Is A Flat Tax Fair?

Conservatives are always pushing for a “flat tax.” It sounds so simple: One easy rate, so we all pay the same, easy to calculate… Get rid of deductions and lower the tax rates. So simple, but it turns out it is a simple trick, a scam to enrich the 1%, like so much else that conservatives are selling. Don’t fall for it — it means taxes will go up for the 99% of us who aren’t really, really rich. See if you can guess what happens if you are in the top 1%. Or, just scroll down and see the chart.
What We Have Now
We have what’s called a “progressive’ tax system. This means as you make more you pay more taxes. The first “bracket” of $XX dollars you make is taxed at a low rate. The next $XX dollars are taxed at a higher rate, and so on. Many people think if you “go into a higher bracket” you pay more on all the money you make, but that is not how it works. If a bracket starts at $1 million, and you make $1 million plus $1 you only pay the higher rate on the $1 that is in that bracket. Yes, that means that a 5% increase on taxes over $1 million would mean that person pays a nickel. Yes, all that screaming by Republicans is over a nickel. Screaming is what they do best.
The reason we have a progressive tax system is because we have a democracy. People who make more do so because of the investment in governent that We, the People make. We, the People pool our money collectively and use it to build the infrastructure that lets people make so much money. That’s the roads, schools, police, courts, etc. — they whole system — that provides the foundation for our businesses to go out an compete in the world. And when our businesses do well, we ask them to pay back a dividend to the rest of us for enabling that to happen.
No Deductions
Conservatives always call for getting rid of deductions, because they are complicated. Get rid of deductions, they say, simplify the system, and you can lower tax rates. Here is the game they are playing. Suppose you have a small businesses, a grocery store. Suppose you buy $100,000 inventory and sell it for $130,000. If you get rid of deductions that means the small-grocery-owner pays taxes on $130,000 because that is the income of the store.
If you say the business owner should be allowed to “deduct” the amount paid for inventory we’re back to deciding which deductions to allow. So we are right back where we started, except now the conservatives have lowered tax rates (at the top) and their big corporate sponsors will be gaming the system to give themselves more and more and more deductions just like they already do.
What Happens With A Flat Tax?
Conservatives object to the idea of the rich paying back more. They say that taxes are theft — government confiscating money that people have earned, ignoring that our democracy enabled them to earn it in the first place. They call taxation “redistribution” of wealth. Of course, as AlterNet’s Joshua Holland points out, redistribution is the core job of government. He points out that when government collects taxes and builds a sidewalk that everyone can walk on — or homeless people can sleep on — that is redistribution. Courts, schools, police, ports, airports — all of it is redistribution of wealth.
So conservatives call for a “flat tax.” Most notably Republican Presidential candidates Rick Perry and Herman are calling for various forms of this. Cain This means everyone pays the same tax rate as everyone else, regardless of income. Because this is about scrapping democracy’s progressive tax system this necessarily means that the rich will pay a lot less. Guess who pays more to make up for that? A good example of this effect is the 9-9-9 tax plan.
The 9-9-9 Plan
The Tax Policy Center takes a look at Repubican candidate Herman Cain’s “9-9-9″ tax plan, in a post titled, Herman Cain’s 9-9-9 Tax Plan

Herman Cain’s plan would eliminate the current individual income tax, corporate income tax, payroll tax, and estate and gift tax and substitute three taxes imposed at a 9 percent rate: 1) a 9 percent “national sales tax” 2) a 9 percent “business flat tax”, and 3) a 9 percent “individual flat tax.”

They have a table here that shows how people’s taxes would change under the 9-9-9 plan. Jared Bernstein made a chart illustrating these numbers in his post 9-9-9 in One (Really Long) Graph.

So here you have it: the change in tax liabilities, compared to current tax policy, under 9-9-9, for different income groups, in one incredibly unsettling graph.

In the following chart the blue lines that are above zero illustrate how much more most of us will pay. The red lines below zero show how much less the rich and really rich will pay. The blue lines — representing taxes on most of us — go up. The red lines — representing taxes on the top few — go … well, see for yourself.
Average-tax-change-from-9-9-9-plan-10-18-2011-OPT.jpg
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Citibank Knew Where Toxic Assets Were Because They Put Them There

The financial system collapsed because it was full of “toxic assets.” That collapse took millions of jobs, homes, businesses, retirements down with it. Years later we are nowhere near recovering.
But even when markets are collapsing there is a lot of money that can be made. You can place bets against assets that are overvalued, and when their price drops those bets pay off. If they drop a lot, the bets pay off really big. (Oh – and when they do pay off the billionaires get special, lower tax rates.)
And if you know where the toxic assets are, in advance, you can make a ton of money. And you can know that if you put them there, on purpose, in order for them to collapse, so you can make a killing when they do collapse.
Here is a story in ProPublica about an SEC settlement with CitiBank for creating toxic assets on purpose in order to make bets that they would fail, Did Citi Get a Sweet Deal? Bank Claims SEC Settlement on One CDO Clears It on All Others,

In the run-up to the global financial collapse, Citigroup’s bankers worked feverishly to create complex securities. In just one year, 2007, Citi marketed more than $20 billion worth of deals backed by home mortgages to investors around the world, most of which failed spectacularly. Subsequent lawsuits and investigations turned up evidence that the bank knew that some of the products were low quality and, in some instances, had even bet they would fail.

In this case Citibank made a lot of money from these bets because they knew where the toxic assets were, because they put them there, on purpose, in order to bet against them. CitiBank created these CDO toxic assets in a way that was designed to fail, and sold them to customers as solid investments, and then made bets that these assets were worthless. When the designed-to-fail assets failed, CitiBank made money, the customers were wiped out.
As I pointed out in the previous post, the corrupt SEC is “settling” a case with corrupt Citibank, and the corrupt Justice Department isn’t doing anything about it. Everyone knows that the people in the SEC who are doing the settling will get lucrative jobs on Wall Street in a year or two. That is the quid pro quo. Everyone knows this.
This sort of thing was widespread – and probably still is. Wall Street firms created toxic assets on purpose in order to make money betting against them as they imploded on the customers. Goldman Sachs, for example, also did this. In one case they worked with – and were paid millions by – a big hedge fund to create toxic CDOs that were sold to customers, while the hedge fund made bets that the CDOs would fail. When the CDOs failed as planned the hedge fund made billions, the customers lost. The SEC settled with Goldman – no one was prosecuted.
And , of course, after the collapse these very firms were bailed out by taxpayers because they were so big. And now, with all the money that taxpayers have had to spent on the effects of the disaster that these firms created the Wall Street-backed Tea Partiers are demanding that taxpayers take “cuts” in pensions, health care, education, infrastructure.
With this in mind, watch this video of Wall Street types on a balcony mocking the #OccupyWallStreet people as they march past.

NYTimes On Climate

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Here is how the corporate/conservative movement succeeds in keeping the public misinformed: No reporter will get fired for promoting big corporate interests, no reporter will have career advancement from taking them on.
OK I just got around to reading this. A whole “how come?” story on how the US is an outlier on climate change, why isn’t it in the national discussion anymore, and not mentioning Koch Brothers or oil company funding of the conservative movement even once. Sheesh. Whatever Happened to Global Warming? – NYTimes.com

Scrap The Cap

Just Scrap the Cap
There is really only one way to fix Social Security and that is to scrap the cap: raise the limit on incomes that pay into Social Security. Income gains only go to the top few now, so the calculations that established the “cap” are wrong. So get rid of the cap and make the rich pay into the system.
Cutting benefits only shifts costs onto seniors and their kids who will have to support them. This video shows what that will be like for the kids.

61 House Republicans Co-Sponsored China Currency Bill, Now Side With China

Last week, in These Are The House Republicans Blocking The Crackdown On China Currency Manipulation. Call Them. I named 61 House Republicans who had co-sponsored the China currency bill, but who now side with China by refusing to help force a vote on the bill. The bill has passed the Senate and Republican leaders are refusing to allow a vote in the House. This bill means jobs. This bill means confronting China over their trade cheating. Call these members of Congress and demand that they side with American workers instead of China.
From last week’s post,

We buy a lot from China, and they don’t buy much from us. Some call that “trade.” The result is that our jobs, factories, companies, industries and wealth are moving to China. One very big thing we can do about this right now is to confront China over their currency manipulation and the Senate passed a bill to do just that. The House leadership, under the control of lobbyists siding with China, refuses to allow the bill to come up for a vote. You can contact co-sponsors of the bill and ask them to sign a “discharge petition” that will make that vote happen.

Why Is This Important?
From Trade Deals Pass Congress — China Currency Bill More Important Than Ever,

Congress just passed three more NAFTA-like trade deals, so our country’s trade deficit is going to get even worse. And pressure on working people to accept pay and benefit cuts and longer and harder working hours is going to get even worse. And the rewards to the top 1%, at the expense of the rest of us, are going to get even greater. But we can still win the fight over China’s manipulation of its currency. If we win this it lessens the difference between prices of goods made there and goods made here and can bring some jobs, factories, countries, industries and wealth back to the 99% of our country that doesn’t benefit from these trade deals.
… China manipulates its currency to keep it “weak” (low) compared to the “strong” dollar. This means that goods made in China cost much less – up to 40% less – than goods made here, even before any wage differentials, exploitation of the environment, trade cheating, special subsidies and other trade violations are taken into account. China does this in order to capture the jobs, factories, companies and industries that make a country strong. We have let them do this for many years, leading to the economic situation we find ourselves in today.
One reason this continues is that big companies can threaten workers here with moving a job or factory there if they don’t go along with big cuts in wages and benefits and working standards — or just move the factory or company to take advantage of the differential. This benefits a wealthy few in the short term, and China in the long term after those wealthy few have sold the rest of out and cashed out for themselves.
This trade situation with China, while greatly enriching the top 1% here (and there), has hurt the rest of us so much, and drained so much wealth from the country, that even some Republicans are willing to support doing something about it. There are 61 Republican cosponsors of the bill to confront China over their currency manipulation!

The Club For Growth, a Wall Street front-group that backs China’s positions on these issues, has demanded that Republicans side with China on this, and has called it a “litmus test.” One Republican who actually did sign the discharge petition to force the House to vote, Harold Rogers, was forced by House leadership to remove his name!
What You Can Do
There are 61 Republican members of the House of Representatives who co-sponsored legislation to confront China over their currency manipulation: Currency Reform for Fair Trade Act (HR639). Contact them and ask them to sign the “discharge petition.” They are:
Tim Murphy (PA)
Todd Aiken (MO)
Steve Austria (OH)
Lou Barletta (PA)
Brian Bilbray (CA)
Rob Bishop (UT)
Mo Brooks (AL)
Dan Burton (IN)
Shelley Moore Capito (WV)
Howard Coble (NC)
Chip Cravaack (MN)
Rick Crawford (AR)
Charles Dent (PA)
Jo Ann Emerson (MO)
Michael Fitzpatrick (PA)
Randy Forbes (VA)
Jeff Fortenberry (NE)
Jim Gerlach (PA)
Chris Gibson (NY)
Sam Graves (MO)
Morgan Griffith (VA)
Gregg Harper (MS)
Duncan Hunter (CA)
Bill Johnson (OH)
Tim Johnson (IL)
Walter Jones (NC)
Mike Kelly (PA)
Blaine Luetkemeyer (MO)
Steven LaTourette (OH)
Frank LoBiondo (NJ)
Donald Manzullo (IL)
Tom Marino (PA)
Thaddeus McCotter (MI)
Patrick McHenry (NC)
David McKinley (WV)
Patrick Meehan (PA)
Candice Miller (MI)
Sue Myrick (NC)
Tom Petri (WI)
Joe Pitts (PA)
Todd Platts (PA)
Jim Renacci (OH)
Scott Rigell (VA)
Dana Rohrabacher (CA)
Harold Rogers (KY)
Mike Rogers (AL)
Mike Rogers (MI)
Dennis Ross (FL)
John Runyan (NJ)
James Sensenbrenner (WI)
John Shimkus (IL)
Bill Shuster (PA)
Marlin Stutzman (IN)
Glenn Thompson (PA)
Michael Turner (OH)
Lynn Westmoreland (GA)
Ed Whitfield (KY)
Joe Wilson (SC)
Rob Wittman (VA)
Frank Wolf (VA)
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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