Follow the money part 1

The western front of the United States Capitol...

The western front of the United States Capitol. The Capitol serves as the seat of government for the United States Congress, the legislative branch of the U.S. federal government. It is located in Washington, D.C., on top of Capitol Hill at the east end of the National Mall. The building is marked by its central dome above a rotunda and two wings. It is an exemplar of the Neoclassical architecture style. (Photo credit: Wikipedia)

In order to understand the conversation in Washington, DC, it is necessary to follow the money. Taxes, who pays and how much will be the subject of the conversation at least until the election and probably afterward. Unless you understand a few facts, you will not be able to separate fact from fiction, and the GOP will be airing a lot of fiction.

One large talking point for the GOP is that half of Americans don’t pay Federal income taxes. That may be true, but it is not true for the reasons implied by the GOP that we are a nation of freeloaders who live off the government dole and should work harder. Everyone who works pays Social Security and Medicare taxes which hit the poor more than anyone else. These are called regressive taxes and are the opposite of progressive income taxes which in my opinion are the fairest taxes of them all.

At some point in the past, a bargain was struck in Congress not to raise the minimum wage which the poor depend on. That allowed business to pay everyone lower wages, from the poor on up the wage scale. To offset the shrinking value of the minimum wage, the Federal government started crediting low wage earners with an earned income tax credit which reduced or eliminated their Federal income tax due. The earned income tax credit is only given to those who are working. The unemployed are not eligible. Now the GOP wants to continue with an inadequate minimum wage and take away the earned income tax credit. That is a double whammy to the working poor.

To my mind, the solution would be to pay a living wage so that the poor earn enough to live a decent life and earn enough to pay income taxes as the conservatives say they favor. Then we can phase out the earned income tax credit.

Please see Follow the money part 2

Advertisements

Don’t work/don’t vote

USFederalTotalTaxShareByIncomeLevel.1979-2007

USFederalTotalTaxShareByIncomeLevel.1979-2007 (Photo credit: Wikipedia)

If you don’t work, you can’t vote. That’s a position I just saw voiced on a right-wing blog. The writer maintained that it is a conflict of interest to allow recipients of government checks to vote. If you start with the jobless who may receive unemployment checks and/or welfare checks, then where do you stop? Obviously from the gist of her comments, she was talking about those who do not pay Federal income taxes. However, you could easily include Wall Street banks too big to fail and you could include several large corporations that have paid no income taxes in recent years. And then there are the agricultural firms that receive government money for price supports of their produce. If we eliminated the vote for anyone receiving government money, then only a few billionaires and their lackeys could vote. In that case, why not just eliminate elections? They are just a waste of time and money now anyway.

Real Americans

Map of USA highlighting states with no income ...

Map of USA highlighting states with no income tax on wages (Photo credit: Wikipedia)

Real Americans emulate the Founding Fathers as much as possible. That means that they:

Live on the farm, not in cities
Own guns for hunting and protection from hostiles
Serve in the militia
Avoid entangling alliances abroad
Pay import duties, but no income taxes
Avoid doctors and hospitals, living shorter lives
Only male property owners may vote
No standing army or Dept. of Defense
No Social Security or Medicare
No unemployment benefits
Debtors prison for the insolvent
No paper money, only specie

16th amendment

16th Amendment of the United States Constitution.

16th Amendment of the United States Constitution. (Photo credit: Wikipedia)

The 16th amendment to the US Constitution permits a graduated or progressive income tax at the Federal level. It was adopted in February, 1913 and has been opposed by the GOP ever since. Until they can engineer its repeal, the Republicans have been working to make the law ineffective. Their definition of a progressive income tax is an income tax on the income of progressives only. Their version of the tax is one that most people would define as regressive, the more you earn, the less tax you pay. For those earning the really big bucks, the tax rate is zero, or in some cases, less than zero. Personally, I believe that the progressive income tax is the fairest tax of them all.

P. S. The 16th amendment will celebrate its 100th birthday next year in February.

Executive salaries

Plot of top bracket from U.S. Federal Marginal...

Plot of top bracket from U.S. Federal Marginal Income Tax Rates for 1913 to 2009. Data are from http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_progressivity_in_federal_income_tax (Photo credit: Wikipedia)

Why are top executives in the US paid so much more than their companies’ lowest paid employees? There once was a rule of thumb (I have it written on my thumb) that the CEO’s salary was limited to a relatively small multiple of the janitor’s wages, such as 100 to 1 or 250 to 1. Now the sky is the limit. In Japan, I believe the old standard of 40 to 1 still holds true. In Europe, much smaller multiples than in the US are sufficient to attract and hold top talent to the CEO position. Only in the US are we told that outrageous salaries and bonuses are required to attract and retain top talent. And then those talented individuals earn their money for the company by increasing sales and profits, as Wall Street demonstrated during the onset of the Great Recession.

I think that the arguments put forth for CEO pay are specious. If US corporations will not rein in their CEO pay, I think that the marginal tax rates on outsized salaries and bonuses should be raised to the 90%+ level. The argument against higher personal taxes on CEOs and higher corporate taxes in general is that the consumer will be forced to pay higher prices. That argument is true in some cases, but not all. Consumers can resist higher prices if there are competitive products available. Then corporations are forced to accept a lower profit margin, stockholders receive lower profits and stock prices, and corporations have less money to pay outrageous salaries. Corporations have plenty of money now to pay their CEOs. If outsized salaries and bonuses were required to attract and keep top talent, then Japanese and European firms would not have any CEOs.