The Rich Really Do Pay A Lower Tax Rate Than Others

The charts above are from The New York Times. They show the total tax rate paid by all income groups in this country (total of federal, state, and local taxes). The United States has traditionally had a progressive tax system. That means that those who make more money pay a higher tax rate than those who make less. Republicans (whose main constituency is the rich) don't like progressive taxation.

Note in the top chart, the progressive taxation was working in 1950. As income rose, so did the total tax rate, and for the rich that rate was substantially higher than for other groups (about 70%). Republicans will tell you that inhabits growth and hurts the economy, but the 1950's was actually a booming economy for the United States.

About 1980, the Republicans gained control of the government, and they immediately began to lower the taxes for the rich (mainly the top 5%). The administrations of Reagan, Bush II, and Trump substantially lowered the tax burden on the rich, while leaving the tax burden on everyone else about the same as it was. The result is shown in the bottom chart. Now it is a fact the the richest Americans actually pay a smaller percentage of their income (smaller tax rate) than any other group in the country (including the poor).

The Republicans told us this would grow the economy and increase wage for everyone. That has not happened. All it has done is fatten the bank accounts of the rich and balloon the deficit and national debt of our federal government.

Here's is part of an excellent article by David Leonhardt in The New York Times on this:

Almost a decade ago, Warren Buffett made a claim that would become famous. He said that he paid a lower tax rate than his secretary, thanks to the many loopholes and deductions that benefit the wealthy.

His claim sparked a debate about the fairness of the tax system. In the end, the expert consensus was that, whatever Buffett’s specific situation, most wealthy Americans did not actually pay a lower tax rate than the middle class. “Is it the norm?” the fact-checking outfit Politifact asked. “No.”

Time for an update: It’s the norm now.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.

The overall tax rate on the richest 400 households last year was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980.

For middle-class and poor families, the picture is different. Federal income taxes have also declined modestly for these families, but they haven’t benefited much if at all from the decline in the corporate tax or estate tax. And they now pay more in payroll taxes (which finance Medicare and Social Security) than in the past. Over all, their taxes have remained fairly flat.

The combined result is that over the last 75 years the United States tax system has become radically less progressive.

The data here come from the most important book on government policy that I’ve read in a long time — called “The Triumph of Injustice,” to be released next week. The authors are Emmanuel Saez and Gabriel Zucman, both professors at the University of California, Berkeley, who have done pathbreaking work on taxes. Saez has won the award that goes to the top academic economist under age 40, and Zucman was recently profiled on the cover of Bloomberg BusinessWeek magazine as “the wealth detective.”

They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. The story they tell is maddening — and yet ultimately energizing.

“Many people have the view that nothing can be done,” Zucman told me. “Our case is, ‘No, that’s wrong. Look at history.’” As they write in the book: “Societies can choose whatever level of tax progressivity they want.” When the United States has raised tax rates on the wealthy and made rigorous efforts to collect those taxes, it has succeeded in doing so.

And it can succeed again. . . .

The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it’s been true recently. Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.

In their book, Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth.

One crucial part of the agenda is a minimum global corporate taxof at least 25 percent. A company would have to pay the tax on its profits in the United States even if it set up headquarters in Ireland or Bermuda. Saez and Zucman also favor a wealth tax; Elizabeth Warren’s version is based on their work. And they call for the creation of a Public Protection Bureau, to help the I.R.S. crack down on tax dodging.

I already know what some critics will say about these arguments — that the rich will always figure out a way to avoid taxes. That’s simply not the case. True, they will always manage to avoid some taxes. But history shows that serious attempts to collect more taxes usually succeed.

Ask yourself this: If efforts to tax the super-rich were really doomed to fail, why would so many of the super-rich be fighting so hard to defeat those efforts?

A History Of The Top Tax Rates In The United States

Donald Trump, and his Republican congressional friends, think taxes are too high in this country -- especially for the rich and corporations (the only entities affected by the top tax rate). I think we need to know what we are talking about before this new tax cut gets started in Congress.

So, I made the charts above. The top chart shows the top tax rate in every election year from 1920 to 2016. Note that in most years the rate has been significantly higher than it currently is, and the economy worked just fine during those years. The second chart shows the amount of income over which the top tax rate applies.

Don't get me wrong. I think a tax cut could be good for the economy and job creation, but only if it's a tax cut for the middle and working classes. Cutting taxes for the rich and the corporations will not help the economy. It will just fatten the bank accounts of the rich and corporations.

Public Thinks Rich/Corporations Pay Too Little In Taxes

The chart above is from a new Gallup Poll -- done between April 5th and 9th of a random national sample of 1,019 adults, with a margin of error of 4 points. It shows that while about half of the public thinks lower income and middle income people pay too much in taxes, that feeling does not extend to upper income people and corporations.

Significant majorities believe that those with an upper income (63%) and corporations (67%) don't pay enough income taxes (i.e., don't pay their fair share). This flies in the face of the intention of Trump and congressional Republicans to give the rich and the corporations massive new tax cuts.

The Republicans want people to believe that taxes for the rich and corporations (those who must pay the top tax rate because of their huge incomes) are taxed too much -- and that this is hurting the economy. That is simply not true. As the chart below (from the Tax Policy Center) shows, the rich and corporations currently enjoy one of the lowest top tax rates since 1935 -- and periods of U.S. history had healthy economic growth during periods with a much higher top tax rate.

NOTE -- The rich do not pay that top tax rate on all of their income, but only on the amount above about $415,000 (after deductions).

There Are 2 Tax Systems - One For The Rich And One For Us

(Cartoon image is by Dave Granlund at davegranlund.com.)

If you listen to the Republican politicians, you might be convinced that the rich in this country are overtaxed (and need another tax cut). That is not even remotely true. The rich are currently paying less in taxes than at any time since World War II. Part of it is because their income is taxed differently than that of working Americans (taxed at a lower "capital gains" rate, instead of the "earned income" rate paid by most Americans).

But that is just part of the problem. Their ability to hire an army of CPS's and tax lawyers, and the ability to hide money overseas, has resulted in them paying a lower percentage of their income in taxes than most in the middle class must pay. This has created, in effect, a different tax system for the rich than is applicable to ordinary Americans.

The New York Times has written an excellent article on this. I post only a portion of it below, but I urge you to read the whole article. It is quite shocking.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means. . .

Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent. . .

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”. . .

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future. And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies. . .

Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.

Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities. . .

Organizing one’s business as a partnership can be lucrative in its own right. Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control. But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals. And the income taxes are often reduced by large deductions, such as for depreciation. . .

The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client. One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax. The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds. The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum.

Many of these maneuvers are well established, and wealthy taxpayers say they are well within their rights to exploit them. Others exist in a legal gray area, its boundaries defined by the willingness of taxpayers to defend their strategies against the I.R.S. Almost all are outside the price range of the average taxpayer. . .

The combination of cost and complexity has had a profound effect, tax experts said. Whatever tax rates Congress sets, the actual rates paid by the ultra-wealthy tend to fall over time as they exploit their numerous advantages. . .

“We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice,” said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality. “At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system.”. . . 

For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee. ”Unless you plug every hole or get a new barrel, it’s going to leak out.”

Low Taxes For Rich Have Nothing To Do With Job Creation

(This cartoon image is by Paul Combs for the Tribune Content Agency.)

I continue to be amazed by people who believe that lowering the top tax rate will result in jobs being created. I understand why the congressional Republicans support that idea -- they've been bought and sold by the giant corporations, and they are just trying to fatten the bank accounts of their corporate masters. What amazes me is that a lot of poor, working-class, and middle-class voters have been fooled into believing this is true.

This idea has been supported by the Republican Party for many decades, and it has never worked. It didn't work in the 1920s -- it just made the rich much richer and everyone else poorer, and led to the Great Depression. That disaster woke people up, and for about the next 50 years they supported a saner (and fairer) economic policy. But the Republicans are nothing if not persistent, and in 1980 they realized most people did not remember what that policy had wrought in the 1920s -- so they again began to preach it (calling it "trickle-down economics this time), and they convinced many people it would work this time.

The idea is that if we lower taxes on the rich and the corporations, they will spend that extra money to create new jobs (which will benefit all Americans). It's a silly idea. It didn't work before the Great Depression, and it's not working now. The Bush administration followed this "logic" and lowered taxes for the rich and corporations to the lowest they have been since World War II. And once again, it didn't work. It made the rich much richer, while the job creation during the Bush administration was the lowest of any presidency in modern times -- and it led to the most serious recession since the Great Depression.

Compare that to the 1950s, a time when the economy was booming and huge numbers of jobs were created -- and the top tax rate was 90%. It should be obvious to any thinking person that the top tax rate has nothing to do with job creation. All it does is make the rich richer.

Why is this true? Because it is just good business to hire only the number of employees a business needs to make its product or provide its service. Hiring more just cuts into the business profits. Corporations and rich people know that (which is why they didn't increase hiring when Bush cut their taxes). They just hope you and I don't realize that.

So, what does create jobs? The only thing that creates new jobs is an increase in demand for the goods/services of businesses. When demand goes up, businesses hire to meet that demand (and when demand decreases, they lay off workers they no longer need). How can we increase demand? It certainly won't be done by giving more to the rich -- since they already have enough to buy whatever they want to buy.

Demand is only increased when the bulk of the population (the 80% to 90%) has more money to spend. Their spending increases demand, and that increases the hiring of workers (so businesses can meet that demand and increase their profits). And this can be done in numerous ways -- raising the minimum wage, strengthening unions, tying CEO compensation to a percentage of worker wages, stopping the offshoring of U.S. jobs, providing more help for the poor and disadvantaged, lowering taxes for the working and middle classes, etc.

The one thing that won't work is the lowering of the top tax rate. That just robs the government of needed funding and fattens the bank accounts of the rich -- and anyone who believes it will work is either rich or very foolish.

Clinton & Bush Released Tax Returns - Why Hasn't Trump?

Last Friday, Hillary Clinton released the last eight years worth of tax returns for her and her family. It shows that she and Bill earned about $141 million dollars (an adjusted gross income of $139.1 million) during that eight year period -- and they paid about $43 million in federal income taxes. Over the eight year period, that's an effective tax rate of about 31% (and an effective tax rate of 35.7% for just last year). They gave $15 million to charity over the eight year period.

Jeb Bush has also released tax returns -- for the last 33 years (although many of them were already public). Bush made $7.4 million in the last year, and over the 33 year period paid an average tax rate of about 36%. Like the Clinton's, he and his wife are multi-millionaires.

I don't have much of a gripe about the tax rates paid by both of these candidates. They both paid a far higher rate than middle income Americans, and the rate being less than the top rate can easily be accounted for by charitable deductions. It's far different than the 13% tax rate paid by Mitt Romney (on an income of more than $20 million a year).

The question I have is -- why hasn't Donald Trump released his tax returns for the last few years? He claims to be a serious candidate, and in fact, is leading in all the national polls. Isn't it time he revealed the tax rate he has been paying?

The only clue we have to his tax rate comes from his own lips, in an interview with CBS News back in 2011. At that time he claimed to be paying an effective tax rate of 17%. Is that the real figure? Is it even lower? Why won't he release the returns? Is he afraid he'll garner negative publicity (like Romney did in 2012) by admitting he's paying a lower effective rate than a middle income taxpayer?

The Super Rich Are Not Paying Their Fair Share Of Taxes

(Image is from an excellent post of taxes for the rich at Think Progress.)

The rich and their Republican lackeys are still complaining that the top tax rate is too high, even though after the Bush tax cuts for the rich were repealed, that top rate remains below 40%. That's 50 points lower than the top tax rate was in the 1950's, when it was 90% (and the economy was booming).

But the truth is that while the top tax rate is slightly below 40%, none of the super rich pay anywhere near that. They pay an average real tax rate of slightly over 17% -- less than half of the top tax rate, and only 3 points above the average rate paid by the middle 50% of Americans.

How can they get away with that? The primary reason is because they don't pay the earned income tax rate like working Americans. They have a special capital gains tax rate of 20% (because they make their money by gambling on (manipulating?) the stock market. Then they have a range of loopholes and deductions to lower the rate below that 20%.

Folks, this just ain't right. Income is income, no matter how it is earned -- and it should all be taxed in the same way (at the earned income tax rate). It's time to do away with the special capital gains tax rate for the rich -- and force them to pay their fair share of taxes. That rates destroys the progressively of our income taxes.

Should Our Top Tax Rate Be About 85%-90% ?

If you are rich, or a right-wing worshipper of the rich (like most Republicans), you may have spewed your coffee all over your keyboard after reading my headline -- but it is a serious question. And there is a serious new economic paper, written by Dirk Krueger of the University of Pennsylvania and Fabian Kindermann of the University of Bonn, that says all citizens (including the rich) would be better off if the top tax rate was between 85% and 90%.

Now this doesn't mean the rich would pay that percentage on all of their income -- only on the portion of their income that exceeds a certain level. The current top tax rate is 39.6%, but that rate only applies to income earned above the level of $406,750 ($457,600 for a couple). The money under that level is taxed at the same rate as those who make less than that amount. In other words, the top tax rate, whether 90% or 39.6%, would only apply to less than 1% of the population.

Those on the right will say such a high tax rate would be disastrous for the economy, and discourage high earners from making money. Not true. Note on the chart above that there have been extended periods in our recent history when our top tax rate was much higher. From the mid-1930's until the early 1980's our top tax rate was between 90% and 70% -- and those were some of the most robust periods of growth this country has experienced.

It was not until the Reagan administration that the top tax rate was lowered, as a part of the GOP's "trickle-down" economic policies. It was supposed to spur economic growth and benefit all Americans, but it didn't. It It only helped the rich, and created the biggest wealth gap since before the Great Depression. And that wealth and income gap, in combination with other "trickle-down" policies, was the primary reason for the Bush recession (which most ordinary Americans are still struggling to recover from).

I know raising the top tax rate to 85% or 90% is politically impossible at this time. The "trickle-down" lies about taxation are still believed by too many economically-ignorant people. But I do think a couple of things could be done with taxation that would help this country a great deal. The first would be to raise the top tax rate to somewhere between 45% and 50%. The second would be to eliminate the lower capital gains tax rate, and have everyone pay the earned income tax rate (regardless of how they earned their money).

This would provide much-needed revenue for the federal government, and it would slow the growth of the wealth and income gap (and combined with a substantial raise in the minimum wage, could even stop the growth in that gap).

We need to stop pandering to the rich in this country, and institute some economic policies that would be beneficial to all Americans. And while we're at it, it certainly wouldn't hurt to eliminate the subsidies and tax breaks that keep corporations from paying any taxes (even though they make huge profits).

The $1.34 Trillion Giveaway To The Rich

(This cartoon image is by Pat Bagley in the Salt Lake Tribune.)

When the income tax was passed in this country, it was set up as a progressive tax. That means that those who made more money paid a higher tax rate than those who made less. This was deemed fair -- because those who made the most money could not only afford to pay the most, but they were the ones who had reaped the most benefits from the economy and government (and therefore owed the most to it).

This was a concept even endorsed by conservative icon Ronald Reagan, who said a bus driver should not be paying more in taxes than a rich man. But modern right-wingers are not interested in fairness, or in what their rich buddies owe to the country that helped to make them rich. They much prefer regressive taxation -- which means the less money you make, the larger portion of your income is paid in taxes. They have come up with a variety of loopholes and subsidies for the rich and the corporations to dodge paying their fair share in taxes -- so much so that many corporations pay no taxes at all (even though they make billions in profits) and most of the rich pay a smaller tax rate than many in the middle class.

One of the most pernicious of these tax-dodging schemes is the long-term capital gains tax rate. While the working and middle class pay the earned income tax rate, most of the rich (since they make their money from investments instead of actually working for it) pay a lower tax rate -- the capital gains tax rate. During the Bush administration, the Republicans decided that money received from investments should not be taxed at the same rate as earned income, so they set up a special 15% tax rate for investment income. This is how Mitt Romney wound up paying just over 13% on over $20 million in income -- because he paid only a 15% capital gains tax rate reduced by some charitable donations (to his church).

The rate was raised to 20% by president Obama, but only for the richest Americans -- those who would have to pay the top rate of 39.6% if they paid the earned income rate (so they are still getting a 19.6% tax break for receiving their income through investments instead of working for it). And there are still many in the top 5% of the richest Americans who still pay the 15% tax rate.

How much is this "subsidy" for the rich costing this country? Over the next 10 years, it will cost the government about $1.34 trillion in revenue. Just think of what this $1.34 trillion could do for this country. For starters, we wouldn't have to be cutting programs that help veterans, children, the poor, the unemployed, and the elderly. Unfortunately, the Republicans don't care about those groups. They only care about their true constituency -- the rich and the corporations. They would rather hurt ordinary Americans than make the rich and the corporations pay their fair share in taxes.

A special lower tax rate for the rich has never made sense. The only thing it accomplishes is to further increase the huge gap in income and wealth between the rich and the rest of Americans. Republicans will tell you that it creates jobs, but that is a lie. Only an increase in demand creates new jobs, and letting the rich pay a smaller tax rate than many in the middle class does nothing to increase demand.

It is time to restore some fairness to our tax system, and a good start toward that would be the elimination of the special lower capital gains tax rate. All income should be taxed at the earned income rates, regardless of its source (work or investments). But that can only be done by voting the Republicans out of power, and then putting pressure on the Democrats.

Why Do The Rich Pay A Lower Tax Rate Than Workers ?

The chart above is slightly out of date, since the capital gains tax has been raised to 20% (instead of 15%) and the top earned income tax rate is 39.6% -- but the point of view is still valid. And that point is that the rich get a special lower tax rate than workers can get. They only have to pay a 20% tax rate on long-term capital gains income (investment income), instead of the top tax rate of 39.6% on earned income (income that derives from work performed). It is this provision (in addition to loopholes) that allow the rich to pay a smaller tax rate than middle class workers (and a perfect example is the 13% tax rate paid by Mitt Romney on an income of over $20 million).

The idea of taxing those who let their money work for them at a less rate than those who must work for their income is a Wall Street-inspired Republican idea. The idea promotes the notion that capital (money) is more important than labor (work). This is a ridiculous idea. The truth is that capital could produce exactly nothing without labor, and labor could do little with capital. In other words, both are necessary for the production of any product/service.

And since both capital and labor are necessary, the income derived from each should be taxed at the same level. It is ludicrous to think the rich should be able to save 19.6% off their taxes simply because they didn't have to work for that money. That defeats the whole purpose of having a progressive tax structure (which says that those who make the most should pay a higher tax rate).

It is time to eliminate the special long-term capital gains tax rate (and other special tax rates that allow the rich to pay less than others). It is time to tax all income as earned income, regardless of how it was earned.

There Is NO Correlation Between Taxes And Employment

The Republican idea that lower taxes on the rich (and on corporations) is the best way to spur job creation sounds good on the surface. The problem with it is that economics just doesn't work that way. Just allowing the rich to keep more of the money they make doesn't mean they will spend any of that money they get to keep to create any new jobs. If it did, we would be swimming in new jobs in the United States right now -- because the rich (and the corporations) are making record-breaking income and profits (and the corporations currently have a record amount of cash on hand, trillions of dollars).

If the Republicans are right, why aren't those corporations spending that trillions of dollars on new job creation? They are not creating new jobs because the tax rate has nothing to do with job creation. The rich (and their Republican lackeys) know this, but few of them want to admit it -- because if most Americans realized this basic economic fact, they probably wouldn't be willing to further lower the top tax rate (and might even want to raise it a bit).

All one has to do is look at the historical charts above. The top one is the unemployment rate and the bottom one is the top tax rate -- both since right after World War II. There is no correlation between the two. Unemployment has been fairly low in times where the top tax rate was very high, and conversely, unemployment has been very high in times when the top tax rate has been low. Note that in the 1950's and 1960's (a time when the economy was booming) the unemployment rate remained pretty low (never topping 6%) while the top tax rate was extremely high (70% or more). Also note that the highest unemployment rate was in 1983, when the top tax rate had been cut by over 20%.

Those examples alone show the Republican notion that tax cuts create jobs is a LIE. The economic truth is that there is only one thing that determines whether jobs or created or destroyed (other than outsourcing, which destroys jobs even in a good economy) -- and that is the level of demand for the goods and services of businesses. When the demand is high, business will hire new workers to help them meet that high demand. When demand is low, business will lay off workers not needed to meet the low demand (because keeping a worker not needed just cuts into profit). This is not a hard concept, and it is one understood by all good business men and women.

Let me add further that cutting the top tax rate does not create demand any more than it creates jobs. That is because there are not enough people making enough money to pay the top tax rate to effect demand in the economy (and those they do make that much already have the funds to purchase whatever they want). Demand can only be increased by putting more disposable income (money) in the hands of the masses (the bottom 80% - 90% of the population), people who are far more likely to spend that increase in income -- and that increase in spending by the masses is what increases demand (which increases profits and job creation).

In short, all Americans must once again be allowed to share in the country's rising productivity -- the working and middle classes through rising wages and the poor through improved social programs. Allowing all citizens to benefit from rising productivity (instead of letting the rich hog all of the rise) is the way to create demand (which creates jobs) and put our economy back on track. Sharing productivity works, while tax cuts (which are mostly enjoyed by the rich) do not.

We used to share rising productivity in this country, and expect the rich to pay a progressively larger share of income in taxes. Now we do neither -- and that is what has caused this economic mess we find ourselves in. It is also what keeps us from fixing the economy.

Comparing Willard's Taxes To Others

This is not a new chart. It was posted by the Washington Post last January. But I just found it, and I thought it was very interesting. The Washington Post wanted to know how Romney's tax rate stacked up against that of other presidential candidates. In an attempt to be fair, they looked at tax returns from other candidates that were from two years before they ran for president, since the only return Romney has released was from 2010 (and sadly, even that return was incomplete because it did not include the required page for foreign investments and accounts).

Of course, tax rates don't mean a lot without knowing the income of the candidate (and his wife). Here are the incomes on which the above candidates paid those tax rates:

Romney...............$21.7 million
Bush...............$18.5 million
McCain...............$6.4 million
Kerry...............$5.4 million
Obama...............$991,296
Dole...............$596,908
Clinton...............$268,646
Dukakis...............$108,957

The newspaper could have included income and tax rates for other years, since most of those listed have released multiple returns. For instance, President Obama (who has released 12 years of returns) made about $4.1 million the following year, and paid a 33.3% tax rate. But since Romney has only released one partial return, they didn't.

Romney made much more than any of the other presidential candidate. The only one who came close was George W. Bush, and he paid a significantly higher tax rate (20.55%). Only one other candidate paid as low a tax rate as Romney did -- John Kerry (and I make no apologies for Kerry, since I believe his and his wife's investment income should have been taxed at the same rate as earned income is taxed).

Is this why Romney refuses to release more of his tax returns? Is 2010 the year he paid the highest tax rate of all recent years? Would releasing more returns show that in some years he has paid a far lower tax rate (and maybe even nothing at all)? That's what I believe. But we may never know, because he seems to have made the decision that it is better to take the political hit than to reveal whatever embarrassing facts are lurking in the unreleased tax returns.

Still, it is legitimate for people to wonder -- WHAT IS ROMNEY TRYING TO HIDE?

Those Poor "Over-Taxed" Corporations

The Republicans in Congress have been repeatedly telling the American people that the reason few jobs are being created is because American corporations are overtaxed -- having to pay the highest taxes of any developed country. And if one was to just look at the tax rates listed in the tax code (and nothing else), that might seem to be true. The U.S. does have a higher top tax rate for corporations than the other countries do. But it is not quite that simple.

The truth is that American corporations actually pay less in taxes than corporations in other countries -- both as a group, and individually. The chart above shows the taxes that American corporations pay as a group -- as a percentage of each country's national Gross Domestic Product (GDP). Back in 1965, American corporations would have ranked much higher on the chart above because they paid about 4% of GDP in taxes. But that is no longer true. Currently they pay only about 1.3% of GDP, putting them nearly at the bottom of the chart (with only Iceland pay a smaller combined tax percentage). Obviously, Republican "trickle-down" economic policy has been very good for corporations -- allowing them to pay a much smaller percentage in taxes.

But surely the corporations must pay more when their individual tax rate is considered (instead of as a group against GDP). Well, NO. While the other countries may have a smaller top tax rate, the American corporations enjoy many more tax loopholes, deductions, and subsidies. This allows the individual corporations to pay a smaller effective tax rate in this country than foreign corporations have to pay in their own countries. The U.S. may have a higher top tax rate, but no corporation has to actually pay that high rate. Many corporations pay only a tiny percentage in taxes, or no taxes at all.

The corporations listed below are a perfect example of this. These are the ten American corporations with the highest profits. Note the tiny actual percentage they paid in taxes for 2011 (probably much less than you must pay if you are middle class);

1. EXXON MOBIL
profits -- $73.3 billion
tax percentage -- 2%

2. CHEVRON
profits -- $47.6 billion
tax percentage -- 4%

3. APPLE
profits -- $34.2 billion
tax percentage -- 11%

4. MICROSOFT
profits -- $28.1 billion
tax percentage -- 11%

5. JPMORGAN CHASE
profits -- $26.7 billion
tax percentage -- 14%

6. WAL-MART
profits -- $24.4 billion
tax percentage -- 19%

7. WELLS FARGO
profits -- $23.7 billion
tax percentage -- 14%

8. CONOCOPHILLIPS
profits -- $23.0 billion
tax percentage -- 8%

9. IBM
profits -- $21.0 billion
tax percentage -- 1%

10. GENERAL ELECTRIC
profits -- $20.1 billion
tax percentage -- 5%

It's pretty clear that American corporations are not paying onerous taxes -- either as a group or individually. They actually pay very little in taxes, and they are sitting on trillions of dollars in profits (billions individually). If allowing corporations to pay a tiny tax was the way to create jobs, then they should be creating those jobs right now. But it doesn't and they aren't -- because increased demand is the only real job creator (in spite of what the Republicans say).

President Obama has said he also wants to reduce taxes for corporations. If he does, then he'd better close a whole lot of loopholes, eliminate a bunch of deductions, and do away with a lot of subsidies. Otherwise, corporations would wind up paying even less than the tiny percentage they currently pay -- or nothing at all.

Personally, I don't want to hear any more whining from corporations about the high tax rates -- at least until they actually start paying those rates.

Romney Wants To Raise Your Taxes

Willard Mitt Romney (aka Wall Street Willie) has been trumpeting a new tax plan that he claims will both cut taxes for all Americans and be revenue neutral. Anyone with even a grade school level of math and the ability for simple reasoning has to know that is impossible, but that is what he is claiming anyway. The truth is that either the deficit will balloon or taxes on some people will have to be raised to cover for the tax cuts of others.

That is not only my opinion, but also that of three organizations that should know -- the Tax Policy Center, the Brookings Institute, and the Center on Budget and Policy Priorities. You might wonder how it is that taxes will be raised on many while all income groups will get a lower tax bracket. Well, the fly in the ointment is in the "revenue neutral" part of Romney's plan.

After lowering the tax brackets for all income groups, Romney plans to make up for the revenue lost in doing that by eliminating certain deductions. The most often mentioned tax deductions that would be eliminated are the child tax credit, the earned income tax credit, and the mortgage interest deduction. These deductions would make up an insignificant part of the tax deductions for the rich (for those making over $200,000 a year), and as the chart above shows, they would see a nice reduction in the amount of taxes they have to pay.

But for the other 95% of Americans, it is a different story. For many millions of them, those deductions add up to more than the tax cut they would get under Romney's plan -- which means they would actually have to pay more in taxes than they currently have to pay. In other words, the Romney tax cut plan would only be a tax cut for the richest 5% of America. For those making under $200,000 a year, the Romney plan would raise their taxes.

This is why Romney has tried to be as general as possible about his plan before the coming election. He wants people to believe he is offering a tax cut for everyone, when in actuality he is only proposing a tax cut for the richest 5% (which of course, includes him). Don't let him fool you!

Romney Pays Smaller Tax Rate Than The Middle Class Does

For months now Mitt Romney, the leading Republican presidential candidate, has refused to release his tax forms to the media. he has done this in spite of the fact that President Obama and all of Romney's opponents have either released their tax forms or indicated their willingness to do so. It has become obvious by now that this has nothing to do with privacy (since a presidential candidate has no privacy), but only because Romney knows the public won't understand how little he pays in taxes compared to the general public (who actually have to work for their income).

It has reached the point now where even the other Republican candidates know this is an indefensible weak point for the Romney campaign, and in the last debate they attacked Romney for his failure to make his tax forms public. And he's starting to crack. He now says he might release his tax forms next April (after he hopes he has the nomination wrapped up). He also admitted yesterday to a direct question that his tax rate is around 15%. He said:

What’s the effective rate I’ve been paying? It’s probably closer to the 15 percent rate than anything, because my last ten years, I’ve, my income comes overwhelmingly from investments made in the past, rather than ordinary income, rather than earned annual income.

Fifteen percent? That's a smaller percentage than a family making about $75,000 a year pays (and Romney makes several million a year). But that's not unusual. Most of the super-rich like Romney pay only about a 15% tax rate, because they make their money off investments rather than having to work for it. Romney pays about the same rate as billionaire Warren Buffett. But there's a big difference between the two men.

While Buffett thinks the rich should pay a higher tax rate, Romney thinks they should pay even less. His tax plan would give the rich more tax cuts, and those cuts would be even larger than the ones Bush initiated for the rich. And while giving the rich huge tax cuts, the Romney plan would actually raise taxes for 22 million people (people who have to work for their income, not rich people). Romney is not only a member of the 1% class, but thinks they shouldn't have to pay as much of their income in taxes as working people.

The charts below (from the excellent blog Under The Mountain Bunker) illustrates the unfairness of Romney's tax plan -- and how much he favors the 1% over working Americans:

 

Why Won't Mitt Release His Tax Returns ?

It's no secret that Mitt Romney is the richest man in either political party to be running for president in 2012. He has both more wealth and more income than any other candidate. He doesn't just make a few million each year -- he makes tens if not hundreds of millions of dollars each year.

That brings up a good question. Since people already know he is filthy rich and he's joined at the hip to Wall Street, why won't he release his tax returns? The answer is not that he's trying to hide his income, although he'd probably do that if he thought he could. He's trying to hide the fact that most, if not all, of his income is investment income (largely from his connection with Bain Capital). And that kind of income gets ridiculous tax breaks.

Even though Romney's income easily falls in the highest income tax bracket (about 35%), since it is investment income (and not money he actually had to work to earn), it is taxed at only a 15% rate -- less than half of what he would have to pay if it was classified as earned income. In other words, Romney pays a smaller tax rate than someone who is making the median income in American (in the vicinity of $50,000).

Romney knows that if he released his tax returns and the American people learned what a small tax rate he is paying, much smaller than middle class Americans pay, they will be incensed -- and they would have a right to be angry. There is no justification for the rich to pay a smaller tax rate than other Americans -- just because the rich didn't have to work for their income. That just ain't right.

The Democrats have created a new website where you can see how much less tax you would have to pay if you could pay the same rate as Mitt Romney. Go check it out, and if it doesn't upset you then you are either filthy rich yourself or brain-dead.

Wall Street already controls much of Congress. Electing Mitt Romney would put them in charge of the White House as well. Can we really afford that?

The Rich Are Greedy Whiners

There is a plan to fund health insurance by imposing a small tax increase on the rich in this country. The plan actually makes sense, but the Republicans have been screaming bloody murder. To hear them talk, you'd think the rich are already overtaxed -- to the extent that they simply could not bear to pay more. What stupid nonsense!

As the tax table above shows, the top tax rate in the United States is near it's lowest point since the 1920's (which is incidentally the last time we had an income gap as large as the current one). The current top tax rate is less than 40% -- not for all Americans, but just those making enormous amounts of income.

How does this compare with other times in our history? During the time of the "New Deal" under President Roosevelt, the top tax rate ran from 63% to 79%. Under Presidents Eisenhower and Kennedy the top rate was 91%. Presidents Johnson and Nixon presided over a top rate of at least 70%, and during President Reagan's first term the top rate was 50%.

And you know what? During those times, the rich had no problem getting richer, and many new millionaires were created. In fact, most economists consider the 1950's, 1960's and 1970's to be a very good time for the United States economy. It was not until the 1980's, after Reagan lowered the rates, that the economy suffered a severe recession. The current recession came after Bush made his own unnecessary taxes cuts, c reating the current huge income inequity.

How bad is that inequity? The Wall Street Journal reports that management executives now receive one-third of all pay earned in the United States. The total payroll of the United States was $6.4 trillion in 2007. Of that money, $2.1 trillion was made by management executives (and that doesn't include such lucrative things as stock options). I expect that ratio has probably even gotten higher in the last couple of years.

In fact, since 1979 the income of the top 1% in this country has increased by 256%. That might be OK if everyone's income had increased that much, but of course it didn't. Income for the middle class increased by only 21%. The working class fared even worse, since their income has barely risen at all in this same period.

An interesting sidelight of this new concentration of payroll to the richest folks is that it has gotten so bad that it is hurting social security. While the rich executives make a third of the income, they don't pay anywhere near a third of the social security taxes. Although the rich won't admit it, this is one of the major causes of the impending social security shortfall.

My point with all these figures is that the rich can easily pay a small surtax to help pay for health insurance. They can also afford to pay more in social security taxes. Both of these together would still leave them paying far less taxes that the wealthy have paid in the past (and currently pay in most other countries). The rich are not overtaxed -- they are undertaxed, and it is time Americans cut through the Republican lies and realize this.

That's why I say most of the rich are greedy whiners.

Obama's Tax On Rich Is Actually Low

Ever since President Obama signed his stimulus package to help the United States out of the recession (depression?) the right-wing Republicans have been screaming about how he has raised taxes enormously. They have even been throwing the word socialism around rather freely.

They make it sound like everyone is going to be paying more taxes, but that is simply not true. About 95% of all taxpayers in the United States will actually receive a tax cut. The people the Republicans are whining about are the richest 5% of Americans. As usual, the only people the Republicans really care about are the rich.

But even if it is the richest 5% (those making over $250,000), has he really raised the rate to an outrageous level? Actually no. Compared to other presidents since World War II (including Republican presidents), the tax rate for the richest Americans is actually still going to be quite low. He is raising the rate back to where it was at the end of Reagan's second term -- 39.6%.

As the chart above shows, this is actually a pretty low rate for the top income earners. Here is what the top tax rate was during the terms of other Republicans:

REAGAN after second term.....39.6%

REAGAN after first term.....50%

NIXON.....70%

EISENHOWER.....91%

So don't let the Republicans fool you with their whining and spurious charges. They know Obama's rate is not out 0f line, but they just don't have anything else. The 2008 election, along with Obama's continuing popularity, has scared them. Now they are trying to scare Americans in an effort to get Obama's numbers down. How pathetic!