The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Monday, June 2, 2014

Income Inequality, Tax Policy, Trickle-down And "Let Them Eat Cake"

It is time for a topic that simply doesn't lend itself to a really quick read. We recognize and understand most readers have grown to abhor long reads. Acknowledged, with this retort.

Would you acknowledge the American people voted to elect George W. Bush and Dick Cheney twice? How about your personal recall of NSA/AT&T communication monitoring as far back as 2006? Are surprised and dismayed about recent revelations from the Veterans Administration? The American public has a short-term paradigm as slippery as the slope of a single edged razor blade. If we do not recall "Trickle-down economics" and the clear fact the GOP has permanent roots in that fail economic policy, you are a danger to the greater society. 

You may be a candidate to vote Republican in coming elections.

In 2007, Bush economic policy, lack of regulation and overlying GOP supply-side economic policy brought an end to the to the message from this chart: The US economic collapse  (Bush Great Recession) hit in December 2007.
The chart is a well known depiction income inequality since Trickle-down  (Supply-side) policy, from the Reagan Administration, took firm hold on a nation. The chart became uber popular after President Obama mentioned the growth of income disparity in a 2013 speech.  Evidence of how Reagan Economic policy has (via design) benefited the nation's top income earners was as stark as the corollary reality of the vast majority who are flat-lined. 

Of much more significance, is the extent to which Americans do not know how Trickle-down has relegated the middle class to a horizon-like growth flat-line. After the aforementioned comments from Obama, a Tampa Bay Times, Politifact, reader fired-off a question about the veracity of Obama's statement. Alas, the reader's failure to believe the president led to a well published "TRUE" finding from Politifact.

The reality is, most of us get our news from television. When can you recall hearing and seeing the words "Income-Inequality" from cable news networks of the than MSNBC. Once, Ali Velshi was no longer broadcast on CNN, the network has gone cold on income inequality (almost as cold as it has frozen up on climate change.....excuse the pun). And, we certainly cannot expect Fox News to mention income inequality in any manner other than this.....

Bill O'Reilly takes up the castle like
moating for the wealthy via lecturing
Fox News Co-host Megyn Kelly.
"It’s worse now since 1920, according to the stats,” Kelly responded. She added that both parties agree on that point and that Democrats have been able to campaign on the issue. 
“You’re buying into this fraud, Kelly, and I’m very disappointed,” O’Reilly shot back. "So, listen to the master here."

"The master?"   
What is it about your psyche that would find such elitism and condensing behavior not only palatable, but preferred viewing? An answer to the question isn't necessary, as I and any regular reader of the TPI considered the question rhetorical. Two plus minutes of income inequality indifference and facilitation fit for archiving by any oligarch who desires to grip a nation.
Can you imagine tuning-in each evening as a viewer of O'Reilly's "The Factor?" 

Fortunately, there are very powerful people among us who not only recognize the long-term danger of a nation (world) deeply separated  via economic strata. Much more important, they speak-out. 

Do you sometimes wonder why Pope Francis is vilified by right-wing media? I posit, because Pope Francis recognizes the dehumanizing world of growing dystopia

In April, Pope Francis tweeted, “Inequality is the root of social evil.” 

Head of the International Monetary Fund (IMF) also knows the danger inherent in the growing divide. The IMF lends money to underdeveloped nations.

Christine LaGarde, the head of the International Monetary Fund  “One of the leading economic stories of our time is rising income inequality and the dark shadow it casts across the global economy,”

President Obama joins both leaders with proper attention to the problem and he does so from a befitting level in US governance: the Presidency. During his State of the Union Address this past January, Obama spoke at length, eloquently and effectively about growing inequality. 

 Barack H. Obama, 44th President of the United States of America                                                                                                                           .....But we know that people’s frustrations run deeper than these most recent political battles.  Their frustration is rooted in their own daily battles -- to make ends meet, to pay for college, buy a home, save for retirement.  It’s rooted in the nagging sense that no matter how hard they work, the deck is stacked against them.  And it’s rooted in the fear that their kids won’t be better off than they were.  They may not follow the constant back-and-forth in Washington or all the policy details, but they experience in a very personal way the relentless, decades-long trend that I want to spend some time talking about today.  And that is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain -- that if you work hard, you have a chance to get ahead.
I believe this is the defining challenge of our time:  Making sure our economy works for every working American.  It’s why I ran for President.  It was at the center of last year’s campaign.  It drives everything I do in this office.  And I know I’ve raised this issue before, and some will ask why I raise the issue again right now.  I do it because the outcomes of the debates we’re having right now -- whether it’s health care, or the budget, or reforming our housing and financial systems -- all these things will have real, practical implications for every American.  And I am convinced that the decisions we make on these issues over the next few years will determine whether or not our children will grow up in an America where opportunity is real.

The Right regards Obama's concern for income inequality contemptible (to keep it clean), but Obama will not be found guilty of misprision regarding income inequality.   

Bill Moyers and Company reported within the past 84 hours, IMF Chief LaGarde's comments about addressing inequity.

What to do about growing income disparity around the world? The IMF chief suggested countries implement “redistributive” measures, including expanded access to education and health care, increased property taxes and more progressive tax systems. 
"...a more progressive tax system."    

I ask, what one fiscal item has been at the forefront of Obama policy since his first term inauguration? The Bush tax cuts. What fiscal issue from the Right has been forefront in all matters of economic policy? Moating in resistance to raising taxes for the nation's wealthy.

I have linked the May 30th, 2014 Moyers and Company piece, here. I have posted a couple of few graphics from the piece for those who do not have time or interest in visiting the site.
The richest 10 percent of people in the world hold 86 percent of the world’s wealth and just 0.7 percent own 41 percent of global riches, according to the Credit Suisse 2013 Global Wealth Report. The bottom half of all adults in the world own just one percent of global wealth:

The global wealth pyramid (Mother Jones chart)
Here’s what the very top of that pyramid looks like. About 100,000 people have more than $50 million:
The apex of the wealth pyramid (MotherJones chart)
In 24 of the 26 countries where the IMF collects income data, the wealthiest one percent has increased its share of income over the past three decades.
The political Right is stuck on keeping taxes as low as taxes can exist. GOP politicians continue to strive towards cutting human services programs and enacting other austerity measures with contempt for passing even meager taxes increase to the nation's wealthy.

Paul Ryan's 2015 Budget (in brief) not only ignores growing income inequality, the budget offers yet another high income earner tax cut slap in our face .

Income inequality is a threat to the health of the nation as surely as former GOP economic policy laid us all bare to the ravages of Bush Great Recession.

How does tax policy look from the Center for Bugdet Policy Priorities (CBPP)?  What follows is a report form this past April 15th, (Tax Day). It provides information that supports consideration of "burying" Bush Tax Polity, yet the piece was written with full acknowledgment the rich pay much more federal taxes.  As is always the case CBPP does not address the fact many of our uber high income earners staffs copious pre-tax dollars is oversea tax shelters. Credit Suissie admits widespread sheltering.

The Top 10 (Well, 11) Federal Tax Charts  

 Read More after the break below

April 15, 2014 at 11:05 am
To usher in Tax Day, here are our top 11 charts on federal taxes, which provide context for debates on issues like tax reform and deficit reduction.
Our first chart shows the sources of federal tax revenue.
Individual income tax revenues have held steady for many decades at a little under half of federal revenue.  The share of federal revenue from payroll taxes (mostly Social Security and Medicare taxes) grew sharply between the 1950s and 1980s and has since remained relatively stable.  Conversely, the share of federal revenue from corporate taxes fell sharply between the 1950s and 1980s and has remained at this lower level.
Our second graph reminds us what those taxes pay for.
Social Security, major health programs like Medicare and Medicaid, and national defense account for roughly two-thirds of federal spending.  Safety net programs (such as unemployment insurance and nutrition programs) and interest on the debt account for 12 percent and 6 percent of federal spending, respectively. The remaining 18 percent goes to such other areas as roads, education, and health and science research.
The United States is a relatively low-tax country, as the chart below shows.  When measured as a share of the economy, total government receipts (a broad measure of revenue) are lower in the United States than in any other member of the Organisation for Economic Co-operation and Development (OECD), even after accounting for the modest revenue increases in the 2012 “fiscal cliff” deal and the taxes that fund health reform.
While high-income filers pay a large share of the nation’s taxes, the main reason is that they receive a large share of the nation’s income.  Moreover, focusing solely on the income tax — among the most progressive taxes — gives a distorted picture of the full set of taxes that different income groups pay.
The chart below provides a more complete picture.  It shows the share of all federal, state, and local taxes that each income group pays and what share of the nation’s income it collects.  As the graph shows, incomes in the United States are extremely polarized, and the overall tax system is only modestly progressive.  For example, the top 1 percent of earners received 22 percent of the nation’s income in 2013 and paid 24 percent of all taxes; the bottom 60 percent of people received 21 percent of the income and paid 17 percent of the taxes.
This largely reflects the fact that average tax rates increase modestly as you move up the income scale.  On average, the bottom 20 percent pays 19 percent of their income in taxes; the middle 20 percent pays 27 percent, and the top 20 percent pays 32 percent, according to Citizens for Tax Justice.
Policymakers considering tax policy changes should keep the economic context in mind, including the dramatic increase in inequality in recent decades. Congressional Budget Office data show that incomes grew at much faster rates for high-income people than for everyone else between 1979 and 2010 (the most recent year available).
As the chart below shows, the average middle-income family had $9,500 less after-tax income in 2010, and the average household in the top 1 percent had $481,800 more, than if all groups’ incomes had grown at the same rate since 1979.
Many low-wage workers struggle to climb the economic ladder, particularly workers who are not raising minor children — the sole group that the federal tax code taxes into (and deeper into) poverty, as the chart below shows.  Often called “childless workers” — though many are non-custodial parents who have financial obligations to their children and play an important role in their lives — they pay substantial payroll taxes and begin paying income taxes while earning less than the poverty line (about $12,000 for a single worker).  The Earned Income Tax Credit (EITC) for these workers is far too small to offset their income and payroll tax liabilities.
The average childless worker who receives the EITC gets just $264, a small fraction of the EITC that other low-wage workers receive, as the chart below shows.  Moreover, childless workers under age 25 are ineligible for the EITC.
There are recent signs of bipartisan momentum to provide a meaningful EITC for childless workers.  President Obama as well as key House and Senate members have advanced proposals that would take a major step forward.  As the chart below shows, the EITC for a childless worker making poverty-level wages would rise from $171 to $841 under the President’s plan.  Moreover, the Treasury Department estimates that the President’s proposal would lift about half a million people out of poverty and reduce the depth of poverty for about another 10 million, under a poverty measure that includes the cash value of tax credits and benefit programs.  The congressional proposals are larger, and so would likely have larger anti-poverty effects.
Recent deficit-reduction measures, including the 2011 Budget Control Act’s funding caps and automatic cuts under sequestration, have been heavily tilted to spending cuts, rather than revenue increases.
If sequestration remains in place, 77 percent of the deficit reduction over 2015-2024 resulting from policy changes will come from spending cuts.  Just 23 percent will come from increased revenues, as the chart below shows. 
Policymakers agreed on a bipartisan basis last December to offset the cost of partially lifting sequestration for 2014 and 2015.
By contrast, however, the Senate Finance Committee has approved a package of “tax extenders” (expiring tax breaks, mostly for corporations) without offsettingthe cost.  If continued for the next decade without offsets, the extenders would cost $484 billion.  That’s the equivalent of giving back more than half of the revenue savings from the 2012 “fiscal cliff” deal, which raised tax rates on very high-income taxpayers, as the chart below shows.  And if policymakers alsocontinue the “bonus depreciation” tax for businesses — mistakenly in our view — the ten-year cost rises to $747 billion, wiping out nearly all of the fiscal-cliff savings.
Policymakers can reduce the deficit or finance investments by scaling back costly and inefficient tax expenditures,” or spending delivered through the tax code in the form of tax credits, deductions and exclusions.
For example, House Ways and Means Chairman Dave Camp’s recent tax reform plan outlined dozens of specific cuts in tax subsidies.
As the chart below shows, tax expenditures cost well more than Social Security and also than Medicare and Medicaid combined.  Harvard economist Martin Feldstein, former chair of President Reagan’s Council of Economic Advisers, has said that “cutting tax expenditures is really the best way to reduce government spending.”
You may have noticed an absence of any dialogue related specifically to corporate taxes. We will leave that issue to Bill Moyers and Joseph Stiglitz.

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