Tag: taxes

Most of us already know that tax cuts, especially for the wealthy, do not create jobs nor do they stimulate economic growth. But there are those who are still pushing this unicorn myth. So here are some facts:

One of the first things you notice in the chart is that the American economy was not especially healthy even before the financial crisis began in late 2007. By 2007, remarkably, the economy was already on pace for its slowest decade of growth since World War II. The mediocre economic growth, in turn, brought mediocre job and income growth – and the crisis more than erased those gains.

The defining economic policy of the last decade, of course, was the Bush tax cuts. President George W. Bush and Congress, including Mr. Ryan, passed a large tax cut in 2001, sped up its implementation in 2003 and predicted that prosperity would follow.

The economic growth that actually followed – indeed, the whole history of the last 20 years – offers one of the most serious challenges to modern conservatism. Bill Clinton and the elder George Bush both raised taxes in the early 1990s, and conservatives predicted disaster. Instead, the economy boomed, and incomes grew at their fastest pace since the 1960s. Then came the younger Mr. Bush, the tax cuts, the disappointing expansion and the worst downturn since the Depression.

That was the conclusion from David Leonhardt’s new column today for The New York Times, and it was precisely the finding of a new study from the Congressional Research Service, “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945” (pdf).

That study concluded that not only did tax cuts for the upper brackets did not stimulate growth, they are associated with increasing income disparity:

    The top income tax rates have changed considerably since the end of World War II. Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The average tax rate faced by the top 0.01% of taxpayers was above 40% until the mid-1980s; today it is below 25%. Tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War.

   The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.

   However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced-lower top tax rates may be associated with greater income disparities.

In another study that was cited in an article by tax expert David Cay Johnston, Owen M. Zidar, a graduate economics student at the University of California at Berkeley, and a former staff economist on the White House Council of Economic Advisers for President Obama, looked at which tax cuts did stimulate economic growth:

He reasoned that “if tax cuts for high income earners generate substantial economic activity, then states with a large share of high income taxpayers should grow faster following a tax cut for high income earners.” The data show that tax cuts at the top, though, do not result in faster growth in states with more high-earners.

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90 percent. A one percent of GDP tax cut for the bottom 90 percent results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10 percent is 0.13 percentage points and is insignificant statistically.” [..]

That fits with the argument made over the last century by a variety of business leaders – carmaker Henry Ford and retailer Edward Filene among them – that the path to economic growth lies in workers making enough (and having enough after taxes) to buy goods and services.

These facts need to be pounded ad nauseum to Congress and the White House, no matter which party is in charge.

(All emphasis mine)

The 2012 Democratic National Platform talks big about job creation and rebuilding the middle class which has been taking hits since the Reagan tax cuts in 1984. While it touts the fact that the private sector has created jobs and the manufacturing sector is growing, its not enough. Most of the jobs that have been created are low paying. The Democratic Party has done little to debunk the lie that the wealthy corporations and individuals are job creators. By rubber stamping the past policies of giveaways to corporations and extending the Bush/Obama tax cuts, the Democrats have made the problems for the ever shrinking middle class even worse.

In two articles at Common Dreams, writers Paul Buchheit and John Atcheson debunk the “job creators fraud” and lay out the real problem ailing the economy, “corporate welfare”. In Mr. Buchheit’s article, he concisely cuts through the “job creator” nonsense with the facts.

Based on IRS figures, the richest 1% nearly tripled its share of America’s after-tax income from 1980 to 2006. That’s an extra trillion dollars a year. Then, in the first year after the 2008 recession, they took 93% (pdf) of all the new income.

He also notes that the wealthiest 10% own 83% of the financial wealth (pdf) and only pay 15% tax under the premise that they would create jobs. Instead they put that wealth into tax fee accounts overseas (pdf).

Mr. Atcheson breaks it down noting that the 15% tax rate allows the wealthy to avoid some $59 billion in taxes per year and by sheltering profits off shore, “(c)orporations are given $58 billion a year in tax breaks (pdf).” Hedge fund managers are given a tax break that allows them to pay only 15% on their earnings, avoiding at least $2.1 billion in taxes a year. Yet, as he further points out:

We spend $59 billion on social welfare programs, but more than $92 billion on corporate subsidies.  According to the Environmental Law Institute, fossil fuel industries alone get more than $70 billion in subsidies, with most going to the oil and gas sector.  Yeah, we certainly can’t afford to deprive Exxon of its record profits just to give money to needy kids.

Add to that $1.2 trillion the $9 trillion in low interest and no interest loans from the Federal Reserve and $700 billion bank bailout that these corporations and banks are making huge profits on and paying no taxes. You have, Mr. Buchheit notes, “$10 trillion in misdirected dollars.  Just 1/10 of that would create 25 million jobs, one for every unemployed or underemployed worker in America. Or a $45,000 a year job for every college student in the United States.”

These are the facts that Mr. Buchheit’s lays out:

The Wall Street Journal noted in 2009 that the Bush tax cuts led to the “worst track record for jobs in recorded history.” 25 million people remain unemployed or underemployed, with 30 to 50 percent of recent college graduates in one of those categories. Among unemployed workers, nearly 43 percent have been without a job for six months or longer.

For the jobs that remain, most are low-paying, with the only real employment growth occurring in retail sales and food preparation. A recent report by the National Employment Law Project confirms that lower-wage occupations (up to about $14 per hour) accounted for 21 percent of recession losses and 58 percent of recovery growth, while mid-wage occupations (between $14 and $21 per hour) accounted for 60 percent of recession losses and only 22 percent of recovery growth.

The minimum wage is shamefully low, about 30% lower (pdf) than the inflation-adjusted 1968 figure. And the tiny pay can’t be blamed on small business. Two-thirds of America’s low-wage workers, according to another National Employment Law Project (pdf) report, work for companies that have at least 100 employees.

All these job woes persist while productivity has continued to grow, with an 80% increase since 1973 as median worker pay has stagnated. [..]

With the bulk of their assets buried in “low-risk investments (bonds and cash), the stock market, and real estate”, the wealthy are not creating jobs:

… Only 3 percent of the CEOs, upper management, and financial professionals were entrepreneurs (pdf) in 2005, even though they made up about 60 percent of the richest .1% of Americans. A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.

There is ample evidence that more jobs were created when the top marginal tax rates were high.

Instead of cutting our social safety net, as President Obama has agreed to do in his “Grand Bargain”, we need to end the corporate welfare programs and put an end to the lie that if we tax the wealthy less they’ll create jobs.

In April of 2011, Rollingstone‘s contributing editor Matt Taibbi wrote a piece about Paul Ryan and budget proposal titled, Tax Cuts for the Rich on the Backs of the Middle Class; or, Paul Ryan has Balls

I heartily laughed at Matt’s description of Paul Ryan:

Paul Ryan, the Republican Party’s latest entrant in the seemingly endless series of young, prickish, over-coiffed, anal-retentive deficit Robespierres they’ve sent to the political center stage in the last decade or so, has come out with his new budget plan. All of these smug little jerks look alike to me – from Ralph Reed to Eric Cantor to Jeb Hensarling to Rand Paul and now to Ryan, they all look like overgrown kids who got nipple-twisted in the halls in high school, worked as Applebee’s shift managers in college, and are now taking revenge on the world as grownups by defunding hospice care and student loans and Sesame Street. They all look like they sleep with their ties on, and keep their feet in dress socks when doing their bi-monthly duty with their wives.

You have to admit that is scathingly accurate.

I thought of my own Tea Party House “Rat”, Michael Grimm. Grimm a former FBI agent and freshman representative from New York’s newly redrawn 11th who is currently the target of a federal grand jury investigation into the fundraising for his 2010 campaign. He fits Matt’s description to a tee.

Although Grimm is not a member of the Tea Party Caucus, he has voted lock step with them. When Grimm voted for Ryan’s first budget plan which called for a fix voucher and cuts to Medicaid that that would hurt the poor and elderly, Staten Island Tea Partiers were vocally upset with him. But I can almost guarantee they will give him a second chance to screw them, and everyone else, come November.

Back to Matt’s article. With his wry wit, he goes on to describe Ryan’s goal to reduce taxes for the wealthiest by asking seniors to cut back on their health care in order to pay for those tax breaks. That takes balls.

Never mind that each time the Republicans actually come into power, federal deficit spending explodes and these whippersnappers somehow never get around to touching Social Security, Medicare or Medicaid. The key is that for the many years before that moment of truth, before these buffoons actually get a chance to put their money where their lipless little mouths are, they will stomp their feet and scream about how entitlements are bringing us to the edge of apocalypse.

The problem, of course, is that to actually make significant cuts in what is left of the “welfare state,” one has to cut Medicare and Medicaid, programs overwhelmingly patronized by white people, and particularly white seniors. So when the time comes to actually pull the trigger on the proposed reductions, the whippersnappers are quietly removed from the stage and life goes on as usual, i.e. with massive deficit spending on defense, upper-class tax cuts, bailouts, corporate subsidies, and big handouts to Pharma and the insurance industries.

This is a political game that gets played out in the media over and over again, and everyone in Washington knows how it works. Which is why it’s nauseating (but not surprising) to see so many commentators falling over themselves with praise for Ryan’s “bold” budget proposal, which is supposedly a ballsy piece of politics because it proposes backdoor cuts in Medicare and Medicaid by redounding their appropriations to the states and to block grants. Ryan is being praised for thusly taking on seniors, a traditionally untouchable political demographic .

Medicaid cuts that would deeply effect the elderly are never discussed by the media, even now with Ryan the presumptive Republican vice presidential nominee:

While the Republican vice-presidential candidate is careful to avoid touching Medicare benefits for anyone at or near retirement, his budget would impose immediate cuts to Medicaid, the health-care program for the poor that funds nursing-home care and other benefits for 6 million U.S. seniors. [..]

The proposed Medicaid changes are often overlooked amid the debate over Ryan’s Medicare plan, which has taken center stage in the presidential contest since the Wisconsin congressman was chosen as Mitt Romney’s running mate on Aug. 11. It’s politically important because those 65 and older are a crucial voting bloc. [..]

Health-care policy specialists say it’s politically easier to cut Medicaid because most voters don’t understand it. [..]

Many middle-income Americans who may be unfamiliar with Medicaid end up relying on the program in their old age because they exhaust their assets. Medicare doesn’t cover long-term care so they turn to Medicaid, which does. [..].

Without Medicaid, current and future Medicare recipients would be in deep financial trouble, as would nursing homes and hospitals that would be under obligation to treat them even if they lack coverage. Ryan’s budget would do this just to give the top 2% another tax cut that wouldn’t even be covered by the cuts.

In his last paragraph, Matt say this about Ryan and his budget:

The absurd thing is that Ryan’s act isn’t even politically courageous. It’s canny calculation, but courage it is not. It would be courageous if Ryan were, say, the president of the United States, and leaning on that budget with his full might. But Ryan is proposing a budget he knows would have no chance of passing in the Senate. He is simply playing out a part, a non-candidate for the presidency pushing a rhetorical flank for an out-of-power party leading into a presidential campaign year. If the budget is a hit with the public, the 2012 Republican candidate can run on it. If it isn’t, the Republican candidate can triangulate Ryan’s ass back into the obscurity from whence it came, and be done with him.

All Paul Ryan has are his “balls” because he certainly doesn’t have a heart or a conscience.

So much for obscurity. Little did Matt know.  

The Confidence Fairy is Dead but its ghost is still haunting the halls of the European Union countries and the United States, as Herr Doktor notes:

This was the month the confidence fairy died.

For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. [..]

The good news is that many influential people are finally admitting that the confidence fairy was a myth. The bad news is that despite this admission there seems to be little prospect of a near-term course change either in Europe or here in America, where we never fully embraced the doctrine, but have, nonetheless, had de facto austerity in the form of huge spending and employment cuts at the state and local level.

Krugman also pointed the de facto austerity policy of the Obama administration and Congress have added to the stagnant job market:

Here’s a comparison of changes in government employment (federal, state, and local) during the first four years of three presidents who came to office amid a troubled economy:

That spike early on is Census hiring; [..] If public employment had grown the way it did under Bush, we’d have 1.3 million more government workers, and probably an unemployment rate of 7 percent or less.

The job market is taking its toll on consumer spending which will continue to slow down any recovery:

More Americans than forecast filed applications for unemployment benefits last week and consumer confidence declined by the most in a year, signaling that a cooling labor market may restrain household spending. [..]

“There has been some slowdown in the labor market,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who correctly projected the level of jobless claims. “That makes consumers feel less confident, and makes them more cautious about their spending. We could see some weakness in April payrolls.”

And even though the predictions about the housing market have been optimistic don’t be fooled, there is a dark side as falling home prices drag new buyers under water

More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.

That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period.

It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk.

As of December 2011, the latest figures available, 31 percent of the U.S. home loans that were in negative equity – in which the outstanding loan balance exceeds the value of the home – were FHA-insured mortgages, according to CoreLogic.

In an interview with The European Nobel Prize winning economist, Joseph Stiglitz said:

…When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working… [..]

The argument that the response to the current crisis has to be a lessening of social protection is really an argument by the 1% to say: “We have to grab a bigger share of the pie.” But if the majority of people don’t benefit from the economic pie, the system is a failure. I don’t want to talk about GDP anymore, I want to talk about what is happening to most citizens.

Meanwhile back in Europe with the distinct possibility that French President Nicholas Sarkozy may lose to the Socialist candidate François Hollande, some leaders are getting the message but aren’t ready to give up totally:

Dutch Prime Minister Mark Rutte and Finance Minister Jan Kees de Jager struck a deal with the opposition and got a majority backing on an austerity package to meet the 3 percent budget deficit target in 2013, after seven weeks of talks with Geert Wilders’s Freedom Party failed and led to the collapse of the minority government.

The package increases the value-added tax to 21 percent from 19 percent, doubles the bank tax to 600 million euros ($791 million) and changes the financing of mortgages, De Jager said in a letter to parliament yesterday.[..]

The Labor Party, the Socialist Party as well as the Freedom Party of Geert Wilders didn’t back the agreement. “This is a bad package and the people with a state pension will pay the bill,” Wilders said in parliament.

In an editorial in Bloomberg News, the editors expressed their ideas how European leaders can “boost economic growth in the euro area”:

First, Europe’s leaders must recognize that common deficit rules alone will not guarantee the currency union’s survival. When countries such as Italy and Spain fall into a spiral of shrinking output and rising budget deficits, countries with stronger economies must be willing to help, either by transferring funds or by stimulating their own demand.

Currently, that would mean more German spending. [..] The Bundesbank would also need to live with a little more German inflation than the current 2.1 percent. Higher prices in Germany would help make other euro- area economies and their exports more competitive, reducing both their current account deficits and Germany’s surplus.

Second, the agreement should give Spain and Greece in particular more time to bring down debts piled up over the past 30 years. Requiring them to slash education, research and development, and other budgets will only stunt their future growth potential. To calm markets concerned about Spain’s deficits, the rest of Europe — Germany again — and the International Monetary Fund would have to provide more bailout funds.

Finally, the pact should acknowledge one of the most immediate requirements for a return to economic expansion: Recapitalization of private sector banks so that they can start providing businesses with more credit. Without that, Europe is doomed to anemic growth and a persistent confidence crisis, no matter what documents its politicians may sign.

Stiglitz in his interview makes two important points. First, “The question of social protection does not have to do with the structure of production”

It has to do with social cohesion or solidarity. That is why I am also very critical of Draghi’s argument at the European Central Bank that social protection has to be undone. There are no grounds upon which to base that argument. The countries that are doing very well in Europe are the Scandinavian countries. Denmark is different from Sweden, Sweden is different from Norway – but they all have strong social protection and they are all growing.

Hear that, Mr President and Congress? Get your hands off reduction in the social safety net.

And second, that here in the US, “politics is at the root of the problem“:

Most Americans understand that fraud political processes play in fraud outcomes. But we don’t know how to break into that system. Our Supreme Court was appointed by moneyed interests and – not surprisingly – concluded that moneyed interests had unrestricted influence on politics. In the short run, we are exacerbating the influence of money, with negative consequences for the economy and for society. [..]

The diagnosis is that politics is at the root of the problem: That is where the rules of the game are made, that is where we decide on policies that favor the rich and that have allowed the financial sector to amass vast economic and political power. The first step has to be political reform: Change campaign finance laws. Make it easier for people to vote – in Australia, they even have compulsory voting. Address the problem of gerrymandering. Gerrymandering makes it so that your vote doesn’t count. If it does not count, you are leaving it to moneyed interests to push their own agenda. Change the filibuster, which turned from a barely used congressional tactic into a regular feature of politics. It disempowers Americans. Even if you have a majority vote, you cannot win.

The Europeans may well be the “game changers” because the election of their politicians doesn’t hinge on campaign contributions, long drawn out primaries or a rigid two party system that has degenerated into a lack of political choice. We need to kill the fairy once and for all and put governance in the hands of the American people.

In an article for FDL Action, Jon Walker sites a Gallup Poll that there are 150 million people around the world who would immigrate to the United States:

WASHINGTON, D.C. — About 13% of the world’s adults — or more than 640 million people — say they would like to leave their country permanently. Roughly 150 million of them say they would like to move to the U.S. — giving it the undisputed title as the world’s most desired destination for potential migrants since Gallup started tracking these patterns in 2007.

The relevant worth of the poll, argues Jon,

[..] because the annual Social Security Trust Fund report should be released today. As a result there will likely be much hyperventilating about how the Social Security trust fund is projected to run out of money in roughly 25 years, even though continuing payroll taxes would still be able to fund a high level of Social Security payments given current assumptions.

While the Administrators try hard to make their projections accurate, any very long term projections are inherently going to be somewhat unreliable. Trying to guess how many working Americans there will be and their average incomes in the year 2030 is basically impossible.

While current demographic trends point in one direction, it is completely possible that at some time in the next decade we could adopt policies that would increase the number of working Americans – and the collection of payroll taxes to support Social Security – well above current assumptions.

Richard (RJ) Eskow gives us the headlines that we won’t see:

“Social Security Trust Fund Even Larger Than It Was Last Year”

“Growing Wealth Inequity Will Lead to Social Security Imbalance Later This Century”

“For-Profit Healthcare Poses Threat to Medicare, Federal Deficit, and Overall Economy in Coming Decades”

“Public Consensus Grows For Taxing Wealthy to Restore Long-Term Entitlement Imbalance”

He chastises Stephen Ohlemacher at the Associated Press for touting the  standard doom and gloom spin on the state of Social Security and Medicare with this erroneous headline,  “Aging workforce strains Social Security, Medicare”:

Ohlemacher’s article was occasioned by the latest report from the Trustees of the fund that handles Social Security and Medicare, which will be released today. He writes that “both programs (Social Security and Medicare) are on a path to become insolvent in the coming decades, unless Congress acts, according to the trustees.”

Unfortunately the piece provides no context for the use of the term “insolvent,” which most people associate with bankruptcy or running out of funds. As Sarah Kliff explains, nobody is suggesting that either of these programs will ever run out of funds. And when programs have ongoing sources of income, the temporary absence of a surplus isn’t the same as “insolvency” as that term is commonly understood.

In fact the report will clearly state that Social Security’s Trust Fund has grown to $2.7 trillion dollars, and that Social Security will be able to pay all its benefits in full for a quarter of a century. After that, if no changes are made, it will be able to pay 75 percent of scheduled benefits without changes.

Nor is the “aging workforce” the cause for any of today’s concerns, despite the millions of dollars in advocacy money meant to make us believe that it is. We’ve known about the baby boom ever since it ended in the 1960’s, and it was fully addressed in past adjustments to the program. That’s why the program was considered perfectly solvent for the foreseeable future after the Greenspan Commission raised the retirement age and made its other adjustments in the 1980s.

Media Matters points out the how the MSM gives a hand to the “Ponzi” lie ever since Texas Gov. Rick Perry “described the program as a “Ponzi scheme”:

Social Security is not a Ponzi scheme. People who call it a Ponzi scheme are not “wrong but partially right,” they’re not “called wrong by critics” — they’re just wrong.

A Ponzi scheme is a criminal endeavor that involves opaque financial dealings that promise investment returns when none or next to none actually exist. Social Security’s finances are crystal clear, and the interest generated by its trust fund is quite real.

A Ponzi scheme eventually collapses. According to last year’s report, Social Security can continue as it is, paying full benefits for nearly 25 years, and 77 percent of promised benefits thereafter. [..]

The same false attack is likely to continue as long as newspapers insist on publishing “he said-she said” stories alongside conservative columnists intent on undermining Social Security for ideological reasons.

These false attacks are reinforced by much read and respected newspapers and on-line news sites who report comments by Social Security critics without ever challenging the reality if the accusations. Conservative hacks, like Charles Krauthammer of The Washington Post  and syndicated columnist, John Stossel, continue to repeat this lie ad nauseum without correction by the editorial boards of their newspapers. Truth and facts merely get in the way.

As both writers and Media Matters point out, the solution to preserving Social Security and Medicare as we know it, is the increase the number of people in the work force (you know, real jobs), closing the income inequality gap, and either lifting the payroll tax cap or eliminating it altogether making all income subject to the tax. You know simple real solutions, not hand wringing, misleading spin and lies.

Not only do major corporations pay zero federal tax but they collect state taxes from workers and don’t turn them over to the state governments for years on the presumption that the corporations will keep and create jobs in those states. All perfectly legal and with the states’ blessing.

David Cay Johnston: Taxed by the boss

Across the United States more than 2,700 companies are collecting state income taxes from hundreds of thousands of workers – and are keeping the money with the states’ approval, says an eye-opening report published on Thursday.

The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers’ paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.

General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers’ paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.

Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations, as this column has documented. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.

Where Are Workers’ Taxes Actually Going? Report: State Withholding Taxes Increasingly Pay for Corporate Subsidies Rather than Public Services

Paying Taxes to the Boss traces the rise of 22 subsidy programs derived from personal income taxes (PIT) that together cost about $684 million a year. “These programs are justified in the name of job creation, but they often end up subsidizing companies to move existing jobs from one state to another. In other cases, they go to employers that threaten to move unless they get paid to stay put,” said Philip Mattera, research director of Good Jobs First and principal author of the report.

“We recommend that states seriously consider abolishing PIT-based subsidies. Short of that, we urge Truth in Taxation: that companies be required to disclose the details of how much money is going where on every pay stub of affected workers,”  LeRoy added. [..]

The programs work in various ways. Some allow employers to immediately retain (and never remit to the state) a large portion of the withholding taxes generated by designated new or retained workers. Some provide cash rebates or grants calculated the same way. Others provide credits against corporate income taxes or other business levies, with the value of those credits based on the withholding taxes of new or retained workers. (Some of these credits are cash-refundable if the credit exceeds the company’s tax liability.)  The share of withholding taxes diverted into subsidies can be as high as 100 percent (such as EDGE tax credits in Illinois and Indiana) and the duration can be as long as 25 years (such as Mississippi’s Withholding Rebates). Twelve programs divert 75 percent or more of withholding, and 18 do so for ten years or longer.

And then they cut programs for the poor and go begging to Federal government for “ear marks.”

Income equality in the United States continues to widen between the 99% and the 1%. It was one of the main issues that Occupy Wall St. brought to the forefront of the conversation on the economy and the phony concern over the deficit. One of the big issues is tax inequality, the poor and middle class pay a greater percentage of their income to the government than do the top earners. President Obama and the Congressional Democrats have proposed a minimum tax of 30 percent to individuals making more than a million dollars a year, called the Buffet Rule, after billionaire Warren Buffet who thinks that it is unfair that he pays less in taxes than his secretary. Although it has been pointed out that revenue generated from the increase would only minimally help reduce the deficit, it is wildly popular with 67% of Americans in support of its passage. Unfortunately, it didn’t have the votes in the Senate to even get to the floor for a vote. Even if it did it would never see the light of day in the intransigent House. We mustn’t tax the job creators who haven’t created jobs in the US for over a decade. We must continue to allow millionaires, like Romney, to give their children millions as a gift tax free, thanks to a tax loophole on “carried interest,” presumably one of the loopholes that would have been closed:

When the Romney campaign disclosed in December that the couple’s five sons had a $100 million trust fund, I suspected that, in setting up the fund, the Romneys used a tax strategy that allows some very rich people to avoid paying gift taxes. But it was impossible to know if this was the case without seeing their tax returns going back years. [..]

Reuters emailed the Romney campaign spokeswoman to ask how much the Romneys paid in gift taxes on assets put into the sons’ trust over the last 17 years. The spokeswoman, citing Brad Malt, the Romney family tax lawyer, answered: none.

The idea that someone could pay zero gift taxes on contributions to a $100 million trust fund may surprise people who have heard arguments that the wealthy are overburdened by gift and estate taxes. But the Romneys’ gift-tax avoidance strategy is perfectly legal.

A good discussion on whether Obama’s ‘Buffett Rule’ would bridge tax divide was had on MSNBC’s Up with Chis Hayes with University of Pennsylvania Wharton professor Betsey Stevenson, Reuters columnist David Cay Johnston, former Rep. Tom Perriello, D-Va., and Demos Vice President Heather McGhee.

This bill had very little chance of passing and was in all reality merely a political gambit to make the Republicans look like they are out of touch with the average American voter. How well that will work this early in the campaign remains to be seen.

One of the reasons that the Republicans lost so badly in 2006 and 2008 and the reason the Democrats took such a dive in 2010 was the economy. Since then the job approval rating of Congress has plummeted with the Republicans fairing worse than the Democrats but only slightly. In regards to the economy the public in general doesn’t think that President Obama is doing such a great job, either. People are worried about jobs, good jobs not deficits. Deficit and the national debt are not what is holding back the economy, it’s jobs.

The Republicans in the House seem to be intent on killing more jobs with its latest suicide pact that would cut everything from taxes for the wealthy, food stamps, destroy Medicare, and spending cuts. As Roger Hicky in his Huffington Post article point out, the Republican budget clearly rejecting what the American public wants.

The only thing that could save Republicans would be if Democrats, like Oregon Senator Ron Widen or House Democratic Whip Steny Hoyer, persuaded their party to ignore American public opinion and join with the GOP in destroying Medicare, cutting Social Security, and slashing public spending in a way that cripples the economy and rewards the wealthy. That’s what the Ryan Republican budget would do, and Democrats — and Americans who believe in majority rule — need to explain the extreme nature of this budget to the American people. [..]

So, the brand-new Ryan Republican budget, so very like last year’s Ryan budget, is already unpopular with the American majority, in all of its major elements. Progressives and Democrats should immediately publicize its many unpopular pieces so the public knows about them all. We should immediately demand to know whether the Republican candidates for president embrace it. And we should keep a wary eye out for Democrats who are willing to give the Republicans cover. When the Paul Ryan Republicans — enemies of everything the American majority believe in — are putting a gun to their heads and are about to pull the trigger, progressives should get out of the way and publicize the results — from now until the November elections.

It is obvious from the results of these kinds of cuts in Europe, austerity budgets don’t work. The Occupy Wall Street movement changed that conversation six months ago.

If Obama and the Democrats are smart, they’ll listen to the American public, sit back and let the Republicans pull the trigger.

Up Date: Ezra Klein, writing in the Washington Post, sums up Ryan’s latest version of a “budget plan” in one sentence:

Ryan’s budget funds trillions of dollars in tax cuts, defense spending and deficit reduction by cutting deeply into health-care programs and income supports for the poor.

The last I checked that isn’t going to win them any elections but you never know when the Democrats will ride into save the day. Calling Ron Wyden.

Democratic challenger for the US Senate seat from Massachusetts and Harvard Law professor, Elizabeth Warren has been a popular guest this week on the cable networks. She appeared on MSNBC Thursday following the Republican debate and assessed Republicans as favoring a policy to “invest in those who already made it”. She specifically addressed wealthy businessman Mitt Romney’s income and his preferred tax rate:

“Mitt Romney pays 14 percent of his income in taxes, and people who get out there and work for a living pay 25, 28, 30, 33 percent. I get it, Mitt Romney gets a better deal than any of the rest of us because he manages to earn his income in a way that has been specially protected for rich folks,” said Ms. Warren.

Her assessment of former House Speaker Newt Gingrich was equally critical on his proposed tax policy of reducing everyone’s tax rate to 15% and expressed her support of “Warren Buffett rule” that would raise taxes on the wealthiest Americans.

Earlier on Tuesday night with Jon Stewart on Comedy Central’s “The Daily Show“, she informed Jon that “The Pats are gonna spank the Giants” and addressed tax policy, lobbying, and investment, her signature issues. She opposes cuts in education research as detrimental and the need to invest in the middle class. In Part 2, she goes on to describe the role that government should play in regulating America’s private sector.  This is the unedited interview that is only available on line

There are those who are concerned that Warren, a political novice, will compromise her principles to the pressure of Wall St. hawks like Sen. Charles Schumer (D-NY). After watching her dress down Treasury Secretary Tim Geithner during hearings as chair of the five-member Congressional Oversight Panel created to oversee the implementation of TARP, I think she’ll be able to stand her ground. I’ll forgive her for her support of the Patriots. Nobody’s perfect.

The House of Representatives officially rejected the bipartisan agreement that passed the Senate with 89 votes for a two-month extension of the payroll tax cut, extended unemployment benefits and a doctor’s fix to prevent a 27% reduction in Medicare reimbursement rates. They did so under a complicated scheme whereby members did not vote on the Senate deal itself, but on whether to move to a conference committee on the package, with the rejection of the Senate deal implicit in the exchange. The final roll call was 229-193, with seven Republicans switching sides and voting with Democrats to reject the conference committee. All Democrats present voted against the bill. [..]

The seven Republican no votes: Charlie Bass (NH), Jeff Flake (AZ), Chris Gibson (NY), Jaime Herrera Beutler (WA), Tim Johnson (IL), Walter Jones (NC), Frank Wolf (VA).

Senate Majority Leader Harry Reid won’t play:

“My House colleagues should be clear on what their vote means today. If Republicans vote down the bipartisan compromise negotiated by Republican and Democratic leaders, and passed by 89 senators including 39 Republicans, their intransigence will mean that in ten days, 160 million middle class Americans will see a tax increase, over two million Americans will begin losing their unemployment benefits, and millions of senior citizens on Medicare could find it harder to receive treatment from physicians. “Senator McConnell and I negotiated a compromise at Speaker Boehner’s request. I will not re-open negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders, and supported by 90 percent of the Senate. “This is a question of whether the House of Representatives will be able to fulfill the basic legislative function of passing an overwhelmingly bipartisan agreement, in order to protect the economic security of millions of middle-class Americans. Democratic and Republican leaders negotiated a compromise and Speaker Boehner should not walk away from it, putting middle-class families at risk of a thousand-dollar tax hike just because a few angry Tea Partiers raised their voices to the Speaker. “I have always sought a year-long extension. I have been trying to forge one for weeks, and I am happy to continue negotiating one once we have made sure middle-class families will not wake up to a tax increase on January 1st. So before we re-open negotiations on a year-long extension, the House of Representatives must protect middle-class families by passing the overwhelmingly bipartisan compromise that Republicans negotiated, and was approved by ninety percent of the Senate.”

A couple of point where I disagree with Barney Frank is that we are doing better than Europe and that the economy is doing better. Maybe for the 1% it is but the middle class is shriveling. The important part of this bill was an extension of the UI which is about expire.