Obama Is Right to Take on the Very Rich

[Ben]

Obama Is Right to Take on the Very Rich
They're paying far less of their incomes in taxes than average Americans.

by Chuck Collins and Sam Pizzigati

We've seen, in recent weeks, an outpouring of public outrage over the mega millions that keep flowing – despite the escalating economic meltdown – into the pockets of America's top bankers and corporate executives.

"I'm angry," Sen. Claire McCaskill (D) of Missouri told her Senate colleagues late last month, as she introduced a bill to cap pay for bailed-out CEOs at $400,000 a year. "Wall Street [is] kicking sand in the face of the American taxpayer."

"I will not tolerate it," President Obama added a few days later, as he announced a $500,000 executive pay cap at firms getting substantial bailout dollars.

The amount of money that goes into executive pockets is staggering. So is the amount that comes out of those pockets in taxes: precious little. America's super-rich are paying far less of their incomes in taxes than average Americans who punch time clocks. This is grossly unfair. The good news: Under Mr. Obama's new plan to cut the deficit in half, the very richest Americans will start paying something closer to their fair tax share.

It's been a while since they've done that. As recent IRS data show, these elites are paying less in taxes – much less – than their deep-pocket counterparts used to pay. In 2006, the 400 highest-income Americans together reported $105 billion in income, an average of $263 million each.

Having trouble visualizing that? To pocket $263 million a year, you would have to take home over $60,000 an hour – and work 12 hours a day, seven days a week, for an entire 12 months. Sounds tiring, doesn't it? But most of the top 400 make their fortunes buying and selling assets, everything from stocks and bonds to the exotic paper that helped inflate the housing bubble.

Uncle Sam taxes income from those assets – whether that income be capital gains or dividends – at a much lower rate than income from work.

The current top tax rate on "ordinary" work income sits at 35 percent. But dividends and capital gains from the buying and selling of most assets face only a 15 percent top rate. That's why in 2006, America's top 400 paid just 17.2 percent of their $263 million average incomes in federal tax.

Millions of middle-class American families, once you tally income and payroll taxes, pay far more of their incomes in tax. One particularly striking example from billionaire investor Warren Buffett: In 2006, he paid 17.7 percent of his income in total taxes. His secretary, who made $60,000, paid 30 percent of hers.

How did we end up with this sorry state of affairs? Lawmakers in Congress have spent the past several decades systematically slicing the tax rates on America's top income brackets. Their rationale? Lower taxes on the top, free up capital for investment, and boost productivity.

In actual economic practice, those lower taxes have served instead to fuel speculation and increase budget deficits. For the ultrarich themselves, the tax savings have been nothing short of breathtaking. Back in 1955, America's top 400 paid more than 50 percent of their incomes in federal tax, almost triple the rate of today's top 400.

We can fix this. Obama just announced his plan to end the Bush administration's high-income tax cuts. This is an important step. We can insist, also, that lawmakers end the preferential treatment of dividends and capital gains. And we can raise the tax rate that kicks in when taxpayers start collecting more than $10 million and $20 million a year.

Steps like these would help get our future in order. But what about the past – and all those windfalls the super-rich have been pocketing as our economy veered into the ditch? Are we going to have to watch these billions multiply, generation after generation, into a new American aristocracy of wealth?

Not if we save the estate tax, the only federal levy on grand accumulations of private wealth. The rich and their retainers have been trying to repeal the estate tax for 20 years now. They haven't succeeded, but they have slashed the tax rate on the fortunes the ultrawealthy leave their heirs.

Congress is about to begin debating legislation that would freeze the estate tax at the current bargain-basement rate set by President Bush. We can't let that happen. More than ever, America needs its ultrarich to chip in more.
Copyright © 2009 The Christian Science Monitor

Chuck Collins directs the program on inequality and the common good at the Institute for Policy Studies. Sam Pizzigati, an Institute associate fellow, edits Too Much, on online weekly on excess and inequality. They are coauthors of the annual Institute for Policy Studies "Executive Excess" report on CEO pay.

[saifan]

Sounds good to me, but who will take on the career politicians who are just as fucking slimy as any Wall Street fat cat or bank executive?

[horneyguy99]

you guys do understand that 1% of americans already pay over 50% of the taxes right? this is also a stupid argument because it relies too heavily on capital gains. if a ceo receives $100 in stock and decides to sell it he still has to pay 35%... the only way the 15% kicks in is if the stock gains value. this also doesnt take into account stocks that are dividend heavy. dividend payouts classify as net income and you pay 35%...

i also doubt they'll be reporting this same story when the rich guy decides to leave his money to his grandkids. generation skipping tax is 200%. so for every $100 you leave to your grandkids you initially take the 35% hit and you're now down to 65. kick in the 200% take on that 65 and you're roughly giving another $44 to the govt in taxes. so you grandkids end up getting $21. that year the rich man's tax level was at 80%. imagine if the govt took 80% of that secretary's money... the middle class would fucking lose it. but it happens to the rich every day

suppose a basketball player makes it big and wants to buy his mother a house to get her out of the ghetto. he buys her a nice 1 million dollar house and the govt makes him shell out the 50% gift tax. in order for the basketball player to buy this house he needs to make 2.3 million. he pays the 35% income tax and is left with 1.5, and 1 mil goes to the house and 500k to the govt for the gift tax.

we also wont get into the fact that the rich never see a cent of their social security while the secretary will be getting checks in the mail every month once she retires. and you know whos paying for these checks that she's getting? the rich..... since they pay over 50% of the taxes.

warren buffet is a dumbass. it's easy for him to bitch about capital gains tax not being high enough (which he has before in the past) because whats the difference between 50 billion and 40 billion? NOTHING. it fucks people who are trying to live off 200k a year in capital gains. but if the tax were to increase, this person would lose 30-40% of their income each year...

and people who make 60k a year pay 25%... not 30%... gotta love it when people just make up numbers to better prove their bullshit point.

[Jonny29]

I have seen the same quote before so its not really the posters fault (unless you want to argue that he should review the data of someone elses quote in his post , then I guess you would be right)

However to make it worse, the poster said that the secretary earned 60k, however lets assume she is single, only one exemption(herself) and takes the standard deduction. The 25% tax rate is her current marginal tax rate ( the rate of tax on the next dollar she earns ) but she would have had over half of her TAXABLE INCOME taxed at a lower rate. I would guess that her effective FEDERAL INCOME tax rate is actually less than Buffetts if his is actually 17%. What I believe is distorting the results is that they are including Social security tax since there is a ceiling as to the amount that is subject to social security.

I understand the gist of what the original poster is saying however , the guy who makes $1 million a year is then probably paying 3 times Buffets 17 % rate. Assuming one exemption and the standard deduction(highly unlikely)

[SugaSweet]

The 'rich' will never pay a large percentage on their taxes.The Bushes and Kennedy's of the country have blind trusts and no one is going to touch that income.The truly rich can utilize annuities,municipal bonds(tax free income),and write off paper losses on real estate investments which in fact are really making money.Taxing the rich?The rich by definition will start off at about $200K a year and it will end up being anyone who was or is responsible enough to set aside some of their income.In other words,the 'rich' will end up being the middle class,who always have to pay for everything.

[hippifried]

you guys do understand that 1% of americans already pay over 50% of the taxes right?

I've seen this babble a lot through the recent past. It's simply not true. Except for ball players who get paid huge salaries, most rich people don't get paid in wages or salaries. Their money is almost all capital gains, which is taxed at a minimal rate. Somebody making $1,000,000 isn't paying taxes on $1,000,000 of income the way somebody making $50,000 would be, because capital gain is counted separately & taxed at a lower rate than the 50K.

The biggest revenue source for most States, Counties, & Municipalities is sales tax. Who do you think buys all this stuff?

[chefmike]

http://www.huffingtonpost.com/bob-ce..._b_170361.html

[JelenaCD]

It's time for the comsumption tax or the flat tax , taxing work is insane , you should tax consumption yet that will never happen except with cap and trade which will bankrupt USA ! its backwards theory , tax people who are productive and give handouts to unproductive , that is a plain insane !

[trish]

Sitting around and letting the stock dividends roll in isn't working. Tax capital gains. That will earn you some revenue. Why tax someone who can't afford to buy stock and has to spend all their measly income on groceries and utilities?

[JelenaCD]

Trish ,
The person who invests $ in a company helps to employ it's workers , , yet you want to make them the devil and people who have no jobs the saint , yet how do you as a person get better if you are on the dole from the govt ? Rewarding sucess and punishing failure is the only way , of course you need a minimum security net to provide for the unemployed !