TAX THE RICH—THEY HAVE THE MONEY

              A lot of rhetoric has been expended over the past several months arising from the fact that the two major tax cuts passed under President George W. Bush in 2001 and 2003 are set to expire at the end of this year, which means the tax rates existing prior to those dates will be restored barring any action by Congress.

               Much of the rhetoric originates on the right from Republican quarters urging that the cuts be extended for all taxpayers while President Obama and some Congressional Democrats have spoken of extending the cuts for those making under a certain threshold, generally $200,000 to $300,000 and restoring the old rates to those above that level.

               Surprisingly many folks who make nowhere near that amount oppose those so-called tax hikes even for the “rich”. Many figures are tossed about as to how these upper income Americans already pay the lion’s share of personal income taxes in this country and further argue that restoring the cuts to those earning above the suggested levels will adversely affect small businesses and stifle job creation, which inarguably has been lagging.

           My position is evident from my title….tax the rich…they have the money. The assertions that this is somehow class warfare, job stifling and unfair are either exaggerated or outright false based on quite verifiable facts.

                 The threshold figure of, say $250,000 in income to pay higher taxes has been attacked as picking on people who are not rich. Daniel Gross sends that attack into retreat.

http://www.slate.com/id/2267287/

                Actually class warfare is an accurate characterization is that the richest class is waging war on the rest of us and winning. While we piss and moan about high unemployment, mortgage foreclosures and no cost of living increases for social security recipients for two years (and I am one of those SS folks), those at the upper end of the income spectrum have only been getting wealthier.

               On Slate.com last month Timothy Noah produced a remarkable ten part series on The Great Divergence, the phenomenon that means in the United States right now we have the largest differential between the haves and have-nots in our history. He explains how this phenomenon is measured and what its causes are, notably not necessarily laying blame at the feet of the usual suspects.

http://www.slate.com/id/2267157/

                And this late report demonstrates how the very super rich have increased their wealth while real income for most Americans has fallen.  This article from the Huffington Post highlights the depth, more precisely the width of the gap in earnings between average people and the super rich.

http://www.huffingtonpost.com/2010/10/25/income_inequality_statistics_tax_code__n_773392.html

               The simple conclusion to be extracted from this phenomenon is that the rich are getting richer on the backs of everyone else. And I am simple enough to do so.

                One admittedly imperfect example of how the rich take advantage is the report that the CEO’s of the 50 companies with the largest number of layoffs have increased their pay at a higher rate than have the CEO’s of the Standard and Poors 500.

http://ee.dominionpost.com/Repository/ml.asp?Ref=RFBvc3QvMjAxMC8wOS8xOCNBcjAxMjAx&Mode=Gif&Locale=english-skin

                A major contention of those advocating that any renewal of the Bush tax cuts include all income levels is that lower taxes result in job creation. Odd then, is it not, that during George W. Bush’s two terms in office which included the two rounds of tax cuts cited resulted in fewer jobs being created during his terms than were created under any other President since this statistic has been tracked beginning in 1945. That includes under JFK who served only three years and Jimmy Carter, a one-term President who has been widely vilified as an inept executive. In fact, Clinton had the highest total of jobs created under his watch despite RAISING taxes.

              http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

                Note the source here is The Wall Street Journal, hardly a bastion of liberality.

                Further, the argument goes, small business owners will be adversely affected by a tax hike at the levels proposed. Two problems with that assertion is that a relatively small number of taxpayers would come under this hike, and many of the “small businesses” Republicans are trying to protect are small only in U.S. tax code nomenclature while many are multi-million or billion dollar enterprises, such as the Koch Brothers energy conglomerate. Even John Boehner admits this.

(On CBS’ “Face The Nation” on Sept. 12, Rep. John Boehner, R-Ohio, conceded that a nonpartisan Joint Committee on Taxation found that 3 percent of small-business people would be impacted if Bush tax cuts for the rich would expire.)
               And many of these “small” businesses have hundreds of millions if not billions of dollars in income. They are classified as small only because of tax laws. http://www.msnbc.msn.com/id/39317328/ns/politics/
 
                 As the Bush tax cuts came simultaneously with the onset of two costly wars and rapidly turned an inherited budget surplus into a huge deficit which has only gotten worse at least some small measure of tax increase is very much warranted. True, other work needs to be done to balance the budget. But the claims that to do so is unfair, that it is class warfare and that it will prevent job creation are like the old bucket out at the well that is no longer useful. they just won’t hold water.

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Comments

  • Betsy  On October 26, 2010 at 1:53 PM

    Dave, While I may or may not disagree with your premise (and mostly I don’t), you surely know that Olbermann’s information has some problems. First, I do not know anyone who would measure the size of a company based on revenues rather than net income. Second, if he is trying to say businesses that do not operate as C corporations are therefore “small businesses,” then it is, in some instances, the fault of state legislatures. Most professional organizations, such as CPA’s, attorneys, etc., are forbidden by law from operating as anything other than a partnership or a LLP.

    • umoc193  On October 26, 2010 at 9:52 PM

      I do disagree with your contention that the size of businesses is not measured by revenues but by net income. The Fortune 500 is based on gross revenues. http://en.wikipedia.org/wiki/Fortune_500. Under certain federal programs, business concerns are small business eliginle with revenues under a certain limit. Although other businesses may be termed small based on other factors such as number of employees.

      The Koch Brothers empire is made up of many different companies which may have different organizational structures, number of employees, revenues or other qualifications for small business status so that the brothers in that sense could legitimately be called small businessmen, but they have a $35 billion conglomerate. Not your local shoe store or newstand or flower shop.

      I think Olbermann’s point, and assuredly mine, is that the term small business can encompass many types and sizes of businesses depending on the criteria used so to speak of “small business” can be misleading when it is used to draw sympathy for those folks.

      While I don’t have figures available, most of the kinds of firms traditionally considered “small business” are those that are proprietorships, partnerships or LLC’s where the owners likely have less than $250,000 /year personal income that would be subject to the restored rates. As a CPA I’m sure you’ve dealt with many such business people and can you honestly say that most of them have such personal income?

      One fact I neglected to emphasize in my post was that the higher tax is only the marginal tax rate. That is, as I know you know, the higher rate paid on income above a given level while income lower than that has a lower rate applied. So if the Bush tax cuts are rescinded only for the higher earners, whatever threshold is set, those folks will be paying slightly less than $3000 more in tax for every $100,000 they earn above the threshold. So with the top rate at 38% instead of 35%, the approximate current level, they would pay $38,000 in tax on that extra $100,000 rather than $35,000 as they do now.

      Look at that in this context. Your income is $250,000 plus. At this time, anything you earn above that is taxed at 35%. If that is the threshold income where new rates go into effect above that, the former 38%, when you earn $100,000 more now you end up with $65,000 but in the future you will have only $65,000 more to play with. Either figure is above the average individual income in the U.S. I don’t see how that damages you to any great extent.

      And Betsy I got so specific and detailed here not for your benefit so much as to be helpful to other readers who don’t have your education and background. I do thank you for commenting and challenging me to justify my opinions.

  • Betsy  On October 27, 2010 at 1:51 PM

    Thanks for the reply, however, my problem is not with the tax rates. I still have a problem with tying revenues and taxes together. And, you made my point for me. Fortune does rank by revenues. So, in 2008, GM was ranked in the top 10. However, their net loss was huge. So they did not pay any taxes. Where they still a gigantic company? Of course. But their revenues are not a reflection of the taxes they paid (or did not pay.) I simply think it is misleading for anyone to try and make it sound as if a company that has $70 million in revenues will pay taxes on $70 million. And gee, because it is a Sub S corp. it won’t have to. A lot of average people simply do not have enough knowledge about taxes (lucky them!) to know the difference.

    • umoc193  On October 27, 2010 at 2:24 PM

      Frankly I am puzzled as to where you believe I favored corporations paying taxes on revenues, not net income.This entire post was about personal income tax rates. I just noted that large revenue companies could be considered “small” depending upon the application of relevant criteria. The owners of these companies then, small businessmen, would be paying the restored marginal rates on their personal income which is highly dependent on the structure of their small businesses. Even a sole proprietor would not be paying tax based simply on revenue. His costs of doing business and other available deductions will reduce that revenue number to what he actually pockets as personal income subject to tax.

      Note: In my first reply in my example I said that the extra net income if the marginal rate was raised would be $65,000 when it is obvious that figure should have been $62,000. Bad proofreading.

  • Betsy  On October 27, 2010 at 7:27 PM

    Dave, I am not saying anywhere that you believe that any business should pay taxes on revenues. What I am saying, again, is that MSNBC, in particular Keith O., try their darnedest to make their points by using terminology that the average person may not be able to decipher. By using revenues as a measuring point for the size of a business, in relation to taxes, it will easily make one think that there is a direct correlation between revenues and taxes. And, while they may both increase together, even without an increase in marginal rates, using GM as an example, shows that is not always true.

    As I have said, my problem is not with yours, or MSNBC’s position that some (or many) “small businesses” are not really “small businesses” and so should not be granted tax cuts. It is only with how some choose to define it. I just cannot see talking about revenues and tax rates together. They are, many times, not related other than revenues is where a company starts when computing taxable income. And, it is taxable income which is taxed, so that is what should be discussed if wanting to talk about tax rates.

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  • By World Wide News Flash on October 26, 2010 at 10:43 AM

    TAX THE RICH?THEY HAVE THE MONEY…

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