard practice, private equity firms take investor’s money to buy the target companies – and keep 20 percent of the profits, and then they only pay 15% tax on the profits.  It’s a money machine available only to the wealthy and it works partially because the tax law allows these whopping earnings to be treated as capital gains, taxed at only 15 percent. Such earnings should probably be taxed at 95% since they are generated by simply manipulating the balance sheet and financial statements of takeover companies.  In other words, they are “gaming” the financial markets and taking advantage of tax loopholes. 

There are many ways in which our legal and financials systems can be gamed, and I’m not necessarily in favor of running around patching up all the holes, as much as I am in favor of stiff taxation schedules that would retrieve billions of dollars from those who made it by manipulating/gaming laws that are supposed to produce a level playing field.  In other words, anyone making $1 billion needs to be taxed and at least a 95% level.  And the money should be earmarked to help the rest of society with improved infrastructure.

The wealthy are apparently supporting an advertising campaign saying “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy”.

When anything is repeated enough, over a long enough period of time, it begins to sound like the truth, and the citizens of the country may begin to believe these phrases…even when they are patently absurd. 

Let’s hope our “poor and downtrodden” (the bottom 90%) still have the will to take back some of the power they lost recently to the the top 1%. We should adjust the tax laws appropriately…. And not believe any slogans or advertisements suggesting that concentrating wealth in the hands of the top 1% is good for the country!  The most vital, most vibrant, most innovative, most productive nations treat people more or less equally, distribute power of wealth evenly, and ensuring the collective wisdom of the entire society has a chance to flower,