Tuesday, April 10, 2012

Wealthy Heirs for Higher Taxes

Before there was the Occupy Wall Street movement, there was Wealth for the Common Good, which is a network of business leaders, high-income individuals and partners working together to promote shared prosperity and fair taxation. "We are the 1 percent that wants an economy that works for everyone. Our membership includes entrepreneurs, doctors, lawyers, school teachers, engineers and elected officials of all backgrounds and from all over the country."

* Editor's Note: To the best of my knowledge, this author doesn't believe that "celebrity heiresses" that feature themselves in reality TV shows (such as Kim Kardashian and Paris Hilton) belong to this group.

Forbes Magazine calls Wealth for the Common Good "a group of left-wing trust fund babies" -- as opposed to calling them a group of radical and greedy right-wing oligarchs (like the Koch brothers), who have been relentlessly hell-bent in transforming this country from a democratic republic into a corporate plutocracy. I prefer to call the members of the Wealth for the Common Good decent people, who have genuine empathy for humanity, and who are the true patriots of this great county.

Take Chuck Collins for example...

Wealth for the Common Good was co-founded in 2009 by Chuck Collins, an heir to the Oscar Mayer meat fortune. In 2003 he co-authored a book with William Gates Sr. (the father of Microsoft co-founder Bill Gates) called Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. In the book they argue for the retention of the federal estate tax (generation-skipping inheritance taxes).

Chuck Collins also wrote the book 99 to 1: How Wealth Inequality Is Wrecking the World and What We Can Do about It

Wealth for the Common Good (WCG) is pushing for higher taxes on the rich and released a report in 2010 saying that since 1955 the tax rate paid by the 400 highest-income earners fell by two-thirds. Meanwhile the tax burden on the middle class rose by about 1%.

If everyone on the Forbes 400 List had paid the same tax rate today that they did in 1955, the federal government would be collecting another $50 billion a year, every year. But instead, they got The Bush Tax Cuts.

The WCG has also figured the historical tax burden on the top 150,000 taxpayers (one out of every 1,000), and found that it has fallen roughly by half since 1955. If taxes were levied on them at the same rate today as they were in 1955, Uncle Sam could collect an additional $300 billion a year in tax revenues (equal to about half of the annual defense budget). That also includes the $50 billion on the Forbes 400 List, but makes no allowance for the possibility that the rich might cheat more if their tax rates were higher, which is fairly common among the wealthiest Americans. Read my related posts:

The WCG website calls for "shared prosperity and fair taxation" and declares "economic policies in America have slowly but surely shifted to disproportionately benefit the nation's top earners." (Keep in mind, these are rich people saying this!)

To that end, the WCG report proposed a number of tax increases, including the following:

  • Creation of a new 50% tax bracket on income of $2 million and above. WCG said this would raise at least $60 billion a year. Obama is only proposing a rate of 30% on those earning over $1 million a year in the "Buffett Rule", named after billionaire Warren Buffett. The top marginal rate in 1955 used to be 91% on annual income over $1.6 million in today's dollars. They're now only paying a 15% tax (or less) on capital gains, which is the majority of their income.
  • Endorsement of President Obama's proposal to allow the Bush tax cuts to expire at the end of 2012 for those earning $250,000 plus. That would push the top rate on salary and interest from 35% to 39.6% and the top rate on capital gains from 15% to 20%. (In 2013, including a 3.8% Medicare investment surtax that was part of the recently passed healthcare reform, the top rate on interest would climb to 43.4% and the top rate on capital gains to 23.8%.)
  • Imposition of a "modest federal tax on every transaction that involves the buying and selling of stock and other financial products." WCG says this would raise an additional $100 billion a year and "dampen the rapid speculative turnover of stocks." (But as usual, we can't even get congress to do this.)
  • Reinstatement of stiff estate taxes on estates of $2 million or more, which WCG said would still only tax one out of every 200 estates. (and eliminate all the loophole and exemptions, such as for "gifts".) That's why 2010 was "a good year to die", when the estate tax was repealed for one year.

The WCG study is hardly the only one to note the precipitous drop in taxes paid by the wealthiest. The Internal Revenue Service made much the same point in a recent study of the 400 richest Americans with the highest annual income

The IRS 400, a published study that names no names, was inspired by the Forbes 400 List of America's wealthiest, naming names since 1982. But there is a difference: The IRS measures "annual adjusted gross income", while Forbes measures "net worth". It is thought there is not a great overlap because net worth includes "unrealized" capital gains that's not included in taxable income.

The WCG isn't the first to make the point that the rich are paying lower rates these days. No less an authority on wealth than top billionaire Warren Buffett, who runs Berkshire Hathaway, has said his secretary pays a higher tax rate than he does (which was proven true, just as was Mitt Romney's case).

The WCG report also noted that the top marginal tax rate was 91% before it started dropping during the Kennedy administration. The "effective rate" (total tax paid on gross income after deductions and loopholes) for the "IRS 400" dropped from 51.2% in 1955 to a mere 16.6% by 2007. The report says the effective rate on the middle class (defined as the middle 20% of taxpayers) rose from 15.9% during the Fabulous Fifties to 16.1% by that same time.

The WCG asserts that "our nation has borrowed money to pay for the tax cuts that have gone and continue to go to America's wealthy, a reality that will have future generations of mostly middle-income taxpayers footing the bill, with interest, for these tax cuts."(The Republicans have continued to falsely blame Obama for this burdening debt on our children and grandchildren.)

28-year-old Jamie Johnson, the heir to the Johnson & Johnson pharmaceutical fortune (and also an Emmy-nominated documentary filmmaker) agrees with the heir to the Oscar Mayer fortune and the WCG.

In Johnson's first documentary Born Rich (which is available on DVD and Netflix and pictured below) he exposes how 10 children from families such as the Trumps and the Newhouses spent their time--and their fortunes.

Then Jaime turned the camera on his own family in the film The One Percent. This documentary (also on DVD and Netflix) offers a rarefied view of the scandalously secretive world of the top 1%, a small segment of the U.S. population that owns roughly 40% of the country's wealth. Through a series of interviews with high-profile figures like Bill Gates Sr., the sensible U.S. Secretary of Labor Robert Reich and the evil economist Milton Friedman (who famously asserted that a corporation's only responsibility was to maximize profits), Jaime Johnson explores the vast disparity of wealth in America.

Since the housing bubble burst, the stock market crash, and mass layoffs in 2008-9, Americans have become acutely aware of the great disparity in wealth and income inequality in America. The cat is now out of the bag, and we all now know that America's richest have not been paying near enough in taxes for many decades -- concentrating and hoarding the nation's wealth.

So why does congress refuse to raise their taxes? Especially when people like the heirs to Johnson & Johnson and Oscar Mayer, and billionaires like Warren Buffett, and all the Patriotic Millionaires have been begging them to raise their taxes for years!

And also because the very rich, the IRS, and everybody else and their mother is now aware of this blatant and unfair preferential tax treatment that very wealthy have enjoyed for decades. The top 1% has enjoyed favorable tax rates on capital gains since 1921!

So why do the Republicans and Tea Party complain about America having a debt problem? They know very well that it's not Obama's fault. They know that taxes on the rich are historically low, but always say otherwise. And the Republican Speaker of the House John Boehner knows damn well that we don't have a spending problem.

* Editor's Note: I was going to title this post "John Boehner is a Lying Idiot".

"Hey mister Boehner! We have a revenue problem, not a spending problem you lying idiot!"

My Related Posts:

* Editor's Note: The Republicans want to cut programs that the middle-class and poor want and need, but want to continue funding law enforcement, the National Guard, and the corporate military industrial complex, so as to profit and to protect their assets overseas and here at home. But they also want to defund IRS auditors too! (Post excerpted, edited, and partially sourced from Forbes.)

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