Why We Only Talk About the Income Tax

Who Pays? - Institute on Taxation and Economic PolicyWhile reading a very good article about Rick Perry by Jonathan Chait, I came upon this amazing report by the Institute on Taxation and Economic Policy (ITEP), Who Pays? 5th Edition (pdf) — that’s the 2015 version of the report. What’s interesting about the report is how it looks at how much money is paid in taxes by people in different income groups. In general, people present it as total amounts. But that isn’t fair because (obviously) the rich make more than the poor. So the report looks at the percentage of the income that each group pays in taxes. And the results are astounding.

We’ll get to the individual states in a moment. But even taking into account all of the states — including the supposedly liberals ones — ends with the result that the more money people make, the less they pay in state and local taxes. The lowest 20% of income earners in the nation pay 10.9% of their income in state and local taxes. The top 20% of income earners pay just 7.5%. So as a percentage of their incomes, the lower class pays almost 50% more than the upper class. It’s even worse when they look at the top 1% of earners. They pay only 5.4% in state and local taxes. That means the lower class pays over twice what the rich pay.

The situation is far worse in individual states. That shouldn’t be surprising. What was going on in Ferguson was just an especially egregious example. What I’ve seen everywhere is that taxes that hit the rich are rolled back, only to be replaced by flat or regressive taxes. And this is not just a red state problem, because the neoliberals are often even worse than the conservatives. The ten most regressive states are (from worst to least worst): Washington, Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Arizona, Kansas, and Indiana. That’s three blue states, and two of them are in the top five.

In Washington, the bottom 20% pay an average of 16.8% of their income in state and local taxes. The top 1% pay only 2.4%. That means the lower class is paying seven times what the rich are paying. Evening looking at lower class and the middle class is terrible: the lower class is paying two-thirds more in taxes than the middle class. The situation in the least worst state, Indiana, looks pretty good, but only in comparison: the lower class only pays 2.3 times what the rich pay. But in that case, it’s almost as bad for the middle class who pay just over twice what the rich pay. How does this happen? It happens by instituting regressive taxes. The best way to do that is to have no income tax and depend heavily on consumption taxes. Of the ten most regressive states, they either have little or no income tax, a flat tax, or a low top tax rate.

The least regressive states are: District of Columbia (DC), Vermont, Minnesota, Delaware, Montana, Oregon, and California. Those are more or less in order, but it does depend upon how you calculate it; I’ve just compared the lower class to the upper class. What’s interesting is that by this measure, only DC is progressive; the others are all regressive to one extent or another. And DC is quite regressive when comparing the middle class to the upper class. But these states manage to not be too bad mostly because they have progressive income taxes, tax credits, and low use fees.

The one thing that I wish people would take away from the report is this graph:

Comparison of Tax Types

What it shows is that both use and property taxes are particularly regressive. Only the income tax is modestly progressive (and hardly even that when you look at the middle class). But all you ever hear conservatives talk about is the income tax. This is a con. They know that the tax system is stacked against the poor in a big way on every tax but the income tax. But they’ve managed to fool the whole country into thinking of taxes just in terms of the income tax.

And this is what allows there to be a steady whine coming from Fox News and CNBC about how badly the rich are treated. Well, look at “Who Pays?” It’s bad enough that the poor are screwed by the tax system. But we also have to listen to rich complain about how much they suffer. It’s unbelievable.

The Real Purpose of the Greek Bailout

Mark BlythThe roots of the crisis lie far away from Greece; they lie in the architecture of European banking. When the euro came into existence in 1999, not only did the Greeks get to borrow like the Germans, everyone’s banks got to borrow and lend in what was effectively a cheap foreign currency. And with super-low rates, countries clamoring to get into the euro, and a continent-wide credit boom underway, it made sense for national banks to expand private lending as far as the euro could reach.

So European banks’ asset footprints (loans and other assets) expanded massively throughout the first decade of the euro, especially into the European periphery. Indeed, according the Bank of International Settlements, by 2010 when the crisis hit, French banks held the equivalent of nearly 465 billion euros in so-called impaired periphery assets, while German banks had 493 billion on their books. Only a small part of those impaired assets were Greek, and here’s the rub: Greece made up two percent of the eurozone in 2010, and Greece’s revised budget deficit that year was 15 percent of the country’s GDP — that’s 0.3 percent of the eurozone’s economy. In other words, the Greek deficit was a rounding error, not a reason to panic. Unless, of course, the folks holding Greek debts, those big banks in the eurozone core, had, over the prior decade, grown to twice the size (in terms of assets) of — and with operational leverage ratios (assets divided by liabilities) twice as high as — their “too big to fail” American counterparts, which they had done. In such an over-levered world, if Greece defaulted, those banks would need to sell other similar sovereign assets to cover the losses. But all those sell contracts hitting the market at once would trigger a bank run throughout the bond markets of the eurozone that could wipe out core European banks.

Clearly something had to be done to stop the rot, and that something was the troika program for Greece, which succeeded in stopping the bond market bank run — keeping the Greeks in and the yields down — at the cost of making a quarter of Greeks unemployed and destroying nearly a third of the country’s GDP. Consequently, Greece is now just 1.7 percent of the eurozone, and the standoff of the past few months has been over tax and spending mixes of a few billion euros. Why, then, was there no deal for Greece, especially when the IMF’s own research has said that these policies are at best counterproductive, and how has such a small economy managed to generate such a mortal threat to the euro?

—Mark Blyth
A Pain in the Athens

Working More Isn’t Necessarily Better

Jeb BushDid Jeb Bush really mean to say that Americans need to work more hours? It’s hard to say. But as Brian Beutler noted, that interpretation goes along with his policy ideas — and that of the whole of the conservative movement. It is certainly true that a big conservative argument against the progressive income tax is that it remove the incentive for people to work more. And certainly requiring overtime pay makes employers less likely to allow employees to work more than 40 hours per week. Or, as Beutler pointed out, “Supplement people’s incomes, and they have less incentive to work.” So get rid of the unions! Get rid of the minimum wage! We want people to have a real “incentive” work!

You may remember that there was a big conservative dust up when it turned out that some people were choosing to work less because of Obamacare. That was actually a good thing. What has happening was that people who had been working a lot of hours just to get health insurance, were lowering their hours. These weren’t people who were involuntarily working part time; these were people who were thrilled to be working less. Hooray for Obamacare! But of course conservatives were angry as though individuals should work more hours just to keep the economy pumping. (Not to mention that the slack could be taken up with companies hiring more people.)

So regardless of what Jeb Bush meant to say, he and the party he represents think that people should work more. But I can’t help but think of Greece. Conservatives all over the world think that the Greek people should pay for their past big spending ways. But here’s the thing: they are paying by not being allowed to work. Austerity is always that way, and it makes no sense at all. If a woman overspent last year, she would work more this year; she wouldn’t choose to work less.

People like Jeb Bush seem to think that people are unemployed just because they don’t feel like working. This is just not the way the economy works. And I don’t really believe that anyone actually thinks it does. I know there are certain conservative economists who claim that it does, but that is clear apologetics. No serious person thinks that the 25% unemployment rate in 1930 was due to people just not wanting to work. But the truth is that we should all push for people working less.

Part of the problem that we have here in America is that those who do have jobs are pushed to work far too many hours. This means there is less work for people who don’t have jobs. This is something that Germany has been really good at. For one thing, Germans just don’t work as much as we do. Last year, Germans worked an average of 1,371 hours and we worked an average of 1,789. We work almost a third more hours than they do. But it’s generally true: we work more hours than people in most advanced economies. Even the Japanese work less than we do.

But what Germany is really good at is their work sharing program. In recessions, instead of laying a bunch of people off, people work fewer hours. The government makes up the difference — think of it as a special approach to unemployment. The economy doesn’t collapse on itself — thus reducing the impact of recessions. But most conservatives would see such things as un-American. For one thing, they reduce suffering. But for another, conservatives think everyone should work more and more and more. It’s curious, because the more you work, the less time you have for things that conservatives claim to value like the family.

This is something I commented on during the 2012 presidential race. It was claimed that Ann Romney was some kind of hero for staying home and caring for her family. And great for her! But the people who thought it was so great that she was home with the kids were the exact same people who thought that poor mothers ought to have to dump their kids at daycare and take the bus to some minimum wage job. So sure: Jeb Bush and the rest of the vile party he represents want the rest of us to work more hours — for less pay — so that the rich can capture an ever greater share of the economy. But that shouldn’t surprise anyone.

What Was the Point of the Greek Referendum?

What Was the Point of the Greek Referendum?I remember during the 1988 DNC, there was conflict. Jesse Jackson got almost 30% of the popular vote. Michael Dukakis did not intend to have Jackson be a major part of his campaign. And so there was a meeting between Jackson and Dukakis. And Jackson came out of the meeting talking about how they had had a substantial discussion about important issues. And it was pretty clear that what he got was nothing. He was putting on the best face in a bad and extremely embarrassing situation. I felt bad for him and I was a Dukakis supporter. Wasn’t there any way that all those smart people in the Democratic Party could come up with a better way to support the man that came in a very good second place? (Dukakis only got 42% of the vote.)

But I suspect that the idea among the Democratic elite was to hang Jackson out to dry. This was the proto-Sister Souljah moment. Liberals, it seems, can’t be taken seriously unless they they make a firm commitment to stand up against the black man. Or at least, that seems to be what elite opinion is in the Democratic Party. And now, I’m feeling the same thing about the situation in Greece. The whole thing strikes me as pathetic.

The Greek parliament just voted (narrowly) for Alexis Tsipras’ proposal to give the Troika… exactly what it wants. Oh, yes: there are some very small changes. This is pretty much the deal that Tsipras had wanted to get before the referendum: total capitulation with something — Anything! — he could use to save face. Who knows if the Troika will even give him what he’s asking for now. They seem instead to want him to do a Jesse Jackson: have him come out of a meeting and claim that everything is good because they had a substantial discussion about important issues.

But the whole thing seems bizarre. What Tsipras is pushing seems to be what he would have pushed if he had lost the referendum. Is that what he was expecting? Did he think that he would lose so that he could capitulate and it would be no big deal? Was the huge win last weekend actually a disappointment? Why did Finance Minister Yanis Varoufakis resign? It really is looking as though Tsipras and the majority of Syriza are just a bunch of wimps who do not have the strength of their convictions.

And here’s the thing: I understand that doing what Greece is now doing is the least painful thing to do for the immediate future. But that’s the point! Yes, Greece can make another deal and limp along for another couple of years. If they are very lucky, they might get the unemployment rate down to the high teens. But more likely, they get the unemployment rate down one point or two — still in the mid-twenties. And yet they will still be just as indebted as they have been — maybe more so. There isn’t a time when the Troika says, “You’ve suffered enough! Now we’ll let your economy heal!” That’s not going to happen. It’s just going to be years and year and years of pain.

I think the whole world should be afraid of this. Right now I’m wondering that if a true leftist party like Syriza is so easily co-opted by the Troika, maybe it will take a far right party to get Greece out of this mess. And if I’m wondering that, you’ve got to be certain that a lot of Greeks are wondering the same thing. The current situation has got to have been the best thing that ever happened to Golden Dawn.

Morning Music: Jimmie Davis

Jimmie DavisIn the film Primary Colors, Jack Stanton mentions “You Are My Sunshine,” and says, “It is the most American goddamn song I can think of.” He also says, “A southern governor wrote it.” He doesn’t mention who it is, so years ago, I looked it up. It’s a deceptive claim, because it is more accurate to say that a famous singer became a south governor. The song was written years before he was governor too. The famous singer was Jimmie Davis and the state was Louisiana.

The other thing is that Davis almost certainly didn’t write it. He was given credit for it — along with his writing partner Charles Mitchell. He appears to have bought it from Paul Rice of The Rice Brothers Gang — who recorded the song before Davis. But even they weren’t the first to record it. They were beaten by three weeks by The Pine Ridge Boys. So who knows who actually wrote it. Given the usual way of American capitalism, I think we can assume whoever did write it didn’t get paid.

Here is Jimmie Davis performing the song on television. I have no idea when. He only died in 2000, at the age of 101.

Anniversary Post: Burr–Hamilton Duel

Burr–Hamilton duelOn this day in 1804, the infamous Burr–Hamilton duel took place. I do think that Burr was a jerk. But it is hard not to side with him on this given that Hamilton apparently fiddled with the pistols to give them hair triggers. There is also the evidence that Hamilton wrote a letter the night before with the intention of making Burr look bad if Hamilton lost the duel. I rather think of the duel as being between John Cleese and Terry Jones of Monty Python’s Flying Circus. Jones (Burr) might be difficult and emotional, but he isn’t calculating like Cleese (Hamilton). Clearly the world needs both kinds of men, so they shouldn’t get in duels.

Earlier this year, I wrote about Steve King and his use of this duel:

You see, the founding fathers were men of honor. And his example? “It’s been 210 years since Alexander Hamilton and Aaron Burr fought a duel over honor.” Ah, yes: that honorable duel. And what was it over? Burr felt insulted by something that Hamilton had said. This was coming off Burr’s devastating loss to the almost unknown Morgan Lewis to become governor of New York in 1804. Burr thought Hamilton had helped Lewis, and he probably did. Regardless, the whole thing seems more like a squabble between mean girls in a suburban high school. Ah yes, honor!

So 211 years ago today, the mean girls had their fight. Hamilton died the following day. And Burr hardly covered himself with glory after the duel. What honorable men!