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Income inequality, taxes, and power

politicalstrategy April 17, 2012 1

Guest Blog by Jonathan Shapiro

This post is about  the rising level of income inequality in this country , its relationship to taxes, both corporate and individual , and  the effect that  it  has on the ability of a very few people with big money, including corporations, to exert control over our political process.

You can join us tonight: Friday, February 17, 7:30 PM for a workshop on progressive tax reform, both national and state and what effort is now under way in New York to reform corporate income tax laws. Our indoor space is at 472 Madison Ave, Albany.

More info about the event here

As everyone knows, a recent GAO report documented just how much the income of the top 1% has grown compared to the rest of us.  What you might be surprised to know is that a 2010 CIA report placed the United States  93 out of 133 countries in income disparity, somewhere between Iran and Mexico.

Why should we care?

Aside from the obvious reasons, income disparity is bad for the economy.  According to an April study by Berg and Ostry, writing for the IMF, income inequality has a negative effect on the economy, a large negative effect.   They conclude by saying that “over the longer horizon, reducing income inequality and sustained growth maybe two halves of the same coin.”

Now the question of taxes.

I pay them.  You pay them, but apparently, despite a  supposedly  high corporate tax rate of 35%, many corporations do not, according to a recent study by the Citizens for Tax Justice, as cited in the NY Times and Washing ton Post.  Examples include Boeing, GE, PG&E,  and Verizon to name a few,  for the period of 2008-10, and yet these same corporations spent over $261 million lobbying during this same time.  And of course, part of what they lobby for is a continuation of tax breaks and loopholes, such as offshore  tax shelters , the later of  which, according to the US Public  Interest Research Group,  cost   taxpayers approximately  $100 billion a year in lost revenue.  So the 35% is more or less a joke.

Regarding personal income tax, the United States supposedly uses a system of “progressive taxation, “ meaning  that as you make more money, you pay a larger share of your income to the government.  However in 1950, the top tax rate was 90% and now it is 35%, the lowest since the great stock market crash in the 1920’s.  I  say supposedly, because although our tax structure still appears progressive, this is much less true the higher one goes on the income ladder. A person making 100,000 pays 30.2% in taxes, if they make 141,000, they pay 31.2%, at 245,000, 31.6%, and the kicker, at $1.3 Mil, 30.8%.  These figures include federal , state, and local taxes.

It is a commonly held belief among economic conservatives that  taxes, by definition, strangle economic growth.  This line of attack has been used to successfully slash taxes,  benefitting  the superrich far more  than the rest of us.  We have been lowering taxes for decades and in the process have seen a ballooning national debt, persistent unemployment , galloping income disparity, several  booms, and just as many busts.  So, the idea that low taxes promote growth should  be debunked once and for all.  Today we are seeing the results of the anti-tax  and free market orthodoxy: the government is broke, our infrastructure becomes more like the Third World every day,   and the middle-class is  fast doing a disappearing  act.

Why is nothing being done?   MONEY

Money  to finance political campaigns, money for lobbyists, money for access.   And who has by far the most money, the top one percent, corporations, and  last, but certainly not least, Wall Street.  How many politicians, including Democrats ,  are essentially bought and paid for by influence peddling  organizations and individuals that, not surprisingly, want to promote their OWN interests.  I repeat, their interests, not ours.  Not the interests of the 99%.

An example might be  The Club for Growth, a conservative political organization which  spent a staggering 8.2 Mil in 2010 helping Republicans who supported their anti-tax agenda and assisting challengers to unseat RINO’s who wavered in their anti-tax orthodoxy.   They also, despite having a stated goal of improving the business  climate, opposed raising the debt ceiling.

Then there’s Grover Norquist, whose organization, Americans for Tax Reform, has convinced 238 House members and 41 Senators to sign a pledge never to raise taxes.And  then , the Koch brothers.  And then, etc.,  The list goes on and on ad naseum.

Our political system is rigged by money.  OUR DEMOCRACY  IS FAST BECOMING THEIR  KLEPTOCRACY.

We need’ to adopt a system limiting the influence of lobbyists and special interests through public financing. We need to adopt a truly progressive tax system in order to level the playing field, and only at that point  might  we begin to overcome the influence wielded by the super-rich.

The fact is, we already have a class war in this country and the 99% is losing.

Inconvenient Income Inequality – NYTimes.com

Big corporations use loopholes, dodge taxes: Study – The Washington Post

10 Big Businesses That Have Moved Their Headquarters Abroad to Pay Less U.S. Taxes

Who Rules America: Wealth, Income, and Power

10 Giant Loopholes That Businesses Use To Dodge Taxes
Confronting Income Inequality – NYTimes.com
Tax Shell Game: How Much Did OffShore Tax Havens Cost You In 2010? – U.S. PIRG

One Comment »

  1. education April 18, 2012 at 12:05 pm - Reply

    The 1% buy access to pols using big bucks, their lobbyists help draft tax laws, they don’t pay anything like their share, the rest of us pay though higher taxes and inadequate public services.

    Even worse, the 1% have been running hog-wild in the private economy: practically all the real economic growth since Reagan was elected went to the top brackets.

    The teach-in mentioned in the post was in the past, but there will be a free screening of the award-winning documentary PRICELE$$ Wed May 2 at the Spectrum theater on Delaware Ave in Albany, hosted by Citizen Action, followed by a Q&A discussion with Paul Tonko.

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