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Americans must get informed as to what really ails the economy. More articles are becoming available, mostly on the Internet, that give light to the many unnoticed studies that details the unfairness of America’s tax codes and policies. While the mainstream media gives these studies tepid coverage at best, it is now the responsibility of citizen journalists and online journalists to use their thousands of spheres of influence to get the information out so that Americans can make the necessary demands to their politicians. The middle class must stop being held hostage by the minority of the ill-informed or the ill-willed.

Every American must read the paper “Changes in Income Inequality Among U.S. Tax Filers between 1991 and 2006: The Role of Wages, Capital Income, and Taxes” by Thomas L. Hungerford, an economist for the Congressional Research Service (CRS),. The most important statement in it is

By far, the largest contributor to increasing income inequality (regardless of income inequality measure) was changes in income from capital gains and dividends. Capital gains and dividends were less equally distributed in 1991 than in 2006, though highly unequally distributed in both years. The large increase in the contribution of capital gains and dividends to the Gini coefficient, however, is due to the large increase in the share of after-tax income from capital gains and dividends, and to the increase in the correlation of this income source with after-tax income.

It is not rocket science that income and wealth inequality has exploded since the inception of Reaganomics (voodoo economics according to George HW Bush), or supply side economics, the actual term. What is absurd is that inasmuch as all the data is readily available to show the destructive nature of this policy, it is not questioned enough nor is it given the coverage it deserves.

First, a little bit of economics 101 that intelligent politicians choose to forget, because they are paid by special interest, is in order. If one wealthy person gets an extra million dollars from a tax break or tax cut, it is unlikely that he/she will spend it. It will likely be invested. That investment today would likely not be in anything that will create jobs in America because Americans’ credit, income, & wealth are tapped out. They not going to spend money they do not have.

If 100 poor people get $2000 and 800 middle class folks get $1000 in tax breaks or tax credits (that’s $1 million) they are likely to spend most of it. They will go to more movies, or eat out at a restaurant. They will buy house hold goods. Those entire activities mean your local community businesses and corporations for that matter will make more money and buy more inventories, hire more people to handle the increase demand, and pay more taxes. Remember, a dollar circulated creates several dollars of actual income and with that wealth. An invested saved dollar that does not invest locally (in America) is an extraction of wealth from the country for the benefit of the one.

The story gets more interesting. The American tax code has determined that income from invested money’s in stocks and similar financial instruments, should be taxed at a much lesser rate than income from someone who actually goes out and do work, the garbage man, the engineer, the lawyer, the doctor, the teacher, the policeperson, the fireperson, etc. Since most of the rich earn their income through capital gains, the rise in their stocks, it is a mathematical fact that the growth of their wealth will always be greater than the wage earner. That defines codified systemic wealth and income disparity building policies.

For those that may say that stock prices may fall. The tax code even has an answer for that. Stock losses can be written off from ones income. The tax code is biased towards the wealthy, the rich. The wealth and income disparity one sees is greatly attributed to this. There are other policy factors that include offshoring/outsourcing of American jobs, a patent system gone awry, and a private medical insurance system that saps middle class American dollars, placing it in the hands of the a few wealthy well connected people.



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Originally posted to ProgressiveLiberal on Sat Feb 23, 2013 at 09:29 AM PST.

Also republished by Income Inequality Kos.

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Comment Preferences

  •  Well, the other (or complementary) approach (6+ / 0-)

    would be to regulate earnings up front. For public companies, I would think going back to the 1980s, when executives made, on average, about 42 X that of their lowest paid (or average?) employee, would be a good place to return to. Off course, there should be a sliding scale based on various factors of size and performance. In private companies, I think the multiplier might have to be higher, because these owners do have more personal risk, I believe. Either that or perhaps a share of profits should be removed and put into accruals before the income ratios are applied.

    And then there's the minimum wage and benefits, both of which also do a lot to increase inequality.

    An infinite number of more and better Democratic legislators will make little substantive difference in the Class and Climate Wars.

    by Words In Action on Sat Feb 23, 2013 at 09:35:12 AM PST

    •  "Reserves" (1+ / 0-)
      Recommended by:
      NancyWH

      not "accruals".

      Brain fart.

      An infinite number of more and better Democratic legislators will make little substantive difference in the Class and Climate Wars.

      by Words In Action on Sat Feb 23, 2013 at 09:37:10 AM PST

      [ Parent ]

    •  Free Trade. (9+ / 0-)

      The lower paid employee earning 1/42 that of the 1970's executive now works in the 3rd world earning 1/10000th of what the exec earns.

      That's another part of the problem.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Feb 23, 2013 at 09:46:16 AM PST

      [ Parent ]

    •  WiA - there is no legitimate role for government (6+ / 0-)

      in setting executive compensation unless it's a company like GM, where the government is a shareholder, or a bank with TARP loans. In both those cases the federal government dictated executive compensation policies. When the government has no role as a lender or shareholder they should have no role in setting compensation. That's a decision for the corporation's owners, its shareholders, or the board of directors. The appropriate public policy response to high executive pay is higher marginal tax rates. There is no reason why corporate executives should have compensation limits and all high income earners physicians, lawyers, entertainers, athletes, and corporate executives should all be taxed in the same manner, at the same rates.

      "let's talk about that"

      by VClib on Sat Feb 23, 2013 at 10:41:56 AM PST

      [ Parent ]

      •  Says who.....you? (1+ / 0-)
        Recommended by:
        cynndara

        You don't have the answers to the US' downward spiral and neither do 'free market' policies/theories.

        We are being bled dry by the powerful.

        If we don't want to become a society of serfs, a world of serfs, something drastic needs to be done about tax policy, corporate forms, etc.

        And clearly, playing on the margins is not going to do anything.

        The banks have a stranglehold on the political process. Mike Whitney

        by dfarrah on Sat Feb 23, 2013 at 11:40:58 AM PST

        [ Parent ]

        •  It will happen eventually (1+ / 0-)
          Recommended by:
          Sparhawk

          At some point, overpaid US corporate executives can become overpaid Cayman Islands corporate executives.

          It's better to collect 35% than 0%.

          •  Utahrd - I am confused (0+ / 0-)

            What will happen eventually?

            "let's talk about that"

            by VClib on Sat Feb 23, 2013 at 01:38:19 PM PST

            [ Parent ]

            •  Like 1970's British rock star tax exiles (1+ / 0-)
              Recommended by:
              VClib

              No matter how moral it is to increase taxes on the rich, if taxes go too high, corporate executives can move assets and income overseas before I can finish typing this.

              I'm not saying taxes can't go higher.  But how much higher?

              •  Thanks Utahrd, that's what I thought (0+ / 0-)

                "let's talk about that"

                by VClib on Sat Feb 23, 2013 at 02:35:28 PM PST

                [ Parent ]

              •  Can. (0+ / 0-)

                Will only if you push them a LOT harder.  Because people get attached and have expectations about the place that they live.  Most particularly, rich people have certain expectations regarding infrastructure that, despite our overall deterioration thereof, can be met here and in a few choice places in the world -- all of which have higher taxes than we do.  Moving to the Caymans means giving up a beloved family home and getting used to an entirely different climate, not to mention people who don't even Look Like Us.  It's much more likely to be threatened than done.

                And if they move only the MONEY -- which of course they CAN do, with a keystroke or two -- well, the government has ways to cut that off entirely if they choose to use them.

        •  dfarrah - well current US law (2+ / 0-)
          Recommended by:
          johnny wurster, Sparhawk

          The notion that any government could dictate to the owners of a private enterprise what the maximum amount they could pay is preposterous and not possible under current law. There is no country in the world where the residents have economic freedoms and a government imposes such a restriction. It would not be in the interest of the federal government to propose such a restriction because executive compensation is always taxed at the highest marginal income tax rate. It's much easier, and more straight forward, to just raise marginal rates and increase tax revenues. Reducing executive compensation would just lower the total taxes paid.

          "let's talk about that"

          by VClib on Sat Feb 23, 2013 at 01:37:28 PM PST

          [ Parent ]

          •  Plus, how in the world could it (3+ / 0-)
            Recommended by:
            Utahrd, VClib, Sparhawk

            actually be accomplished? Companies already pay their execs more in options and bonuses than they do in salary. So would we have laws that say that certain employees could not receive bonuses, and that no matter how much the Board thinks they are worth, that they may not receive very many stock incentives? The whole thing is ludicrous, would not generate any additional tax revenues as you point out, and to me seems to be more rooted in jealousy and envy than in any rational policy theme. Boo.

            •  And how many companies aren't multinational? (0+ / 0-)

              Here's what would happen:

               - Executive salary from Megacorp USA = $100,000

               - Executive salary from Megacorp Cayman Islands = $10,000,0000

              •  Some people seem to not be aware (1+ / 0-)
                Recommended by:
                cynndara

                of all of the global changes over the past 40 years. These ideas are very 1917.

                •  So is the idea (1+ / 0-)
                  Recommended by:
                  NoMoreLies

                  that a government CANNOT control its citizens or residents.  There's such a thing as "freezing assets", and we do it for entire nations.  It's a piece of cake to do it for individuals.

                  Good god, our President has asserted the god-given right to kill anyone in the world, anywhere in the world, by remote control without oversight of judge or jury.  We can certainly tax a few overpaid con artists if we so choose.

                •  Well, it's nice that (0+ / 0-)

                  you think serfdom is acceptable for us.

                  The banks have a stranglehold on the political process. Mike Whitney

                  by dfarrah on Sat Feb 23, 2013 at 05:00:00 PM PST

                  [ Parent ]

              •  What if the US (1+ / 0-)
                Recommended by:
                NoMoreLies

                simply pulled the company charter-or whatever it is that allows the company to operate in the US?

                Let's speculate on what could happen.  Some other company might step in to fill the void and start producing whatever it was that your Cayman Megacorp was producing.  The US has had companies that operate that act in a responsible manner; these companies have existed in the past and do exist even now.  

                Further, in the past, workers shared in the productivity increases.  Are you aware of that fact?  That once upon a time, labor managed to keep improving its lot and executives did not steal all of labor's productivity.  Why do you think it is so impossible now for labor to share in the fruits of its efforts?

                That's the problem with people like you, VClib and doc2-you simply refuse to see other possibilities.

                The banks have a stranglehold on the political process. Mike Whitney

                by dfarrah on Sat Feb 23, 2013 at 04:48:12 PM PST

                [ Parent ]

            •  Oh how, oh how (1+ / 0-)
              Recommended by:
              NoMoreLies

              could anything be any different than it is right this very minute?  

              I'm glad you weren't around discouraging invention and creativity when Edison invented the light bulb, the Wrights worked on flying machines, and Turing worked on computers.  

              You post as if the corporate form is the only business operating form that can exist, and we're just stuck with them.  

              Well, we aren't stuck with them.  The corporate form has turned into a dysfunctional creature where top management acts only to further top managment's personal interests inside of a company that it operates until it can suck out every last dollar and leave a shell behind.  These companies cause and create many dysfunctions within the economic system while they are answerable to no one for the problems they cause. They need to be broken up.

              And please quit with the 'envy' stuff.  Top executives and shareholders have been stealing the value of the laborers since the '70's.  Workers have every right to be angry over not sharing in the very wealth they have created.  

              The banks have a stranglehold on the political process. Mike Whitney

              by dfarrah on Sat Feb 23, 2013 at 04:58:44 PM PST

              [ Parent ]

  •  Knowledge is power! (8+ / 0-)

    It is amazing how uninformed most people are on the basic economic facts that affect their lives, and how quickly they throw up their hands in exasperation and think nothing can be done about it.  Anyone with a minimal knowledge of history and ability to read some charts can see the relationship between certain policies and the expansion or contraction of the middle class and its relative share of the nation's wealth.

    But the minute you start discussing the data, much like with climate change, you see how the conversation has been muddied with lies and false "facts" propagated by the 1%, that don't even allow for common ground to begin the discussion.  What should be a straightforward discussion of specific policies turns into a quasi-theological "how many angels can dance on the head of a pin" exercise in futility and irrelevance.

    Only by persistently getting the truth out there and refuting all the misinformation will the public be informed enough to demand the change necessary to return a semblance of fairness to the lives of most Americans.

    "Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." ~ Mark Twain

    by wonkydonkey on Sat Feb 23, 2013 at 09:37:24 AM PST

    •  There Were People Speaking Up About This At the (5+ / 0-)

      time these policies were being passed. There was no reason any of this had to happen, in terms of what was known about economics and warnings being put out.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Feb 23, 2013 at 09:47:34 AM PST

      [ Parent ]

      •  I completely agree with you (4+ / 0-)

        It was sold to the people with The Gipper's ingratiating smile as an alternative to the alleged "malaise" that was nothing more than an attempt at honestly discussing the natino's problems like adults.

        So here we are 40 years later after the "Morning in America" still with no real energy or climate change policy, an unstable economy that makes "stagflation" seem like a stroll in the park, and a middle class completely looted of its jobs, homes and future economic security in the name of "free markets."

        We got government "off our back" to make room for the vulture financial capitalists to climb on-board and ream us raw.

        "Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." ~ Mark Twain

        by wonkydonkey on Sat Feb 23, 2013 at 10:14:36 AM PST

        [ Parent ]

  •  So all we have to do is tax the rich so they pay (3+ / 0-)
    Recommended by:
    NancyWH, wonkydonkey, isabelle hayes

    their fair share.  The people I know understand this.  The congress being controlled by the 1% can not let their bank bankrolled donors down.  We need to vote them out of office, no small task, but the last election shows what can be done and I bet the rich boys and girls  will strike back with more $ than ever to maintain their edge.  Yes, we need to cut through the constant fog of misinformation and see that people understand where their self interests are.  This is a constant battle, but I bet we will win, like I said, the people I know understand that the rich must start paying their way and these people are average Americans not gifted in economic theory of the wealth of nations.

  •  I hope "someone" (2+ / 0-)
    Recommended by:
    wonkydonkey, NoMoreLies

    pays attention and acts on this.  Otherwise, all the income flows to the 1%, the 99% has no disposible income to spend, and the whole economy freezes up.  Yup, that'll work....

    "The light which puts out our sight is darkness to us." Thoreau

    by NancyWH on Sat Feb 23, 2013 at 10:06:51 AM PST

  •  Wrong (4+ / 0-)

    Yes,tax the rich more; tax capital gains the same as income from labor and put payroll taxes on all income.  Cut deductions for second homes and mansions.  But this is dealing with the numerator of the equation.

    Look to the denominator.  We need to raise the incomes of the millions of ordinary working Americans.  There is no single magic bullet to do this.  Some ways are described above, and it'll take many methods and many years to get incomes up...we've got to start now.

    •  I repeat: not income but WEALTH (4+ / 0-)

      The problem is less that the wealthy are increasing their wealth annually but that they have accumulated 50 or 100 years of unjustified and unjustifiable excess income.

      As in countries which have implemented land reform, as in the UK where wealth was - but is no more - grotesquely concentrated, the need in the U.S. now is for redistribution of wealth more than of income.

      Too late for the simple life, too early for android love slaves - Savio

      by Clem Yeobright on Sat Feb 23, 2013 at 10:25:41 AM PST

      [ Parent ]

      •  Clem - most legal experts believe it would take (5+ / 0-)

        a constitutional amendment, like the 16th for the income tax, for the federal government to have a wealth tax. Several European countries have them, more had them but dropped them. The results have been mixed. Those countries who dropped them did so because of capital flight, lower GDP growth and surprisingly lower overall tax revenues.

        "let's talk about that"

        by VClib on Sat Feb 23, 2013 at 10:45:21 AM PST

        [ Parent ]

      •  Some countries have a"wealth tax"... (4+ / 0-)

        ...to combat large pools of money sitting unproductively in individual hands by making it financially competitive to invest that wealth where it will have a greater return than the tax on it.

        With our current near zero interest rates and no tax at all on accumulated wealth, there is simply no incentive to take any risk and put those trillions of dollars into productive use, where their multiplier effect would increase the size of the economic pie for everyone.

        With an annual 2% wealth tax for individuals and corporations, there would be incentive to invest in activities that would bring a greater rate of return, especially if income earned through speculation and financial gamesmanship was not exempt.

        "Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." ~ Mark Twain

        by wonkydonkey on Sat Feb 23, 2013 at 10:46:44 AM PST

        [ Parent ]

        •  Re (1+ / 0-)
          Recommended by:
          wonkydonkey
          With our current near zero interest rates and no tax at all on accumulated wealth, there is simply no incentive to take any risk and put those trillions of dollars into productive use, where their multiplier effect would increase the size of the economic pie for everyone.
          There would be very little of an incentive to do that, it would probably just blow up in our faces in some unexpected way.

          For example, people become livid at the purportedly reckless risks taken during the dot.com era. Do you want more of that kind of risk taking? That's what you're encouraging. There's no guarantee that the 'incentive' is to create productive business.

          Remember, money out of circulation just causes deflation anyway, then it's as if the money doesn't exist.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Sat Feb 23, 2013 at 04:24:09 PM PST

          [ Parent ]

          •  The so-called dot.com era... (0+ / 0-)

            ...just so happened to be the longest post-WWII economic expansion, creating over 20 million jobs, and was the one period since the late 1970's when the middle class's share of the national income actually grew.  In the last election even the Republicans referred to it approvingly as the "Ciinton Boom years."

            Yes, it did spectacularly crash, but that was due to the lack of realistic underlying value to the investments made in ventures like Pets.com.  The problem wasn't having lots of capital being put to use in the economy.  Investing more wisely, in infrastructure, new energy projects, research and development, that will actually have a reasonable chance of offering recouping their capital and yielding some profit might turn out differently.

            "Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." ~ Mark Twain

            by wonkydonkey on Sat Feb 23, 2013 at 11:53:00 PM PST

            [ Parent ]

          •  What about using (0+ / 0-)

            it for public works?

            You know, the things like the highway system, infrastructure maintenance, etc.

            It's just amazing to me that what was possible in the past has now become impossible.  

            I don't get that--maybe you can explain why we could build great schools, highway systems, etc., etc., in the past, but, somehow, we just became completely devoid of any ability to do such things again.  

            And posters like you want to make the rest of us believe that no change or improvement is possible. You just keep shoving it down our throats, 'this is your lot, STFU and accept it!'

            The banks have a stranglehold on the political process. Mike Whitney

            by dfarrah on Sun Feb 24, 2013 at 08:08:16 AM PST

            [ Parent ]

      •  Income and wealth. (3+ / 0-)
        Recommended by:
        isabelle hayes, cynndara, NoMoreLies

        It doesn't have to be one or the other.

        There is no justifiable reason for taxing capital less than labor.  Or not taxing transactions in capital, just like other transactions are taxed.

        The banks have a stranglehold on the political process. Mike Whitney

        by dfarrah on Sat Feb 23, 2013 at 11:44:15 AM PST

        [ Parent ]

    •  Simple enough really. (0+ / 0-)

      Raise the minimum wage.  Technically,  you could raise it to anything you wanted.  Add in a few controls on exporting entire businesses offshore, like heavy repatriation taxes and taxes on foreign profits, or applying American labor laws to workers for any goods imported to America.  (Yes, somebody will take it to court in the WTO, but frankly, the US OWNS the WTO, and can piss on it.  It's Will is only enforceable if we make it so).

      Mainly, though, most minimum-wage jobs are things that can't be easily exported, like flipping burgers and raising your kids.  So every dollar you raise the minimum wage goes directly OUT of corporate profits (CEO salaries, investor dividends) and into the pockets of workers, by way of Social Security.  And there's a snowball effect as other low-wage jobs also have to increase wages so that they are still better than minimum.

  •  Not income but WEALTH (3+ / 0-)
    Recommended by:
    sunny skies, radmul, isabelle hayes

    Those millions in income that weren't taxed last year and won't be taxed this April 15 are GONE from the income tax revenue base - they are wealth now, and the inequality in wealth is more insidious than the inequality of income.

    We need a new confiscatory gift and inheritance tax to return that money to the tax base.

    Too late for the simple life, too early for android love slaves - Savio

    by Clem Yeobright on Sat Feb 23, 2013 at 10:19:29 AM PST

  •  It's all about "capital gains", (1+ / 0-)
    Recommended by:
    a2nite

    and we've got it bass aakwards . . .

    Fake Left, Drive Right . . . not my idea of a Democrat . . .

    by Deward Hastings on Sat Feb 23, 2013 at 10:47:06 AM PST

  •  Tax the rich more (1+ / 0-)
    Recommended by:
    a2nite

    because that's where all the money is now.

    Just stating the obvious.....

    The banks have a stranglehold on the political process. Mike Whitney

    by dfarrah on Sat Feb 23, 2013 at 11:34:42 AM PST

  •  What will pass (0+ / 0-)

    the People, once you break through the logjam in a corrupt Congress, is fixing the income tax preference for capital gains, dividends, and "carried interest".  Taxing unearned income at the same rate as earned income will start to fix the problem immediately.  Adding a transaction tax to curb financial trading  will assist.  Raising the minimum wage will create an immediate wealth transfer from rich to poor without it having to pass through the government's hands as taxation, and requires no means of enforcement that don't already exist.  

    Oh, and while we're at it, we need to remove ALL the exceptions to the minimum wage.  None of them are justifiable in this day and age and all merely increase the profits of the already-wealthy.  Applebee's and Red Lobster need to pay their own employees full wages, not have it made up from "voluntary" and unreliable tips.  The price of the meal won't change, but it will show up in black and white on the menu.  This eliminates the option for miserly jerks to cheat the workers while forcing the owners to acknowledge the true value of their work up front.

  •  tax rates (0+ / 0-)

    Let's raise the marginal tax rate to the level it was before Reagan, say 70% for incomes over $1,000,000 per year. This would encourage a more equitable distribution of income between CEOs and workers.

    There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.

    by cigale on Sat Feb 23, 2013 at 05:05:56 PM PST

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