In Part 1 of his 3-part ‘Real News’ interview, Jeff Thompson, Assistant Research Professor in Economics at the University of Massachusetts at Amherst, explains that his study shows that while states need revenue, most tax wealthy at lower rates:
from the transcript:
Since the beginning of what some people are calling the Great Recession in 2008, revenues to states have sharply plummeted. Most of the response has been cuts—cuts in public spending and the social safety net, education, and other such areas. Very little of this has been made up by increasing revenues, especially in terms of taxes on the affluent. So why? And what would be effect of this? Some people argue that taxing the wealthy drives down investment or makes them leave the state, so you really can’t do this as a public policy option.Well, what’s the research on this? Well, there’s a new paper out now by Jeffrey Thompson. He’s a assistant professor at the PERI institute in Amherst, Massachusetts, and he now joins us. Thanks for joining us, Jeffrey.
In Part 2, Jeff Thompson details how his study shows that while states need revenue, most tax wealthy at lower rates:
from the transcript:
We’re now discussing Jeffrey Thompson’s research paper looking at the actual evidence of what happens when you raise taxes on the wealthy. States across the country have massive decreases in their revenue because of the recession, and mostly they’re making it up through cuts. Well, Jeffrey’s paper argues that you could raise revenues on the wealthy and in fact increase growth and jobs, not decrease it as some people are arguing.
And in Part 3, Jeff Thompson details how his study shows that if states raise taxes the rich will not relocate:
from the transcript:
We’re continuing our series of interviews with Jeffrey Thompson, who’s recently written a paper looking at ways states can raise revenue and what would happen if they raise taxes on the upper tier, on the 1 percent. Will they stop working? Will they stop investing? Well, as you’ll see if you watch the earlier episodes of the interview, Jeffrey Thompson concludes the rich will not go on strike. But will they just leave? If one state raises its taxes, will wealthy people just move out of the state or do something else to avoid taxes, for example, spend most of their time hiring tax lawyers to figure out ways not to pay the taxes?
But this is Barack Obama, whose idea of negotiating is to give away half the house before he’s even asked the other side for the bathroom sink.
Apparently Obama will propose that people earning more than $1 million a year pay at least the same tax rate as middle-class earners. That’s aiming mighty low.
America’s median income is about $50,000. The typical taxpayer at that level pays approximately 20 percent in taxes.
Granted, that’s a higher rate than most of today’s super rich pay because of countless deductions, credits, and loopholes – including, especially, their ability to take their incomes in the form of capital gains, taxed at 15 percent. That’s a big reason Buffett’s hundreds of millions a year are taxed at just over 17 percent — a lower rate than his secretary faces, as Buffett often says.
But a 20 percent rate is still ridiculously low compared to what millionaires and billionaires ought to be paying. Officially, income over $379,150 is supposed to be taxed at 35%.
And even 35 percent is a pittance compared to the first three decades after World War II. Before Ronald Reagan slashed taxes on the rich in 1981, the highest marginal tax rate was over 70 percent. Under Dwight Eisenhower it was 91 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.
I’m not entirely sure what this says about either myself or the president, but I was shocked to hear that his proposal for paying for the American Jobs Act out of existing spending will come entirely from cuts in “tax giveaways.” That is to say, he wants to raise taxes on the plutocrats and their various pseudo-monopolies.
White House budget director Jack Lew outlined Obama’s proposals for paying for the plan, targeting the rich and corporations as the president has in the past to no avail.
The biggest item would raise $400 billion by limiting deductions and exemptions on individuals who earn more than $200,000 per year and families who earn more than $250,000.
He also proposed raising $18 billion by treating the earnings of investment fund managers as ordinary income rather than taxing it at lower capital gains rates.
He would eliminate many oil and gas industry tax breaks to raise $40 billion and change corporate jet depreciation rules to bring in another $3 billion.
According to Lew, The Hill notes:
[T]he total measures proposed by the administration would bring in $467 billion, $20 billion more than the cost of the bill.
Previously the leftist consensus seemed to be (and I would say I agreed) that he would look to cut spending from areas that were a sure thing with Republicans, like the American welfare state. This would have offset any good that his plan did by an equal amount of evil distributed elsewhere. Instead, it turns out he’s targeting tax loopholes, an unjust tax code, and corporate welfare. Whatever the reason for this shift, I’m pleasantly surprised. The Anarcho-Militarist Party, the president’s primary opposition, will not be.
Go Bernie, go. Can we draft Bernie to run against Obama in the Democratic party? Honestly, he’s the only politician who says anything, ANYTHING, about the impact of all this debt ceiling hoo hah has on real Americans, the 99% of us who are not millionaires. He even uses the word immoral. Which clearly means Bernie is out of touch.
Excellent smackdown of the media and economists and politicians who are not in touch with real people and what they have to deal with every day. It’s also a rhetorical road map for any real progressive at the federal and state level who wants to win in November 2012, whether running for State Assembly or President or Governor.
From Senator Sanders YouTube Channel.
UPDATE: Kudos to the Wall Street Journal opinion page for publishing a version of Sanders’ speech. If you’re like me and refuse to pay money to Rupert Murdoch, the full opinion piece also is on Senator Sanders’ website. While I doubt his viewpoint will prevail, it’s great to see it get some hearing. Then again, read the comments on WSJ.com and you’ll see there’s a hard core of people who refuse to realize what will happen if the middle class gets wise and, like the rich, also refuse to pay taxes that go to build courthouses, roads, bridges, and all the rest. We’ll see how that works out.
New data released by the IRS reveals that, over a period of 12 years, tax rates for the richest 400 Americans were effectively cut in half. In 1995, the richest 400 Americans paid, on average, 29.93% of their income in federal taxes. In 2007, the last year for which the IRS has released data, the richest 400 Americans paid just 16.63%.
In 1995, just 12 of the 400 richest Americans paid an effective tax rat of between zero and 15%. By 2007, that number skyrocketed to over 150. The massive reduction is due to both Bush-era tax reductions for the wealthy and the aggressive exploitation of tax dodges and shelters. (For details, check out this report from BusinessWeek.)
As their tax rates plummeted, the total income of the richest 400 Americans skyrocketed. In 1995, the combined income of the richest 400 was just over $6 billion. By 2007, the combined income of the richest 400 was almost $23 billion.
If the richest 400 Americans simply paid the same effective rate in 2007 as they did in 1995, the government would have collected over $3 billion in additional revenue. Some millionaires agree that the reduction has been unfair and have formed a group, Patriotic Millionaires for Fiscal Strength, to demand higher taxes.
So, not only the tax rates didn’t increase too, or at least stay the same, but they went down. Furthermore, those numbers don’t include the Great Pillaging Of The Middle Class of the last 4 years. And, no doubt, Obama and his buddies wants to make the disparity even bigger.
From a NY Times editorial the other day:
AS a labor lawyer I cringe when Democrats talk of “saving” Social Security. We should not “save” it but raise it. Right now Social Security pays out 39 percent of the average worker’s preretirement earnings. While jaws may drop inside the Beltway, we could raise that to 50 percent. We’d still be near the bottom of the league of the world’s richest countries — but at least it would be a basement with some food and air. We have elderly people living on less than $10,000 a year. Is that what Democrats want to “save”?
“But we can’t afford it!” Oh, come on: We have a federal tax rate equal to nearly 15 percent of our G.D.P. — far below the take in most wealthy countries. Let’s wake up: the biggest crisis we face is that most of us have nothing meaningful saved for retirement. I know. I started my career wanting to be a pension lawyer. In the 1970s, lawyers like me expected there to be big pots of private pensions for hourly workers. By the 1980s, as factories closed, I was filing hopeless lawsuits to claw back bits and pieces of benefits. Now there are even fewer bits and pieces to get.
A recent Harris poll found that 34 percent of Americans have nothing saved for retirement — not even a hundred bucks. In this lost decade, that percentage is sure to go up. At retirement the lucky few with a 401(k) typically have $98,000. As an annuity that’s about $600 a month — not exactly an upper-middle-class lifestyle. It’s too late for Congress to come up with some new savings plan — a new I.R.A. that grows hair, or something. There’s no time. We have to improve the one public pension program in place. Should we means-test it? No. I don’t care if they go out and buy bottles of Jim Beam: let our elderly have an occasional night out at a restaurant.
This is a great argument, especially calling out that imposing the payroll tax that funds Social Security on all income, wages and capital gains, would not only “fix” Social Security (it’s not currently broken) but allow us to provide retirement income slightly below first world countries. The factoids also are interesting.
Of course, chances are this will never happen in the current political and media climate. We’re supposed to punish anybody not wealthy, not help them. And we’re supposed to coddle the wealthy as a reward for their virtue which is the only thing that made their wealth possible.
Verizon, Boeing, Wells Fargo, and other corporations join GE in giving the finger to Uncle Sam [New]
Today’s release details the pretax U.S. profits, federal taxes paid and effective tax rates of (in alphabetical order): American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. CTJ’s full corporate report is scheduled for release this summer.1
Not a single one of the companies paid anything close to the 35 percent statutory tax rate. In fact, the “highest tax” company on our list, Exxon Mobil, paid an effective three-year tax rate of only 14.2 percent. That’s 60 percent below the 35 percent rate that companies are supposed to pay. And over the past two years, Exxon Mobil’s net tax on its $9.9 billion in U.S. pretax profits was a minuscule $39 million, an effective tax rate of only 0.4 percent
Had these 12 companies paid the full 35 percent corporate tax, their federal income taxes over the three years would have totaled $59.9 billion. Instead, they enjoyed so many tax subsidies that they paid $62.4 billion less than that.
If just these 12 companies had paid at a 35 percent tax rate over the past three years, total federal revenues from corporate taxes would have been 12 percent higher than they actually were.
Here is the information on the 12 illustrative companies. Technical notes follow on page 3.
Twelve Corporations: Their U.S. Pretax Profits and Their Federal Income Taxes, 2008–2010
$62.4 billion from just 12 corporations! But teachers, cops, firefighters and other public employees are driving America over a cliff say the right-wing pinochios.
As if that wasn’t bad enough, now Apple is lobbying Congress [Win America Campaign] to pay next-to-no taxes when they bring back to the US their over $12 billion in offshore profits. And they’re leading a national lobbying group of global corporations that want the same special treatment for their more than $1.2 trillion in offshore profits.
If Congress passes this “tax holiday,” Apple will avoid over $4 billion in taxes. And global tax dodgers could avoid over $80 billion. Not only is this more than enough to solve every state budget crisis in the country, it’s also unfair to individual taxpayers and domestic businesses that have to pick up the slack for tax deadbeats like Apple
editor: added Win America link
What I love about the Win America site, as a student of rhetoric, is the line, “Currently, there is over $1 trillion earned by American businesses trapped overseas.” Trapped? By whom? Companies that cannot stand to pay any reasonable taxes on the money? A completely bogus statement, a lie. This money is not trapped: companies have decided not to pay their fair share of taxes unless they get to decide the tax rate. These companies benefit from taxpayer-funded infrastructure, indeed, would have no business without that infrastructure. Who else is going to pay for that key part of their business? Plus paying fair taxes ensures all companies can continue to create jobs and wealth. None of these companies would be allowed to stiff their investors yet they’re happy, even eager, to stiff taxpayers who funded (invested) in what makes their business and wealth possible.
Ignoring corporate tax cheats also is part of the “don’t tax rich people (or we can’t tax rich people)” meme. In this case, the amount of tax owed to taxpayers (for court houses, police, and infrastructure needed to enforce their contracts that make their business valid) would solve the state budget crises that is destroying desperately needed living wage jobs. Remember, only poor people dodge taxes. Not wealthy corporations. Certainly not the rich.
Apple has a great reputation for design and being customer friendly. It’s a shame their corporate practices on taxation and labor are so horrid. Really they should have zero business.
On the April 9 edition of Fox News’ Fox & Friends, after co-host Gretchen Carlson stated that “yesterday we were reporting a story that 47 percent of all Americans don’t pay any taxes,” Fox Business host Stuart Varney stated: “Yes, 47 percent of households pay not a single dime in taxes. And some of those households actually make a profit from the Treasury.” Co-host Steve Doocy asked, “Is that fair.”
There is a small problem with the narrative, again: it’s not true, again. Chuck Marr and Brian Highsmith at the Center of Budget and Policy Priorities explain:
The notion that “half of Americans don’t pay taxes” not only overstates the share of households that do not pay federal income taxes in a typical year. It also ignores the other taxes people pay, including federal payroll taxes and state and local taxes.
Policymakers, pundits, and others often overlook this point. At a hearing last month, Senator Charles Grassley said, “According to the Joint Committee on Taxation, 49 percent of households are paying 100 percent of taxes coming in to the federal government.” At the same hearing, Cato Institute Senior Fellow Alan Reynolds asserted, “Poor people don’t pay taxes in this country.” Last April, referring to a Tax Policy Center estimate of households with no federal income tax liability in 2009, Fox Business host Stuart Varney said on Fox and Friends, “Yes, 47 percent of households pay not a single dime in taxes.”
None of these assertions are correct. As the Tax Policy Center’s Howard Gleckman noted regarding TPC’s estimate that 47 percent of Americans owed no federal income tax in 2009, “rarely has a bit of data been so misunderstood, or so misused.” Gleckman wrote:
Let me explain — repeat actually — what [the 47 percent figure] means: About half of taxpayers paid no federal income tax last year. It does not mean they paid no tax at all. Many shelled out Social Security and Medicare payroll taxes. In fact, only 14 percent of Americans didn’t pay either income or payroll taxes. Some paid property taxes and, it is fair to say, just about all of them paid sales taxes of one kind or another. So to say they pay no taxes is flat wrong. 
The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only one that matters. Some 86 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to just 1.6 percent for taxpayers in the top 1 percent of the income distribution (see Figure 2).
In addition, Congressional Budget Office data show that lower-income households pay a significantly larger share of their incomes in federal excise taxes (levied on goods such as gasoline) than middle- and upper-income households do.
When all federal taxes are considered, it is clear that the overwhelming majority of Americans pay such taxes. The poorest fifth of households paid an average of 4 percent of their incomes in federal taxes despite their low incomes in 2007, while the next fifth paid an average of 10 percent of income in federal taxes.
Low-income families also pay substantial state and local taxes. Most state and local taxes are regressive, meaning that low-income families pay a larger share of their incomes in these taxes than wealthier households do. The bottom fifth of taxpayers paid 12.3 percent of their incomes in state and local taxes in 2010, according to the Institute on Taxation and Economic Policy (ITEP) model. That was well above the 7.9 percent average rate that the top 1 percent of households paid (see Figure 3).
Considering all taxes — federal, state, and local — the bottom 20 percent of households paid an average of just over 16 percent of their incomes in taxes (12.3 percent in state and local taxes plus 3.9 percent in federal taxes) in 2009. The next 20 percent paid about 21 percent of income in taxes, on average. 
In fact, when all taxes are considered, the share of taxes that each fifth of households pays is similar to its share of the nation’s total income. The tax system as a whole is only mildly progressive. 
Last month’s discovery that GE paid zero in taxes in 2010 has exploded across the news. But GE is not alone. Rainforest Action Network reviewed the top four banks, oil and coal companies in the country, and found that all of them are gaming the system. In fact, Bank of America, Citi, Massey Energy and Chevron have also all paid zero in federal income taxes this year or in year’s past.
We reviewed 12 of the dirtiest corporate tax dodgers: Bank of America, Citi, JPMorgan, Wells Fargo, Chevron, BP, Shell, Exxon, Massey Energy, Alpha Natural Resources, Peabody Energy and Arch Coal. These 12 banks, oil and coal companies are responsible for foreclosing on millions of people’s homes and polluting our air, water and climate. At the same time, we found that they pay next to nothing into a tax system that provides the very services that protect the homeless, the sick and our environment.
As the graphic below shows, banks, oil and coal companies are making billions in profits annually and paying much less than their fair share in taxes. In fact, the top four oil companies in the country made $1.26 trillion in gross revenues and paid a shocking 2.04% average tax rate.
Some amazing charts from Center on Budget and Policy Priorities:
From Paul Krugman. As Krugman notes, notice that the countries with the highest tax rates avoided most or all of the financial crash of the past few years. And they’re also the most civilized countries in terms of how they treat average citizens, you know, not letting people die because they can’t afford health care.
IMHO the last chart alone should generate public scandal and be on the front page of every newspaper in the country. And be the first response when people ask about “class warfare” and whether or not the US de-taxation policy has been a success or failure. Followed up by union busting and all the other ways the elites have suppressed middle class wages for over a generation.
UPDATED: Actually the third chart needs this chart to be appreciated fully:
The source data is here, the chart from here. The disparity in income becomes clear when you look at the data: the poorest group doubled their income by 1970 (about $12k/year to $24k/year) then saw their income stagnate. The wealthiest group saw their income go from $67k/year to $190k/year in the same time period with no break in the upward rise.
So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home.
Welcome to America in the second decade of the 21st century. An army of long-term unemployed workers is spread across the land, the human fallout from the Great Recession and long years of misguided economic policies. Optimism is in short supply. The few jobs now being created too often pay a pittance, not nearly enough to pry open the doors to a middle-class standard of living.
Arthur Miller, echoing the poet Archibald MacLeish, liked to say that the essence of America was its promises. That was a long time ago. Limitless greed, unrestrained corporate power and a ferocious addiction to foreign oil have led us to an era of perpetual war and economic decline. Young people today are staring at a future in which they will be less well off than their elders, a reversal of fortune that should send a shudder through everyone.
The U.S. has not just misplaced its priorities. When the most powerful country ever to inhabit the earth finds it so easy to plunge into the horror of warfare but almost impossible to find adequate work for its people or to properly educate its young, it has lost its way entirely.
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.
And guess who President Obama appointed chairman of the President’s Council on Jobs and Competitiveness, a board to get Americans back to work and strengthen our economy? GE’s CEO and Chairman, Jeff Immelt.
That was another episode of the critically acclaimed series The wolves are guarding the henhouse.