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Much of the rhetoric amongst Republican politicians and right wing media centers around a couple of themes: 1) the rich already pay more than their fair share of taxes, and 2) cutting taxes further on the rich will stimulate job growth. I consider both of those premises false, but will only focus this posting on the first item that the rich pay their fair share of taxes.
First I'll refer you to a graph (Figure 2) from the Tax Policy Center showing the sources of federal government revenue since 1950. I would copy the graph here but for some reason it won't let me do it. So you'll have to go to the link.
Back in the 1950s, note that both corporate taxes and excise tax revenues were much higher, payroll tax (Social Security and Medicare) were much lower, and individual income tax revenues were slightly lower. You can download the actual numbers from the Tax Policy Center website and these are the numbers I have extracted below.
Corporate taxes in the 1950s contributed an average of 27.6 percent of the government revenue compared to an average of only 10.8 percent since the year 2000. Most of the decrease has been a result of the lowering of the top corporate tax rate from 52 percent for much of the 1950s to a low of 34 percent in 1988, increasing slightly to 35 percent in 1993 where it remains today. Reagan's Economic Recovery Tax Act also had several other provisions for lowering corporate taxes including raising the top 34 percent bracket to income over .
Payroll taxes contributed 11.8 percent to revenues in the 1950s versus 36.1 percent since 2000. The increases result largely from the addition of Medicare and Medicaid in 1965, and increases in Social Security taxes in 1983. Payroll taxes hit the poor and middle class disproportionately, and with more of the burden shifting to these taxes, this demographic group shares a larger burden of the taxation.
Excise taxes contributed 15.3 percent of our revenue in the 1950s versus only 3.3 percent since 2000. The biggest sources of excise taxes today are gasoline and diesel taxes, air transportation taxes, cigarette taxes and beer taxes...all taxes that primarily affect the middle class. I don't know what items drove the higher numbers in the 1950s, but I do note that luxury taxes on such things as jewelry, furs, boats, and private aircraft were all repealed in 1993.
Individual income taxes contributed 43.1 percent of the revenue in the 1950s versus a slightly higher number of 45.6 percent since 2000. However, within this group, the middle class has borne an increasing share of the tax burden and I'll try provide some further insight into this group. The Wealth for the Common Good website has published a bar graph (Figure 2) comparing the declining trend of effective federal tax rates for the Top 400 for the years between 1955 and 2007. In 1955 the top marginal tax rate was very high at 91 percent, but the average federal effective rate that these super rich paid was much lower at 51.2 percent, a little more than half. In 2007, the top marginal tax rate was 35 percent, but the Top 400 paid an average effective tax rate of just 16.6 percent, less than half. They can achieve this because most of their taxable income comes in the form of dividends and capital gains, both of which are taxed at 15 percent. And dare I mention that hedge fund earnings are also taxed at the capital gains rate...15 percent for long term earnings? Oh the tough life of a hedge fund manager...take the profits and let the taxpayers take the risk.
Other Taxes that largely hit the middle class are state income taxes and sales taxes, as well as property taxes. Sales taxes disproportionately affect the poor and middle class. But I'll focus here more on property taxes...those taxes that largely fund our school systems. I have always voted for every property tax increase, knowing that if mill levies are defeated, our public education system will suffer. And that's exactly what is happening across America as property tax revenues have plummeted, not only because of decreasing home values, but also because privileged groups have learned to game the system. Take Walmart for example. According to this article, Walmart has extracted more than $1.2 billion in property tax abatements, sales tax rebates, infrastructure and site improvements, and other economic and development subsidies from state and local governments across the country. Walmart's gain is the taxpayers' loss.
Want a new baseball or football stadium with more luxury boxes? I'm sure there are enough cities to sucker their taxpayers into paying for it, again largely the middle class.
And churches too. The largest land owner in the United States is the Catholic church. Faith based groups worldwide own almost 8 percent of the habitable land. Does anyone doubt that they don't pay property taxes on the land and don't pay capital gains taxes when they sell the land? Every time they invest in property it's one more property not paying taxes...and a shift of the burden to more middle class home owners. Scientology Founder L. Ron Hubbard is quoted as saying, "Writing for a penny a word is ridiculous. If a man really wanted to make a million dollars, the best way would be to start his own religion." I won't criticize all those people that want to contribute to the affluent life styles of the televangelists and other mega church leaders, but as a taxpayer when I have to pick up the shortages caused by their tax breaks, then in a sense I am being forced to subsidize their life styles also.
And how about all those super rich who use agricultural tax exemptions meant for farmers to avoid property taxes on their huge estates. As this Nation article points out:
"Take Michael Dell, founder of Dell Computers and the second-richest Texan, who qualified for an agricultural property tax break on his sprawling 1,757-acre residential ranch in suburban Austin simply because his family and friends sometimes use the land as a private hunting preserve to shoot deer. Periodically hunting and maintaining a “well-managed deer herd” reduced the property’s 2005 market value from $71.4 million to an agricultural value of $290,000, which saves him—and costs Texas—$1.2 million a year.
"Or take billionaire publisher Steve Forbes, who got more than a 90 percent property tax reduction on hundreds of acres of his multimillion-dollar estate in upscale Bedminister, New Jersey, just by putting a couple of cows out to pasture. They are not alone. All across the country, a huge number of America’s wealthiest are tapping into agricultural tax breaks—and none of them have to do any real farming to qualify.
"Not only are agricultural tax breaks allowing wealthy landowners to shift their tax burden onto other less-affluent taxpayers but they are also helping bankrupt public schools, which derive the bulk of their funding from local property taxes."
Tax Code: These are just some of the things that shift the tax burden to the middle class. The tax code is 71,684 pages in length largely written with the help of lobbyists and tax lawyers to extract more benefits for the rich and corporations. When I do my taxes, I use probably less than 20 of those pages including the instructions. The tax code in the 1950s was in the order of 14,000 pages and even then it had its benefits to the rich.
Wages: In addition to bearing a larger share of the tax burden through income taxes, payroll taxes, excise taxes, and property taxes, much has been written about how wages for labor, particularly in manufacturing, have stagnated in spite of productivity gains. See Figure 4, for example, in the Wealth for the Common Goood website. Of course the finger has rightfully been pointed at the CEOs and others getting a bigger piece of the pie. Those arguments are all complicated, but the overall erosion in worker pay for several decades is a well known fact.
Summing it up: Am I sounding more and more like a Tea Partier? Yes perhaps with regards to their genuine complaints about taxes, but not in their misguided focus as to the blame and how to fix the problem. The bottom line of everything I have said here is that the middle class has borne a larger and larger share of the tax burden, while corporations and the rich have used tax lawyers, lobbyists, and every gimmick in the book, which they have helped write for their benefit.
So let me borrow a phrase from the Tea Partiers. "I want to take my country backl!"...but not in the way they want to do it. I want to see a systematic phasing in of higher taxes for the rich and the removal of all those thousands of pages of tax loopholes that allow the rich and corporations from paying their fair share of taxes or any tax at all. I want to see a return to a 1950s mentality that recognized that taxes are not evil and that government can and should do some things better than corporations...a recognition that government actions are driven by a need to serve the greater good of their citizens, while corporations, on the other hand, are only driven by a need to make profits for their shareholders. Both can and should co-exist in fairness and harmony with each other, but one cannot replace the other.
My father was a miner and supported my mother, me and my four siblings as we grew up in the 1950s and 60s. We lived within our means, and even on one miner's salary, it was enough to support all of us. That would be difficult to do today because not only has the tax burden shifted to the working class, but also because little or none of the gains in productivity for the past 40 or more years have been shared with the working class. Working class wages adjusted for inflation have remained largely stagnant while CEO salaries have gone through the roof.
This posting is much too long already so I'll close now and invite discussion and debate...