Soak the rich? Hang ’em high and squeeze them dry.
Stories like this can be found everywhere, and aren’t particularly interesting or noteworthy. But as many as there are, they really do make me wonder sometimes just how naive people are about the current state of this country and its economy.
The national debate about who should be paying more in taxes, and how much, boring as it may be, is healthy and long overdue. But far too many people seem to lack a firm grasp on what the tax rates looked like in this country in the years before taxes became politicized, and before those people magically discovered in politics in 2004 and 2008.
That said, that there even is a debate over whether or not the rich and businesses should pay higher taxes is simply amazing, and goes a long ways toward explaining why our national government and political process is so dysfunctional and the deficit situation seemingly out of control.
Mitt Romney is a prime example of this. Romney earned $21.7 million in 2010 alone, and paid just 13.9% on it due to tax breaks for capital gains that were supposed to encourage domestic investment, in a country that hasn’t had domestic investment problems at practically any time in the past 220 years. We’ve now found that most of Romney’s wealth is hidden away in low-tax or tax-free off-shore Swiss bank accounts and in the Cayman islands, doing nothing for America.
Without those breaks (and off-shore shenanigans typically associated with white collar criminals), Romney would be paying 35% in federal income tax, and even that rate is near historical lows.
This isn’t really about Mitt Romney so much as it is about the culture of greed that has overtaken America since Reagan’s “me first” generation began asking what their country could do for them, and only caring about that, and an ignorant society that looks up to selfish do-nothings as role models and defends them as if they are some persecuted and powerless minority. That one of the truly rich ruling do-nothing class wants to run the United States government as his next big acquisition, and proudly boasts about how he’d run it just like all his other businesses — a sick and frightening prospect given the massive damage done to the environment, and the rampant lawlessness in the private sector — shouldn’t be surprising and hasn’t been. To the contrary, few people see any problem with the end game of plutocratic and corporatist rule, because we’ve all been so well trained to believe this is normal behavior.
It’s not, at least not since the end of British rule.
The lowest the top marginal tax rate has been since the end of World War II was 28% in 1988 and 1989. The second lowest was 31% in 1991 and 1992. The third lowest is 35%, what it is today, and has been since the second round of Bush tax cuts in 2003.
If that sounds high to you, consider that the highest that rate has been during that period was 94% near the end of the second world war. It had been a common practice for the federal government to pay for wars by raising taxes, so it shouldn’t come as any surprise that the highest rate the rich has ever endured was the direct result of the biggest war that mankind has ever seen. (This illustrates what a big and important departure it was for the Bush administration to seek huge tax cuts while simultaneously fighting two wars in the middle east, and explains much of the record budget deficits during that period.) Rates reminded high throughout post-war recovery, as high as 91% until 1964, when the country’s wealthiest people got a massive 14 point cut, and another 5.25 point cut a year later.
The top rate hovered around 70% until Ronald Reagan came to power, promising prosperity for all on the back of “trickle down” economics. The Reagan administration’s policies led Congress to cut the top marginal rate from 69.13% in 1981, to 50% in 1982, an unprecedented 19 point cut. They did it again in 1987, cutting the top rate to 38.5%. The top rate in 1982 was the lowest it had been in 51 years. Then they did it again, cutting the top rate to 28% in 1988.
Taxes for the rich in America were at a 56 year low, and while Clinton administration policies changed course, bringing the top rate up to 39.6% between 1993 and 1999 — also known as one of the greatest periods of economic prosperity in modern times — they were brought down yet again by the GOP, in 2003, to where they stand today at 35%.
Now remember that with loopholes like the capital gains tax, the Mitt Romneys of the world can earn over $20 million per year and pay not 35%, but 13.9%, a real rate the top bracket hasn’t seen since 1915.
Throw in stories like this, showing dozens of major corporations that today pay no taxes at all, or have paid no taxes at least once in the past four years, and you’ve got a good idea of what reality looks like outside the plutocratic echo chamber that’s formed around and completely subsumed our 1% Congress (nearly half of Congress are millionaires) generally, and the Republican Party specifically.
Among those extremely powerful and wealthy multinational conglomerates getting a free ride at the tax payers expense are aviation behemoths General Electric and Boeing. GE spent nearly $40 million lobbying the government in 2010 alone, and has been rewarded with over $3 billion in federal contracts as a result. Barack Obama took over half a million from GE during his 2008 presidential campaign, making them his 17th largest contributor, and later appointed Jeffrey Immelt as his “jobs czar”. Immelt is GE’s sitting CEO and chairman of the board and claims to be a Republican. GE subsequently received $24.9 million in grants from the American Recovery and Reinvestment Act in 2009, yet had $156 billion in revenue that year while firing 18,000 employees, and paying no federal income taxes.
In fact, General Electric got tax rebates from the federal government to the tune of 18.9% between 2008 and 2011.
The revolving door between Big Business and government has been spinning faster in the past 13 years than anytime in history, easily crossing party lines and transcending petty political disputes like trillions in national debt, endless and seemingly pointless wars in the middle east, a suffocating middle class, and a failing education system.
Boeing had a -5.5% tax rate during that period, spending $68.3 million lobbying the government, and holds $19.3 billion in federal contracts. Boeing has paid over $1 billion in fines to the government and in civil settlements and judgments over the years due to multiple violations of federal law and other unethical behavior. Boeing earned $4.01 billion in pure profit in 2011 on $68.7 billion in revenue, yet paid no federal income taxes between 2008 and 2011.
These are two of the largest, most powerful and profitable corporations in the world, that are firing tens of thousands of people while taking tens of millions in grants meant to stimulate the economy and lead directly to job growth, violating countless ethics and corruption laws amounting to billions in fines, that pay literally no taxes at all. Worse than that, they get tax handouts from the federal government and see their most powerful executives rewarded with influential and high profile political appointments in administrations of both major parties.
Does Boeing and General Electric deserve a tax cut? Should we believe the rhetoric that has people asking the rich and businesses to pay more in taxes be an anti-American, anti-business extremists? Does Mitt Romney, paying 14% — a rate that the rich haven’t seen since the 1930s — or the Walton family, owners of Wal-Mart that are worth a combined $102 billion, deserve a tax cut, like the GOP say they need to create jobs?
Boeing already doesn’t pay any taxes, gets millions in government handouts, has billions in government contracts and earns billions in revenue and profit, yet still fires tens of thousands of people.
I doubt anyone supports raising taxes on the local gas station or independent grocery store that grows and sells its own produce. But this country has clearly conducted a very lengthy generational experiment in reducing taxes for super rich families and massive billion dollar corporations close to or below historic lows, while doing almost nothing for the middle class which makes up over 90% of our population.
Is this country any better off for it?
When does the middle class get an 11.5 point cut, like the people earning more than $388k per year did in 1987? Or a 19 point cut that Ronald Reagan gave them in 1982?
Here are the 2012 federal income tax brackets:
10%: $0 – $8,700 (Boeing, General Electric)
15%: $8,701 – $35,350 (Mitt Romney)
28%: $85,651 – $178,650
33%: $178,651 – $388,350
Does that make sense to anyone?
Herman Cain’s 9-9-9- tax plan would have lowered all personal federal and corporate income tax rates to just 9%, even less than someone like Mitt Romney pays today, and an increase on corporations like Boeing and General Electric that would represent a 26 point cut from the rate they are supposed to be paying.
Newt Gingrich’s plan would have reportedly cut Romney’s tax rate to 0%, because it eliminated the capital gains tax, would have given Gingrich himself a half-million tax break, and reduced the corporate tax rate from 35% to 12.5% (while doing nothing about corporations like GE that already pay nothing.)
Even George Bush’s Treasury Secretary, Bruce Bartlett, thinks such plans would be a fiscal disaster for the federal government, saying they would “increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished’, and the middle class would “unquestionably pay more under Phase 2 of the Cain plan”, while the rich “would pay almost nothing”.
Forget all the talk about soaking the rich, we’re about one election and a 2 point cut away from the rich having the lowest tax rate in modern American history. That is not good governance, it’s unfathomable selfish greed and a sure path back to aristocracy, which is only marginally different than the plutocracy we already have.
With Mitt Romney having at least fair odds of becoming President, it may be worth considering the wild success of the rich’s systematic capture of American politics, which is on the precipice of being fully and finally realized. This country should be debating tax policy in general terms, specifically as they apply to the massive majority working middle class. But there should be no debate about increasing taxes on the rich and corporations. If those two classes — the ruling classes — get any more cuts, they could be the second class of people in America that pay no federal taxes at all, right next to the unemployed and the dead.
GE and Boeing are already there, and Mitt Romney would have joined them had Newt Gingrich gotten his way.
If you want to talk about taxes and patriotism, then let’s have that conversation. Mitt Romney’s tax plan would cut his already low 13.9% rate even more, while doing almost nothing for nearly 300,000,000 Americans. Is that patriotic?
Barack Obama’s plan to extend the middle class cuts and let the cuts for the rich expire — speaking of Bush’s cuts that expire this year — would almost certainly increase the tax bill for Mitt Romney, Newt Gingrich, Herman Cain, The Walton Family, the Koch brothers, George Soros, and of course Barack Obama.
Is that patriotic, asking people who can easily afford to pay more to do so?
I couldn’t care less, but if you’re going to frame things that way, then the answer almost certainly is yes in the latter case, and no in the former.
What matters most is who needs the cuts the most, and it sure as hell isn’t Warren Buffet, Paris Hilton, and Mitt Romney. If Romney saw his tax rate increase from 13.9% to 35%, where it’s supposed to be, he’ll still have six homes, one of them with a garage that features an elevator for all his cars. Paris Hilton will still be able to jet set around the world in private jets with all her rich friends without having worked a single day in her entire life, both of them living privileged lives that even Kings and Queens never knew.
Give the middle class a 20 point cut for once in their lives and soak the rich for a few years. They can easily afford it, and even doubling their rate to 65% would leave them lower than they were between 1936 and 1981. Hell, just get rid of the capital gains abomination.
I think Ray Dalio will cope just fine.