Category Archives: Taxes

Teapublican Lie #9.

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“Cutting taxes on the wealthy creates jobs.”

This lie could only have been generated by wealthy contributors to political campaigns. But let’s examine it anyway.

Both political parties acknowledge that the vast majority of jobs are created by small businesses and, most especially, by new businesses. Yet, for investors, these businesses often entail a great deal of risk – something the wealthy are generally adverse to. So the wealthiest Americans tend to invest their money, instead, in large corporations which offer greater security.

Moreover, most of the incomes for the wealthy are the result of capital gains (generated by selling stocks for more money than they paid for them). This income is now taxed at the unbelievably low rate of 15 percent. That’s lower than the income tax rate for most of the middle class! It begs the questions, “How much farther can we cut taxes for the wealthy?” and, “How will that create jobs?”

Teapublican Lie #8.

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“Most Americans don’t pay taxes.”

Lately, Teapublicans have been saying that 51% of Americans don’t pay any taxes at all. They say that those Americans should be forced to “have some skin in the game.” They call them the “Freeloader Class.” And they blame them for the nation’s economic woes.

While it is true that 51 percent of Americans did not pay federal income taxes for tax year 2009, it is not true that they did not pay taxes. It’s not even true (as Teapublicans suggest) that they are lazy, welfare recipients content to sponge off society. In fact, many of those who paid no federal income taxes in 2009 were among the wealthy and the upper middle class!

From an article by PolitiFact.com, Bob Williams, a tax policy specialist at the nonpartisan Urban Institute-Brookings Institution Tax Policy Center, said there are lots of popular tax breaks, which are sometimes called tax expenditures. “We estimate they total more than a trillion dollars a year in reduced taxes and, in fact, the bulk of those go to the top end of the income distribution,” said Williams.

As for the rest, they are mostly the elderly living on Social Security and those working at minimum wage jobs that don’t make enough to pay federal income taxes. (According to the 2010 Census, one in six Americans now lives below the poverty line.) Yet these people still pay taxes. Many pay payroll taxes for Social Security and Medicare. All pay sales taxes. Many pay state income taxes and property taxes (even if they rent). And most pay gasoline taxes, beer and liquor taxes, etc. So they do, indeed, “have some skin in the game.”

The real freeloaders are those who are living off the hard work of others – those who have inherited fortunes from their ancestors, Wall Street bankers who are paid enormous bonuses to gamble with others’ money, and those who, by a stroke of luck, have found themselves in a position of power – and taking advantage of a host of tax shelters created by politicians to protect their benefactors.

Teapublican Lie #7.

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“Raising taxes on millionaires will hurt small business.”

After all, most small businesses are owned by millionaires, right? Rrrrright!

This whopper seems to stem from the Teapublican definition of small business. You see, they define small business by ownership rather than brands, offices, employees or income. In other words, since Cargill is a closely held, privately-owned company, Teapublicans define it as a “small” business. Similarly, they define Koch Industries as a “small” business. In case you don’t already know, these are the two largest privately-held corporations in the world! Both measure their profits by the billions. Yet Teapublicans lump them into the same category as the owners of the small clothing store on Main Street or the corner café!

In the interest of full disclosure, I’ve been a small business owner since 1987. Moreover, I’ve served hundreds of small businesses as clients. As it happens, I have also completed projects for Cargill and Koch Industries. I can tell you beyond the shadow of a doubt that those companies have absolutely nothing in common with small businesses. And I can tell you that 99 percent of the other clients are not owned by millionaires, let alone billionaires.

So, President Obama and Congress, go ahead, raise taxes on millionaires and billionaires. Most small business owners will thank you for it.

Teapublican Lie #2.

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“US corporate taxes are the highest in the world.”

You’ve heard it over and over during the past 2-1/2 years. Not only from Teapublicans. But from supposedly authoritative sources such as the US Chamber of Commerce. So let’s examine this myth more closely.

While it is true that the corporate income tax rate for the US is 34.2% (which includes a state tax rate of 6%), that is not significantly higher than the corporate tax rate for many other developed nations, and it’s less than Japan’s. Brazil has a rate of 32.5%; France and Germany have tax rates of more than 31%; Australia 30.8%; Canada 28% and the UK has a rate of 25.4%.

More to the point, this is not the rate that most large US corporations actually pay. In fact, the effective tax rate for large US corporations (after deductions and subsidies) is less than 18%!

For example, 12 major corporations made $171 billion in profits from 2008 to 2010, yet had a negative income tax rate of 1.5 percent! And the most egregious example is GE. Last year the global conglomerate generated $10.3 billion in pretax income, but ended up owing nothing in US federal income taxes. In fact, it recorded a tax benefit of $1.1 billion!

Moreover, employer payroll taxes in the US are just 7.7% – less than Korea, India, Mexico, Poland and most of the developed world. And since the 1940s, the corporate share of all federal income taxes has dropped dramatically. In 1940, corporations paid 43 percent of all the federal income taxes collected in the US. But, in 2010, that percentage was only 8.9 percent! Indeed, the US raises less corporate tax revenue than most developed countries.

So though the US has the world’s 2nd highest corporate income tax rate, the rate actually paid by US corporations is much lower. In fact, our effective tax rate is less than that of even Mexico, India, Vietnam, Korea, China and Russia. And that’s the truth!

Teapublican Lie #1.

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Today begins a series intended to de-bunk the many Teapublican lies that will be repeated over the coming election season. Primary amongst them is this pants-on-fire whopper:  “Cutting taxes creates jobs.”

This whopper has been repeated so often by so many that voters have come to believe it’s true. Yet when you examine the evidence, you find that it defies belief.  For example, if cutting taxes created jobs, then why was there negative job creation during the Bush administration despite the vaunted Bush tax cuts? (And that was even before the economy was driven off a cliff during the last few months of 2008.)

If cutting taxes created jobs, why did the economy flourish under the Clinton administration despite higher taxes?

And if cutting taxes creates jobs, why is our unemployment now so high despite the fact that US citizens are paying the lowest share of their income for taxes – all taxes – since 1958?

Truth is, the only thing cutting taxes on corporations and the rich does for our economy is to increase wealth for those who need it least.

What If FDR, Truman Or Eisenhower Faced This Congress?

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Despite the fact that our economy was in freefall when President Obama entered office, people are fond of blaming him for our current misery.  Instead of supporting Obama’s attempts to right our sinking ship, Teapublicans have chosen to fight him every step of the way. 

No matter that the record number of Senate filibusters paralyzed our government.  No matter that the cries of “Socialist” have further divided our nation.  Teapublicans seem only to care about ensuring that Obama is a one-term president.

And just when it appeared that the economy was growing again, Teapublicans chose to turn the debt ceiling into a “crisis” resulting in a downgrade of US Treasury Securities and further despair.

All this got me wondering: What if today’s Teapublicans had been around following the Great Depression? Would they have been willing to fund Social Security? Would they have opened the US Treasury to build our infrastructure? Would our nation’s most iconic structures have ever been funded? Would there be a Hoover Dam? Would the Tennessee Valley Authority exist?

What if Teapublicans had been around following WWII? Would they have approved the post WWII-era top tax rate of 91 perecent? Would they have approved of the billions spent to expand our Universities? Would they have supported the GI Bill? Would they have approved of Eisenhower’s interstate highway system?

Looking at more recent history, would they have approved of raising the debt ceiling as Reagan was tripling the national debt? Would they have approved of his tax increases?

I think you know the answers. 

Now ask yourself this: What would have become of the US if today’s Teapublicans had been around during the founding of our nation? Would they even have been willing to spend their money to fund the Revolution?

World’s Greatest Nation? Really?

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Although many Americans are fond of calling the US the greatest nation on Earth, that hasn’t been true for many years. Certainly we have the world’s most powerful military, but that’s no criteria for greatness. Neither is the fact that we are still the world’s richest nation, despite the downgrade in our credit rating by Standard & Poors.

But greatest?

Does a great nation tolerate an ever-widening gap between billionaires and the working poor? Does a great nation leave tens of millions of its citizens without access to health care? Does a great nation allow millions of its children to be homeless? Does a great nation allow its education system to become third-rate? Does a great nation allow its infrastructure to decay and collapse merely to give another tax cut to large corporations and the wealthy?

Does a great nation use its financial and military power to prop up brutal dictatorships around the world? Does a great nation bankrupt the small farmers of neighboring countries by subsidizing corporate farms then demonize those farmers when they cross the border looking for jobs? Does a great nation demean those who labor to build things with their hands, to put out fires, or to teach its youth? Does a great nation begrudge a comfortable retirement to its elderly? Does a great nation allow large corporations and the wealthy to elect its politicians?

How can a nation be called great when it rewards greed and corruption? When its judicial system rules that corporations have rights superior to those of its citizens? When its financial institutions are allowed to grow so large they are immune to failure from their own mistakes? When its corporate lawyers are tasked with seeking out financial and legal loopholes that allow their clients to game the system? When its politicians are more concerned with scoring political points than the welfare of its voters? When its citizens are more interested in the antics of its celebrities than those of its government? When it allows its previous leader to run up a huge debt, and then blames the leader who inherited it?

We didn’t need Standard & Poors to tell us that our nation is on the verge of bankruptcy. When it comes to fairness, ideas and ethics, the US has been on the verge of bankruptcy for many years.

If Teapublicans Have Such Great Ideas, Why Do They Lie So Much?

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Why do they generate and circulate a seemingly endless number of blatantly false and misleading chain emails that demean our President?
Why do they try to shout down everyone with whom they disagree?
Why do they parrot talking points instead of rationally debating issues?
Why do they protect the obscenely wealthy and attack the poor?
Why do they complain about immigration then hire illegal immigrants to do their landscaping or repair their roofs?
Why do they preach small government then pass laws giving government power to prevent gay marriages and lawful abortions?
Why do they fight to ban abortions while, at the same time, fighting against sex education and the contraceptive practices that would help avoid them?
Why do they revere police and firefighters for responding to 9/11 then try to take away their right to collective bargaining and health care?
Why do they praise those in the military and ignore veterans in need of help?
Why do they revere President Bush for adding $7 trillion to our national debt and crashing our economy then attack President Obama for adding $1.4 trillion in trying to fix it?
Why do they complain about the excesses of Wall Street bankers while trying to block laws that will regulate them?
Why do they slash budgets for education while complaining that the US is falling behind other nations?
Why do they complain about unemployment as they cut federal budgets to force even more layoffs?
Why do they complain about government health care while telling the government to keep its hands off their Medicare?
Why do they complain about passing health care reform after a 10-month debate then pass a bill to kill entitlements with virtually no debate.
Why do they talk about helping small businesses then undercut them with policies that only benefit large corporations?
Why do they refuse to eliminate tax loopholes for corporations that claim an offshore P.O. Box as their corporate headquarters?
Why do they subsidize big oil companies and refuse to subsidize renewable alternatives?
Why do they call themselves conservatives when they’re against conservation of our environment?
Why do they demand compromise then refuse to consider alternate ideas?

A Primer On The National Debt From Reagan’s Economic Advisers.

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Teapublicans have elevated Ronald Reagan to God-like status. They have named a Washington D.C. airport after him. They worship at his presidential library. They even want to add his image to Mount Rushmore National Monument.

So why don’t they follow his economic example?

This has never been more puzzling than during the current debt ceiling debate. Under Reagan, Congress was forced to raise the debt ceiling 17 times. But under Obama, Teapublicans refuse to raise the debt limit even once. To save Social Security, Reagan raised the income cap on FICA deductions. But under Obama, Teapublicans want to destroy Social Security, Medicaid and Medicare. Reagan raised capital gains taxes to 28 percent. But under Obama, Teapublicans consider the current rate of 15 percent too high. Under Reagan, the highest income tax rate was 50 percent or more. But under Obama, the highest rate is 35 percent. And under Reagan, tax revenues averaged 18.2 percent of GDP. But under Obama, tax revenues are just 14.9 percent of GDP as reported by the conservative Heritage Foundation.

Indeed, former Reagan Policy Adviser, Bruce Bartlett, recently stated on MSNBC’s Hardball with Chris Matthews, “The dirty secret is that Obama’s a moderate conservative.“ Further, he noted that $7 trillion of the national debt is due to George W. Bush’s policies and tax cuts. $2 trillion is due to the Great Recession that President Obama inherited. And only $1.4 trillion of the debt is due to Obama’s policies, including the measures taken to keep our economy from sliding into the abyss.

And speaking about the Teapublican refusal to increase revenues as part of their plan to cut the deficit, the father of “Reaganomics” and former Reagan Budget Director, David Stockman, said, “When I look at the Republican plan, I have to say I think it’s half right on some things, and it’s half-baked on a lot of others… you’re telling the people of America that we can solve this issue – which is very dangerous, the deficit that we’re facing and the debt we’re building up – by not raising taxes on anyone. That, in my judgment, is a big lie.”

Bartlett was even stronger in response to a question about the Teapublican-dominated Congress. “A good chunk of the Republican caucus is either stupid, crazy, ignorant, or craven cowards who are desperately afraid of the Tea Party people. And rightly so,” he said.

An Economic Lesson For Teapublican Nincompoops

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Upon discussing the debt crisis with some conservative friends, I realized that few of them know the difference between the national debt, the budget and the deficit. Like Michelle Bachmann and other Teapublicans, they wrongly believe that refusing to increase the debt ceiling will result in cutting spending and reducing taxes.

Faced with such stupidity, it’s difficult to know where to begin. But I’ll start with some definitions:

Budget – The annual spending plan authorized by Congress based on anticipated revenue and anticipated spending needs. (For Teapublicans, a budget is the money that Congress authorizes the President to spend.)

Deficit – The negative difference between actual spending and actual revenue.

Surplus – Thanks to Bush, we haven’t seen one of these since the Clinton era. But just for the sake of conversation, a surplus is the positive difference between actual revenue and actual spending.

National Debt – The accumulation of deficits from our nation’s history. It is money that has already been spent.

Debt Ceiling – This is an arbitrary number established by Congress based on paranoia. Since the 1970s, the debt ceiling has been raised more than 70 times; 17 times by Reagan and 7 times by George W. Bush.

Now here’s where it gets really difficult. Failing to raise the debt ceiling will cut spending. But only because there will not be enough money to pay our bills. It forces the Secretary of Treasury to decide which bills to pay; money that Congress already agreed to spend. Failing to raise the debt ceiling will effectively cause the US to default on its bills. (For Teapublicans like Bachmann, Cantor and Palin, it’s as if you went on a spending spree at Walmart and then decided not to pay your credit card company.)

In effect, failure to raise the debt ceiling turns the US into a bunch of deadbeats. Other nations and individuals will not want to invest in our country. Interest rates will rise dramatically. And world stock markets will crash. Indeed, most experts say default will make the Great Recession of 2008 seem like…well…like a tea party.