Here's tax reform, Jerry

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Everyone knows I'm a fan of taxing the rich and that I think most of the economic problems in our country have their roots in the growing inequality of the past few decades, so it should come as no surprise that I enjoyed the Cruickshank piece on Calitics. He's got exactly the right idea: Tax reform that benefits the wealthy (or, in fact, tax reform that doesn't force the wealthy to pay more) isn't tax reform at all.

I was on a houseboat at Lake Shasta over the 4th of July, arguing with some very smart people about why the economy is so fucked up (yeah, for relaxation I go someplace beautiful -- then sit around and talk about economic policy), and we covered a lot of ground. My friend the investment banker and corporate executive said that out-of-control CEO pay -- and bonus payments for failure, and lack of corporate accountability -- were a bit part of the problem. "If corporations succeed, then everyone -- all the people who work there, at every level -- ought to benefit," he pointed out. True: In the early post-War era, labor union clout in major industries (automotive, for example) forced corporations to pay a decent middle-class wage -- that is, to share the fruits of success with the workers. That's all gone now. "Corporations don't pay enough taxes," my friend the corporate salesman said -- and he's right, too.

And all of us agreed that higher taxes won't drive corporations out of the country or out of states or even out of cities; the actual numbers of businesses that pick and and move because of taxes (as opposed to labor-force issues, rents, land availablity, access to transportation etc.) is so minor it's not even worth talking about.

But those are just pieces of the puzzle. Here's what I always come back to: Over the past couple of decades, the size of the U.S. economy has doubled -- and real wages have been essentially flat. All that new money has gone to the very, very top. Robert Reich explain this brilliantly in exactly two minutes -- and I don't care how busy you are, you have two minutes to watch this video.

That, really, is the root of everything, the reason we're still in a recession, that people are losing their homes, that government debt is soaring ... it's all because this country, as a matter of public policy, has allowed the very, very rich to take almost all of our wealth. We have become a banana republic, a corporate kleptocracy, a place so badly managed that it we weren't the United States, the news media would be reporting on our utter lack of economic democracy. And they'd be saying that the system is so unsustainable that one way or the other, it's going to collapse.

Jerry Brown must know this. He's not going to run for another term. There's no excuse at all for not at least proposing a modest tax increase on the highest earners and the most profitable big businesses. Come on, guv: What are you waiting for?

 

Comments

Whereis the summary on the plotical reportings?

Posted by Guest on Jul. 05, 2011 @ 11:41 am

Tim, what are YOU waiting for?

Posted by marcos on Jul. 05, 2011 @ 12:27 pm

If it's true that the only reason the US is in recession is because of the rich, then why are all those european nations that tax their wealthy up the wazoo also having a recession?

Posted by Walter on Jul. 05, 2011 @ 1:16 pm

Neither the US nor EU are in recession. By the numbers, both "economies" are "growing."

The financial sector exploded and both blocs are going into hock to clean up the mess.

The EU's debt problem has to do with monetary union and fiscal sovereignty.

The US' debt problem has to do with monetary profligacy, fiscal retrenchment and privatized health insurance.

Demand in northern Europe is sustained due to countercyclical policies where demand in the US is flagging due to cyclical policies.

Posted by marcos on Jul. 05, 2011 @ 1:37 pm

caused by NOT having the government have to pay for medical care? That makes no sense at all.

And actually Europe's problem is essentially the same as our problem - both places have governments who spend more than they take in and, as a result, borrow too much.

Either way, Tim's idea that we're in a recession because we don't punitively tax the rich or engage in class warfare is palpably false.

Posted by Walter on Jul. 05, 2011 @ 2:44 pm

Yes, tax the rich...doctors making $800,000 a year working in our state prisons need a raise...!!

Posted by Guest on Jul. 05, 2011 @ 4:03 pm

You mean tax the rich California state prison psychiatrist that makes $883,000 a year in a state with a democratic governor and legislature? Or tax the head of the state stem cell program payed half a million dollars a year that governor Brown picked over an actual medical doctor who wanted the job for less than 200k/year? I am an actual surgeon and I don't make anywhere close to $883,000/year and neither do almost all doctors unless they are state government doctors in a democratic state that "needs" to raise taxes to pay outlandish salaries.

Posted by Guest on Jul. 05, 2011 @ 8:19 pm

You mean tax the rich California state prison psychiatrist that makes $883,000 a year in a state with a democratic governor and legislature? Or tax the head of the state stem cell program payed half a million dollars a year that governor Brown picked over an actual medical doctor who wanted the job for less than 200k/year? I am an actual surgeon and I don't make anywhere close to $883,000/year and neither do almost all doctors unless they are state government doctors in a democratic state that "needs" to raise taxes to pay outlandish salaries.

Posted by Guest on Jul. 05, 2011 @ 8:20 pm

"caused by NOT having the government have to pay for medical care? That makes no sense at all."

Actually it does. Privatized health care costs a lot more because you have to make room for profit, advertising, lobbying expenses, and waste/inefficiency. Privatized health care is much more wasteful and inefficient at health care delivery than the government, because you have to employ armies of people to figure out ways to deny care. And you're siphoning off billions of dollars for executive pay and bonuses, when the same work could be done in the government by people making much more modest salaries.

All of this is a huge drag on the American economy.

"Either way, Tim's idea that we're in a recession because we don't punitively tax the rich or engage in class warfare is palpably false."

Thinking of taxes as "punitive" is the wrong approach. Taxes are the price you pay for living in a civilized society. The benefits of society get distributed unequally, however, so the inequality should be mitigated by taxes. The rich get more out of society; they should pay more back in.

As for class warfare... that's already being waged -on the poor by the rich. Maybe its time the poor started fighting back.

Posted by Greg on Jul. 05, 2011 @ 5:28 pm

I get the arguments in favor of single payer healthcare, but I'm not sure how well that type of system is working, either. I traveled up to Vancouver last year, and every day the paper had a story about how healthcare costs were draining the Canadian government.

Posted by The Commish on Jul. 05, 2011 @ 7:30 pm

I'm not waiting for anything, Marcos. I'm for taxing the rich now.

Posted by tim on Jul. 05, 2011 @ 3:27 pm

Tim,

Broad brush answers such as "Tax the Rich at higher rates" and "Businesses don't pay enough" fail to deeply analyze the situation and should not be taken seriously.

Who is rich? Is it the doctor (commenting above) who makes $200,000 +/- per year but owes at least that in student loans, and pays a Federal income tax of >30% and State of >9%?

Or is the rich person a SF landlord who earns the same amount via renting out a dozen properties (inherited - no doubt) who pays a low Prop 13 tax basis, and using accounting tricks to shelter and share income across multiple parties (e.g. his kids)?

A broad brush "raise taxes on the rich" screws the doctor but is easily avoided (by accounting games) by the landlord.

In my book, a rich person owns lots of assets and can easily live off them - without working. Rich is not necessarily a high income individual. Income is transitory and related to skills, health, and the market. Penalizing income is counterproductive.

Posted by teddy j. on Jul. 05, 2011 @ 10:06 pm

Jeez,

Who the hell is 'teddy j." and will he please stick around? Disagree with the analysis but what a fresh voice. The shit he's saying? That shit makes sense.

Lemme mull that over some more.

"income is transitory and related to skills"

Hmmm, so, teddy, how do we shift the pile of gold coins? I just got a notice today that says that my social security is being cut 5% (by $14.61 a month). If we tax the Bay Citizen's John Webber the same 5% it would be $20,000 a year. Also, on the 1st of July my Muni fare was increased 33% (from .75 to 1.00). Why can the government so easily cut my income and continues to give tax breaks to billionaires?

Giants lost too.

Dang!

h.

Posted by Guest h. brown on Jul. 05, 2011 @ 10:21 pm

thanks h.

I am sorry about your S.S payment cut, that is really disappointing. I am not sure I agree that life is about sharing the gold coins though. While we may all be Americans, we are not collectivists. It is just too big and too dynamic of a country to think that we can ever have equal outcomes. People deserve to save what they work for so that they don't get in the same Social Security (and inflationary) jam that just grabbed you. Counting on the government to provide for your future is starting to look sketchy.

Here's something to think about regarding the rich. Billionaires Gates, Buffett, Ellison, and others pledge their fortunes (fortunes mostly made in this country) to solve the "big world problems" of hunger, poverty, disease, etc. If one of these gentlemen gave just 2% of their fortune to California, we could solve our state education crisis - permanently. These men are the truly mega rich - where is the outrage for them to give back to this country?

Here is something else to consider. Our great state has one of the highest income taxes and the highest sales taxes in the country - yet we can't make ends meet ? I am sorry, but something is wrong with that. Raising taxes would only chase away the wealthy away, and demotivates the productive.

If we really want to raise taxes here in Ca. we would be better off to detach from the rest of the US, become a separate economic territory (ala Puerto Rico) raise our taxes to 18%, and send any left overs to Washington D.C. Every rich person in this country (and world) would line up to move here if they could cap their taxes at 18%. Ever hear of Monaco ?

Over and out.

Posted by teddy j. on Jul. 06, 2011 @ 12:05 pm