Blog

By Sam Pizzigati
Editor, Too Much online magazine

Media darling Rand Paul is doing his best to end progressive taxation in America. Randolph Paul, over a half-century ago, helped make progressive taxation a prime building block for America’s middle class golden age. To stop politicos like Rand, we need to remember insightful advocates like Randolph.

April 15 is fast approaching, and Americans are naturally thinking about taxes. But most of us won’t be thinking about taxes the same way Americans once did. Over the past half-century, we’ve had a profound transformation in our attitudes toward income taxation.

How profound? Consider the tax perspective of Randolph Paul, the corporate tax attorney who helped shape federal tax policy during and after World War II.

Randolph Paul probably thought about taxes — and their role in our society — as deeply as any American of his time. Paul lived and died taxes, literally. In 1956, he slumped over and passed away while testifying about tax policy before a U.S. Senate committee.

Paul’s tax career had started decades earlier. In 1918, just a few years after the federal income tax went into effect, Paul began specializing in tax law. By the 1930s, he had become one of Wall Street’s top tax experts. His clients ranged from General Motors to Standard Oil of California, and probably no one in America knew the tax code — loopholes and all — any better.

That knowledge made Randolph Paul invaluable to Franklin Roosevelt’s New Deal. In 1940, Paul helped New Dealers write an excess profits bill. In 1941, right after Pearl Harbor, he joined the Treasury Department and worked to make sure that all Americans, the wealthy included, contributed financially to the war effort.

Paul succeeded. By 1944, the federal income tax had become a major presence in American life. Most Americans, for the first time ever, were paying income tax — and rich Americans were paying the most taxes of all. During the war, the tax rate on income over $200,000, about $2.6 million today, jumped to 94 percent.

Two years after the war, back in private practice, Paul published his masterwork, the ultimate distillation of his thinking about tax policy. His new book, Taxation for Prosperity, presented a carefully argued case for continuing high wartime tax rates on peacetime high incomes. (more…)

By Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future

Let’s face it. The subject of taxes intimidates a lot of people, and it can be an understandably touchy subject. So we won’t inundate you with charts, graphs, and tables to tell you why the rich are getting away with murder on tax day. We’ve got something better for you on this Tax Day, just 24 hours after Republicans rejected the Buffett rule (a proposal which was sensible, if far too easy on the rich).

Instead of bogging you down with data, we offer you: The Elvis Index.

As we’ve noted before, Elvis had a manager named Col. Tom Parker – who, in the true huckster/promoter spirit, was neither a “Colonel” nor “Tom Parker.” (He was a Dutch immigrant.) Col. Parker famously said back in the 1950s that “”I consider it my patriotic duty to keep Elvis up in the 90 percent tax bracket.”

That’s right. Back in the 1950s – when we were that country that Rick Perry and other conservatives wax nostalgic about – Dwight Eisenhower was President, the nation was enjoying its postwar economic boom, and the top tax rate for ultra-high-earners was 90 percent. (It was either 91 percent or 92 percent throughout the Eisenhower Presidency.)

Today the official top tax rate for ultra-high earners is 35 percent – and between capital gains tax cuts and other accounting tricks, very few of them pay even that much. Here’s a snapshot (shrunk to fit the blog format; click to enlarge:

(Eskow, Campaign for America’s Future; from Federal data)

What has this succession of tax breaks for the wealthy done for – or to – the rest of us? Let’s consult the Elvis Index:

Elvis Presley’s rise to stardom took place during the Eisenhower Presidency. These were the years when he went from the kid who cut an acetate of “That’s Where Your Heartaches Begin” at a county fair for his Mom, to the nineteen-year-old truck driver who changed pop music in Sam Phillips’ Sun Records studio in Memphis, and on to the RCA Records superstar who stunned the world as he sang the songs of Otis Blackwell and Lieber & Stoller.

With a top tax rate of 92 and 91 percent, President Eisenhower was able to build the national highway system – which, like other parts of our infrastructure, is now crumbling into decay. (more…)

Amy Traub

By Amy Traub
Research Director Drum Major Institute for Public Policy

It’s tax day, and Tea Party participants want you to know they’re boiling with rage, denouncing activist government and the taxes that pay for it. Analysts point out that much of the anti-tax fervor is based on half-truths and misinformation: from the myth that half of Americans don’t pay any taxes to the misconception that President Obama has raised taxes on working people (a February CBS/New York Times poll found that just 2 percent of those sympathetic to the Tea Party movement realized that they have received a substantial tax cut from Obama’s stimulus plan, compared with a still-abysmal 12 percent of the general population.) But beneath the scrim of misapprehensions and half-truths, the well-spring of authentic frustration is unquestionable.

New York Times columnist Frank Rich argues that the current surge of anger has little to do with policy debates over health care, taxes or any other substantive topic. Instead, he contends, the rage is rooted in anxieties about demographic change in America, “fears of disenfranchisement among a dwindling and threatened minority in the country no matter what policies were in play.”

But racial anxiety doesn’t tell the whole story. In a speech last week at Harvard’s Kennedy School of Government, AFL-CIO President Richard Trumka offered a different interpretation as he explained populist rage to an academic audience:

The jobs hole – and the decades-long stagnation in real wages — are the source of the anger that echoes across our political landscape. People are incensed by the government’s inability to halt massive job loss and declining living standards, on the one hand, and the comparative ease with which government led by both parties has made the world safe again for JP Morgan, Goldman Sachs and Citigroup, on the other hand.

Rescuing the big banks hasn’t done much for Main Street. The very same financial institutions that got bailed out have not only cut way back on lending to business, they have never stopped foreclosing on American families’ homes.

The fact is that for a generation we have built our economy on a lie–that we can have a low-wage, high-consumption society and paper over the contradiction with cheap credit funded by our foreign trading partners and financial sector profits made by taking a cut of the flow of cheap credit.

So now a lot of Americans are angry. And we should be angry. And just as we have seen throughout history, there are plenty of purveyors of hate and division looking to profit from our hurt and our anger.

Trumka doesn’t discount the potency of fears of demographic and social change. Rather, he argues that if our democracy can deliver economic policies that address Americans’ economic pain, “hate and division” can be overcome.

In much of Europe, racial hatred and political violence prevailed in response to the mass unemployment of the Great Depression. And in the end, we had to rescue those countries from fascism– from the horrible consequences of the failure of their societies to speak to the pain and anger bred by mass unemployment.
Why did our democracy endure through the Great Depression? Because working people discovered it was possible to elect leaders who would fight for them and not for the financial barons who had brought on the catastrophe. Because our politics offered a real choice besides greed and hatred. Because our leaders inspired the confidence to reject hate and charted a path to higher ground through broadly shared prosperity.

This is a similar moment.

The union movement’s answer is to try to channel justified rage towards its rightful target – not the taxes that educate our children, protect our streets, maintain our highways and keep dangerous products off the store shelves; not the health care bill that bears little resemblance to the “big government” caricature painted by its most ardent opponents – but the real economic policies that continue to prioritize the captains of finance over working people and the millions of Americans who want to be working again. Labor’s effort to make American politics answer to the legitimate economic concerns of the American people may be our nation’s best hope.

 ***

Follow Amy Traub on Twitter: www.twitter.com/AmyTraubDMI

***
Amy Traub is the author of the book, From Disaster to Diversity: What’s Next for New York City’s Economy. She also wrote a chapter for the book, Thinking Big: Progressive Ideas for a New Era (Berrett-Koehler Publishers, 2009).  She has authored several influential DMI reports, including “Principles for an Immigration Policy to Strengthen and Expand the American Middle Class.” In 2008, the Jewish Funds for Justice gave her its  Cornerstone Award.  

Dave Johnson

By Dave Johnson
Fellow with Campaign for America’s Future

Yesterday was April 15, so I wrote about Tax Tricks. Here’s a tax trick to talk about: Offshore Tax Havens for corporations.

Here’s one way that offshore tax havens work. You make an item in one country, and sell it at cost to a subsidiary that is based (post office box) in a tax haven country with no or low taxes. So there is no profit to report in the country that it was made in. Then, your company or another subsidiary buys it for import in the US, for a price near to the amount the product will be sold for here. So when it sells, there is no profit to be taxed here. All the profit occurs in the low-or-no tax country. We, the People collect no taxes with which to pay for the schools and roads that make our economy competitive.

This tax trick encourages companies to move offshore, closing factories, laying off workers, kill the local suppliers and force costs onto the community. So not only are we losing the tax base and suffering the loss of the jobs and factory, we’re picking up many of the costs. When a company like Whirlpool says they have to close a plant and destroy a community for competitive reasons, it’s because they can do it, and if they don’t their competitors will. If their competitors do and they don’t respond they lose out, even to the possible point of going out of business (and closing factories and destroying communities.)

Don’t blame the companies. Companies do what we let them do. If you don’t take advantage of this your competitors will. If your competitors gain enough advantage and you don’t you even face going out of business — and closing factories, destroying communities, putting the costs on the public etc. So by allowing this, Congress forces companies to do this. The word you hear is “encourages” but really, in a competitive environment, allowing it at all forces not encourages.

It is OUR job to set up the playing field on which these companies compete and to define the rules they will use. Zach Carter writes in 10 Ways to Force the Stinking Rich to Share Their Wealth,

According to the Government Accountability Office, 83 of the 100 largest American corporations (pdf) engage in this kind of tax evasion. All of those companies have lobbyists.

These companies do it because we let them, which means we make them do it.

Congress: FIX IT!

***

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project.

***

Johnson also is a fellow at the Commonweal Institute and a Senior Fellow at the Institute for the Renewal of the California Dream.

***

Follow Dave Johnson on Twitter: www.twitter.com/dcjohnson 

Robert Borosage

By Robert L. Borosage
Co-Director Campaign for America’s Future

Tax Day. Fox News is flogging Astroturf “tea parties” underwritten by corporate lobbyists, while its pundits warn that raising the top income tax rate to the level it was under Bill Clinton constitutes “socialism.” The Wall Street Journal editorializes about the evils of the estate tax. Ari Fleischer, Daddy Bush’s old flack, is trotted out to complain that “redistribution of income” through the tax code “is getting out of hand.”

Really? Here’s the grim reality. Since 1980, when the conservative era began, inequality has reached Gilded Age extremes – while top end tax rates have been cut. The wealthiest few captured ever more of the nation’s income while successfully lowering their tax rates.

And worse – this is still going on. This month, every Republican Senator – joined bizarrely by 10 Democrats – pushed for yet another tax break for the super-rich – those with fortunes over $7 million. Apparently worried that the heirs of the Paris Hilton class might not be able to keep the yacht clubs humming, Republican Senators voted in lockstep to direct the Congress to raise the full exemption of estates from $7 to $10 million per couple, and drop the top rate from 45% to 35%. Over a decade when fully in effect, this represents a bauble worth about $90 billion to the 1 in 400 estates (one-fourth of one percent) that reach that level.

Fleischer would suggest this is a small, but inadequate step to curb the confiscatory redistribution of the tax code. But he’s peddling bull.

In 1980, as “Gilded Age Taxation,” a study by the Institute for America’s Future shows, the richest 1% of Americans captured fully 7.7% of the nation’s after-tax income. The middle sixty percent captured about 50.9%. By 2006, the latest CBO figures show the opulent 1% — making an average $1.3 million — captured a staggering 16.3% of the nation’s income after all that tax code redistribution. While the middle sixty percent garnered only 44.1%. If class war is being waged, the rich are on the march.

The Institute for Policy Studies details the staggering contrast to the Eisenhower years. In 1955, the top 400 taxpayers averaged about $12.3 million in income (2006 dollars) and paid, after exploiting every loophole imaginable, 51.2% of that in federal income tax. A half century later, the richest 400 average a breath-taking $263.3 million in income each, and pay a mere 17.2% of that in federal income taxes. (A lower tax rate than paid by most of their secretaries).

If those 400 taxpayers had paid at the same rate in 2006 as a half century earlier, the federal treasury would have collected $35.9 billion more in revenue, or enough to double the energy and transportation budget combined. No wonder Ike, clearly a stealth “socialist”, could afford to build the interstate transport system.

So why do Republican Senators en mass and 10 wayward Democrats – Max Baucus, Evan Bayh, Maria Cantwell, Mary Landrieu, Blanche Lincoln, Patty Murray, Bill Nelson, Ben Nelson and Jon Testor – think the wealthiest one-fourth of one percent of Americans need another tax break? They wax eloquent about saving family farms and small businesses. But upon sober review, the New York Times editorial board provided a tempered evaluation of the argument: “That is swill.” Opponents of the estate tax haven’t been able to dig up a family that was forced to liquidate its farm or business due to the tax because these folks simply do not exist.

The sad reality is that conservative dominance over the last decades has had profound effects. One of these is that income inequality grew to Gilded Age extremes, while top end tax rates were slashed. Fleischer is right. We did witness a lot of redistribution. But it went from the middle class to the very top, not the other way around.

(Incidentally the new tax break isn’t a done deal. A conference committee will decide its fate in the next week or two. You might want to call or write Republican Senators or the wayward Democratic 10 and tell them enough already.)