“The question of our time is this: will we tolerate it? Or will we take back our democracy from the oligarchs who run this country?”
By Julia Conley
Common Dreams (10/7/19)
For the first time in U.S. history, the 400 wealthiest Americans paid less in taxes last year than people in any other income group, thanks to decades of tax cuts and loopholes benefiting the rich.
A year after the Republican tax plan—often called the #GOPTaxScam by critics—was passed into law, the richest people in the country were subject to a 23 percent rate in local, state, and federal taxes.
As New York Times columnist David Leonhardt showed Sunday in a graphic accompanying his op-ed, “The Rich Really Do Pay Lower Taxes Than You,” the tax rate wealthy Americans are forced to pay has plummeted over the last seven decades while middle-income households have paid roughly the same share of their incomes each year.
n 1950, rich Americans paid 70 percent of their income in taxes—a system that Rep. Alexandria Ocasio-Cortez (D-N.Y.) has suggested returning to, drawing derision from conservatives. By 1980, the 400 wealthiest people paid 47 percent of their incomes in taxes.
Leonhardt called the trend “maddening.”
“Over the last 75 years the United States tax system has become radically less progressive,” Leonhardt wrote.
The op-ed also refers to the fact that billionaire Warren Buffett was dismissed by economists and journalists in 2012 when he said his secretary paid a larger share of her income in taxes than he had to pay.
“Inequality is driven by policy choices, not some inherent laws of nature.” —Don Moynihan, Georgetown University
Office workers who pay a greater share of their earnings to contribute to services for the greater good than the wealthy CEOs of their companies pay are “the norm now,” Leonhardt wrote.
The op-ed was praised by critics of the U.S. economic system, including Sen. Bernie Sanders (I-Vt.).
“The question of our time is this: will we tolerate it?” tweeted the 2020 presidential candidate. “Or will we take back our democracy from the oligarchs who run this country?”
Leonhardt and other observers noted that the debate over whether to force wealthy Americans to pay their fair share versus protecting their wealth at all costs is centuries old, and those arguing for the former have triumphed in the past.
“Inequality is driven by policy choices, not some inherent laws of nature,” tweeted Don Moynihan, a professor at Georgetown University.
Others wrote that the increasingly regressive tax system explains a variety of issues facing today’s working families.
On the same day Leonhardt published his op-ed, CNBC released a report claiming millennials are “stingy” and are to blame for a sluggish economy.
In the opening paragraph, Pippa Stevens suggested both that millennials spend too much money on avocado toast and that they save too much of their income:
“Millennials—the selfie obsessed, avocado toast-loving generation—might be behind slower economic growth, according to a research note last week from Raymond James. This new generation, scarred by the financial crisis, is saving more than the free-spending boomers did before them, and it’s causing an economic imbalance.”
“Hm. There’s also a theory that the 400 wealthiest people in America paid less taxes this year than ever in history,” tweeted one critic.
Ocasio-Cortez corrected CNBC, writing that millennials are “Not stingy. Broke.”
Instead of blaming young Americans for a slowing economy, tweeted Disney executive John Drake, “Why don’t the 400 wealthiest people in the U.S. (who received a giant tax cut) stimulate the economy through spending?”
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- For the First Time In History, US Billionaires Paid A Lower Tax Rate Than The Working Class — A new book-length study on the tax burden of the ultrarich begins with a startling finding: In 2018, for the first time in history, America’s richest billionaires paid a lower effective tax rate than the working class. “The Triumph of Injustice,” by economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley, presents a first-of-its kind analysis of Americans’ effective tax rates since the 1960s. It finds that in 2018 the average effective tax rate paid by the richest 400 families in the country was 23 percent, a full percentage point lower than the 24.2 percent rate paid by the bottom half of American households. In 1980, by contrast, the 400 richest had an effective tax rate of 47 percent. In 1960, that rate was as high as 56 percent. The effective tax rate paid by the bottom 50 percent, by contrast, has changed little over time. … Read the Rest
(Commoner Call cartoon by Mark L. Taylor, 2019. Open source and free for non-derivative use with link to www.thecommonercall.org )
Paying The Boss 1,000 Times More Than A Worker Encourages Reckless Corporate Behavior
These extreme disparities harm all of us. And we’ve waited too long for corporations to fix the problem on their own.
By Sarah Anderson
Market Watch (10/3/19)
Back in the 1960s and into the 1970s, few American corporate chief executives pocketed more than 40 or 50 times what they paid their workers. That divide looks quaint by today’s standards, but back then business analysts like the famed Peter Drucker considered even those gaps much too wide.
Drucker called for CEO-worker pay ratios no wider than 20 to 1 or 25 to 1. Average Americans today, according to Harvard Business School researchers, consider an even narrower margin — no more than 7 to 1 — to be ideal.
The contrast between public sentiment and our current reality could hardly be starker.
A new Institute for Policy Studies report reveals that at the 50 publicly traded U.S. corporations with the widest pay gaps in 2018, the typical employee would have to work at least 1,000 years — an entire millennium — to earn what their CEO made in just one year.
Among America’s 500 largest publicly traded corporations, nearly 80% paid their CEO over 100 times what their median worker was paid in 2018. More than a quarter had gaps of 300 to 1 or wider.
Across the country, public outrage is driving support for policies to crack down on such obscenely large pay disparities. Just this week, presidential candidate Bernie Sanders released a plan for a federal pay gap tax.
The idea has been percolating around the state and local levels for years.
Skyrocketing CEO pay levels incentivize reckless executive decision-making like the kind that caused the 2008 financial crisis.
Portland, Ore., recently became the first U.S. jurisdiction to make companies pay consequences for extreme pay gaps. Last year, Portland began collecting revenue from a tax penalty on companies with CEO-median worker pay ratios of more than 100 to 1.
San Francisco voters will find a proposal for a similar tax on their March 2020 ballots. And policy makers in seven state legislatures have introduced similar proposals.
Some analysts consider the problem of runaway CEO pay just a concern for shareholders. But it’s a more fundamental problem than that: Skyrocketing CEO pay levels incentivize reckless executive decision-making like the kind that caused the 2008 financial crisis.
Congress recognized this in 2010 when it passed the Dodd-Frank financial reform law after the crash. That law included several CEO pay provisions, including a requirement that publicly held U.S. corporations annually disclose the ratio of CEO pay to median worker pay. The SEC finalized the disclosure regulation in 2015, and corporations began reporting their ratios last year.
Imposing tax penalties on companies with extreme gaps would do much more to discourage the kind of irresponsible behavior that led not only to the crash, but to other widespread social harm — from the opioid crisis to climate change.
Tax penalties on extreme CEO-worker pay gaps would also build on the living-wage movement by encouraging corporations to lift up the bottom and bring down the top of their wage scales. The more corporations shovel into executives’ pockets, the less they have for workers’ wages and other investments.
Like other “sin taxes,” these penalties would both discourage harmful practices while generating revenue for social needs. The new Institute for Policy Studies report finds that S&P 500 SPX, +0.02% corporations as a whole would have owed as much as $17.2 billion more in 2018 federal taxes if they were subject to tax penalties ranging from 1 percentage point on pay ratios over 100 to 1 to 5 percentage points on ratios above 500 to 1.
Walmart WMT, -0.63% , with a pay gap of 1,076 to 1, would have owed as much as $794 million in extra federal taxes in 2018 with this penalty in place. With those millions, the federal government could have extended food stamp benefits to more than 520,000 people for an entire year.
Marathon Petroleum MPC, +0.26% , with a 714-to-1 gap, would have owed an extra $228 million, more than enough to provide annual heating assistance for 126,000 low-income people.
Legislators at the city, state, and federal levels should consider policies to make corporations pay for big pay gaps. These extreme disparities harm all of us. And we’ve waited too long for corporations to fix the problem on their own.
‘Shameful’: Trump Aiming To Gut Rules That Prevent Corporate Offshore Tax Dodging
By Jake Johnson
Common Dreams (10/9/19)
The Trump administration is reportedly considering gutting regulations designed to prevent corporations from shifting profits overseas to avoid U.S. taxes, a move Democratic lawmakers and progressives condemned as yet another effort by the White House to enrich large companies at the expense of workers.
“One of the Trump administration’s top priorities has been making it as easy as possible for the wealthiest Americans and corporations to cheat and avoid taxes,” Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, said in a statement. “Rules preventing the offshoring of corporate profits should be strengthened—not weakened.”
“The same administration that tried to cut food stamps to save money wants to make it easier for companies to avoid paying taxes by hiding their profits offshore.”
Bloomberg reported late Tuesday that the Treasury Department is taking aim at “regulations intended to prevent American firms from lowering their U.S. tax bills by shifting income to their offshore branches that they can loan to their domestic branches and deduct the interest off their Internal Revenue Service bills.”
“The move could make it easier for companies to use accounting tactics to minimize their U.S. earnings and inflate their foreign profits, which are frequently taxed at rates lower than the current 21 percent domestic corporate levy,” Bloomberg noted. “The existing regulations were aimed at stopping U.S. companies from moving their headquarters to a lower-tax country, known as a corporate inversions.”
“Something more business-friendly”
The Treasury Department, headed by former Goldman Sachs banker Steve Mnuchin, is considering repealing the Obama-era rules completely and replacing them “with something more business-friendly,” according to Bloomberg.
“Another betrayal by President Trump—choosing corporations over American workers. Shameful,” tweeted Sen. Sherrod Brown (D-Ohio).
Former Texas Rep. Beto O’Rourke, a 2020 Democratic presidential candidate, said the possible rule change combined with White House efforts to gut the safety net “tells you all you need to know” about President Donald Trump’s priorities.
“The same administration that tried to cut food stamps to save money wants to make it easier for companies to avoid paying taxes by hiding their profits offshore,” tweeted O’Rourke.
Trump has condemned corporate offshoring of profits and jobs during speeches and rallies on the campaign trail, often singling out major companies by name. But, as Common Dreams reported, the $1.5 trillion tax cut legislation Trump signed into law in 2017 contained incentives for corporations to shift money overseas, prompting outrage from members of Congress and advocates for a progressive tax system.
Last year, Rep. Lloyd Doggett (D-Texas) and Sen. Sheldon Whitehouse (D-R.I.) introduced legislation that would close the loopholes in Trump’s tax law and equalize tax rates on corporate profits at home and abroad.
“President Trump promised the American people he’d end the march of jobs and profits overseas,” Whitehouse said in a statement. “Instead, he’s doled out massive new tax breaks that reward offshoring.”
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