From Stark
While taxes are not and never will be popular, the idea of taxing the rich does have some obvious appeal to everyone who is not rich. Oregon voters recently approved a tax hike for the wealthiest citizens, although a similar measure failed in Washington, where voters apparently saw a tax-the-rich ballot proposal as the nose of the income tax camel.
Meanwhile, states that have long relied on taxing the wealthy have been among the hardest-hit during the economic slump. Why? Because the incomes of the wealthy are the most volatile, dropping rapidly during stock market and real estate busts and thereby punching big holes in state budgets.
The Wall Street Journal offers this report centered on California.
For Devlin:
….a dawning Democratic awareness of whom they really represent. For the demographic reality is that, in America, the Democratic party is the new “party of the rich”. More and more Democrats represent areas with a high concentration of wealthy households. Using Internal Revenue Service data, the Heritage Foundation identified two categories of taxpayers – single filers with incomes of more than $100,000 and married filers with incomes of more than $200,000 – and combined them to discern where the wealthiest Americans live and who represents them.
Democrats now control the majority of the nation’s wealthiest congressional jurisdictions. More than half of the wealthiest households are concentrated in the 18 states where Democrats control both Senate seats.
This new political demography holds true in the House of Representatives, where the leadership of each party hails from different worlds. Nancy Pelosi, Democratic leader of the House of Representatives, represents one of America’s wealthiest regions. Her San Francisco district has more than 43,700 high-end households. Fewer than 7,000 households in the western Ohio district of House Republican leader John Boehner enjoy this level of affluence.
http://www.heritage.org/Research/Commentary/2007/11/Democrats-wake-up-to-being-the-party-of-the-rich
AFY!!theheelotsheepdog!!!
It’s close but the dem’s win:
http://thehill.com/homenews/senate/116491-the-hills-50-wealthiest-list-slideshow
AFY!!theheelotsheepdog!!!
More devlin:
http://cdn.ihatethemedia.com/wp-content/uploads/rich-democrat-neighborhoods-e1273327137965.jpg
AFY!!theheelotsheepdog!!!
They’re not republicans?
How could that be?
What, are we entering a new period of absurd censorship, where’s the eat the rich comment?
AFY,
Don’t confuse the pawns for the rooks, knights, and bishops.
Forget the Senators. The easiest way to find out what policies are supported by the super-rich members of the ruling class is to follow lobbyists for the Business Roundtable, the Association of Manufacturers, the U.S. Chamber of Commerce, and the American Enterprise Institute.
Or, you can simply read the PR materials on their websites.
Or just follow the policy statements of the Council on Foreign Relations; the true seat of government.
You’re gonna love this: “Eating the Rich”
http://www.realclearpolitics.com/video/2011/03/31/bill_whittle_on_eating_the_rich.html
You’ve got to hand it to Bill Whittle and that Iowahawk fellow. That’s some of the best propaganda I’ve seen lately.
Let’s see, . . . he begins by calling the U.K. a nanny state, and then, after showing pictures of lawlessly violent Anarchists, he says, “in Wisconsin, of course, we saw the same thing — mobs disrupting the legislative process, because they didn’t like the outcome.” He then calls Michael Moore, “the mendacious Michigan manatee of malevolence” right before ridiculing him for being fat.
As for the economic and tax analysis that follows, it’s just as weak as Iowahawk’s analysis of SAT scores.
Why do people persist in spreading such bunkum?
You just did.
So, citizen, you agree with the points made in the video?
I’m so glad Whittle and Iowahawk mentioned ExxonMobile.
As conservatives, I presume these two support free market capitalism. Of course, since the time of Adam Smith, the basic assumptions of capitalist theory have presumed that companies will compete for customers on the basis of price in free markets.
The idea is that, when an innovative company is the sole, monopoly producer of a good or service that is in high-demand, that monopoly will be able to charge whatever price the market will bear and will, as a result, enjoy super-normal profits. However, other entrepreneurs will soon horn in on the action, begin competing with the monopoly, and drive prices and profits down to their lowest possible point, given the real costs of bringing the good or service to market.
Now, let’s turn to the case of oligopolies, such as ExxonMobile. Does ExxonMobile compete with other oil companies in a free market on the basis of price and the real cost of production? The answer is a resounding “no!”
Oligopolistic oil corporations have successfully used government to erect numerous barriers to entry to petroleum-related markets and secure numerous unfair competitive advantages. Let us briefly count the ways.
First of all, oil corporations have long leased the mineral rights to federal lands for a song, and they receive subsidies on their royalty payments for those leases. In effect, the major oil corporations have convinced Congress to sell them our public natural resources for a reduced price. And, the oil companies have also successfully externalized much of their costs to the rest of us, by capturing many of the regulatory agencies, such as the Minerals Management Service.
http://www.nytimes.com/2008/09/11/washington/11royalty.html
Of course, the major oil corporations are not the only oligopolies to receive government subsidies. As was reported just yesterday in most of the major newspapers, Boeing has been receiving government subsidies worth billions and billions of dollars. And, under our current system of “crony capitalism,” other oligopolistic munitions manufacturers also receive such government subsidies.
So much for the notion of prices reflecting the real cost of production — oligopolies always do everything they can to keep their costs as low as possible, even if it is damaging to the rest of the nation, other nations, or consumers.
What about price? Here things get interesting, because the prices oil corporations are able charge for their products is determined by the price of crude oil on speculative spot markets, much like the price of stocks. Currently, there is plenty of oil in the supply chain, but we’re paying nearly $4 a gallon for gas, because of “geopolitical instability in the Middle East.” In short, the prices oil companies charge for their products on the retail markets are completely divorced from the true costs of production. Indeed, oil companies can earn respectable profits even when oil is only $30 a barrel, because their true costs of production are far lower than retail prices would suggest.
Economic theory says that oligopolies always have an incentive to collude on prices, instead of competing with one another to drive prices to their lowest possible level based on the true costs of production.
In just two years during the Great Recession, 2009 and 2010, ExxonMobile increased the net tangible assets on their balance sheet from about $113 billion to nearly $147 billion, an increase of almost 30 percent. Not bad.
http://finance.yahoo.com/q/bs?s=XOM&annual
Since at least 2006, the largest oil companies have also been reporting all-time record profits, which brings us to taxes. Does anyone seriously believe that the owners of the holding companies and front groups that own our largest corporations are really paying their fair share in taxes?
If you think so, I urge you to read the works of David Cay Johnston, former Pulitzer Prize winning tax reporter for the New York Times.
“In just two years during the Great Recession, 2009 and 2010, ExxonMobile [sic]…”
Exxon is not among the top fifteen largest oil companies in the world.
The tax take from oil consumption and sales is far larger than the profits of the oil companies.
Actually, most of your post undermines your argument.
http://www.taxfoundation.org/blog/show/1140.html
ExxonMobile is the largest industrial holding company in the United States, the largest oil producer based in the United States, and the third largest company in the entire world.
And, globally, “oil companies are the biggest money makers.”
Finally, we should not confuse taxes based on retail sales of gasoline with corporate income taxes and tax subsidies and expenditures written into the tax code.
http://money.cnn.com/magazines/fortune/global500/2010/
http://www.petrostrategies.org/Links/Biggest_US_Based_Oil_and_Gas_Companies.htm
So some taxes are better than other taxes?
Incidentally, I want oil companies to make money so that they can continue to plow vast sums into exploration and refining facilities to deliver gasoline and distillate to us at the lowest possible price.
I have to back off my statement that Exxon Mobil is not among the top fifteen. In terms of reserves, it is fourteenth.
http://www.economist.com/node/7270301
I just thought it was interesting that the public pays quite a bit in gas taxes versus the total profits of oil companies. No statement to make with that, as I really haven’t put much thought into it. But once I saw Dave’s comment about I just did a quick Google search and saw the Tax Foundation link and thought it would interest others here.
Sam,
I was surprised that it didn’t generate more comment. Most years, the tax take is greater than the companies’ profits.
I notice that Todd dismisses Iowahawk and Bill Whittle without effectively rebutting their arguments. After Todd criticized Iowahawk’s blog post about Texas schools, I posted a link to Iowahawk’s response, which effectively rebutted Todd’s criticisms.
Not a word from Todd.
I would like to see a rebuttal from Todd of Whittle’s pretty simple-to-understand math that compares the resources of the “rich” with the results of expropriating their wealth.
Tip Johnson asked, “But, in a recession, is the income of the wealthy as volatile as consumption-based sales tax revenue?”
Without providing a link, there is considerable evidence that, even in non-recessionary economies, the income of the “rich” varies widely, as individuals move into and out of the top quintile of incomes. In addition, many of the “rich” are free to change the location of their residence or business.
Lat year, Sam Taylor posted a link to information that appeared to contradict this, at least for the State of Maryland. That may be true, but I’m betting it’s not.
It will be interesting to see how the state of Oregon, having imposed new taxes on the “rich”, fares in terms of state revenues in a recession.
You all know, I’m sure, that Washington has considerably more revenues available for the current biennium than were spent in the last, so that cries of budget shortfalls are not persuasive to me.
Iowahawk did NOT effectively rebut my previous argument concerning SATs, as I indicated at the time.
As for the Whittle video, he only mentions the top 500 corporations in the US, but there are over 15 million business entities in the US. that pay taxes, plus well over a hundred million households.
The video merely asserts the ridiculous and illogical notion that the rich, alone, cannot sustain the federal budget, while completely ignoring the issue of fairness in the tax code. Are the rich paying their fair share? Tax scholars frequently indicate otherwise.
The video is little more than sophisticated propaganda designed to denigrate the likes of Michael Moore, while advancing the conservative mantra that we shouldn’t tax corporations or the rich.
Our tax code used to be far more progressive, before Republicans decimated the estate tax, cut tax rates on capital gains and dividends, and reduced the top marginal tax rate. Also, corporations used to pay a larger proportion of overall tax revenues, as a percent of GDP. The rich are also arguably not paying their fair share of taxes for social security, by which I mean to suggest that we should seriously consider raising the income cap on social security withholding.
Unfortunately, the Whittle video does not address the core claims in Michael Moore’s argument, nor does it address the fundamental problems with US tax policy. Furthermore, the video suggests that federal spending has grown too high, but the truth is that federal spending has been remarkably stable since before the Reagan years, as a percent of the GDP [the recent recession is an exception].
Instead of addressing the core issues, the Whittle video is merely an illogical attempt to take an underhanded swipe at the left and the idea of class warfare from above.
We need a tax code that generates slightly higher taxes, as a percent of the GDP, but also one that more equitably distributes the tax burden to those who are most able to pay. That would take care of the of the renenue side.
As for spending, we need to trim the Pentagon and get a handle on healthcare costs. Together, these actions would balance the budget and enable us to begin paying down our national debt, as the economy recovers.
There is nothing radical in these suggestions. In fact, this is the path we were on during the end of the Clinton years.
For some historical perspective on federal revenues, see the following:
http://www.cbpp.org/cms/index.cfm?fa=view&id=1324
http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/
http://www.deptofnumbers.com/blog/2011/02/gov-expenditures-gdp-fraction/
For those of you who think that Warren Buffett doesn’t have an unethical bone in his body, I offer this: Berkshire: What Did Sokol Really Do?
“It’s funny how ordinary people are prosecuted for trading on inside information and other similar offenses, but when it comes to top dogs at firms like Berkshire…. not so much.”
http://market-ticker.org/akcs-www?singlepost=2495442
“Billionaire Warren Buffett told congressional negotiators that if they can’t agree on a proposed financial bailout, the nation will face “its biggest financial meltdown in American history,” two sources familiar with the talks said.”
This took place after Berkshire’s Goldman Sachs investment.
Todd,
“Also, corporations used to pay a larger proportion of overall tax revenues, as a percent of GDP.”
I’m sure that you’ll remember from introductory economics that the incidence of taxes on corporations falls on their employees, customers, and shareholders. The corporation is merely a conduit through which the revenue flows. Because of their size and structure, however, corporations routinely engage in tax-avoidance behavior and in lobbying to shape legislation in a manner favorable to their interests.
Here’s a chart that you’ll love: “How Rich are the Superrich?
http://csmonitor.tumblr.com/post/4342514908/sunfoundation-how-rich-are-the-superrich-a
I just happened upon this brief article, which originally appeared in Newsweek. It makes a lot of sense:
The Real GE Scandal, by Robert Samuelson
Like the Simpson and Bowles Fiscal Commission, Samuelson argues that we should reduce corporate tax rates, while increasing taxes on capital gains and dividends. There is much merit to such proposals, so long as corporate tax expenditures and subsidies also receive ample scrutiny with an eye toward reform.
Incidentally, Samuelson notes that “the wealthiest 1 percent of Americans receives two-thirds of capital gains and dividends.”
http://www.realclearpolitics.com/articles/2011/04/04/the_real_ge_scandal_109435.html
Dave,
While the Berkley data in the graph and the statement at the bottom of the link you provided are largely correct, we have to remember that average incomes are misleading, because income distributions are highly skewed. Median values would provide more representative measures of incomes for, say, the top one-tenth of one percent, the bottom 90%, or by quartile.
Incidentally, here’s some interesting food for thought that you definitely won’t see on the evening news or the sunday talk shows:
Video: Dr. Cornel West:”Obama becoming puppet of Wall St Oligarchs”
http://youtu.be/s4M4uBdrI_s
Todd,
kirsch is going to love that.
And, just today, former Commerce Secretary Robert Reich came out with his latest piece, Why we must raise taxes on the rich:
And, how have the rest of us done? Not so well, it seems.
http://www.salon.com/news/taxes/index.html?story=/politics/war_room/2011/04/04/tax_disparity_income_2012_robert_reich
This article, by economist Joseph Stiglitz, just appeared in the May issue of Vanity Fair: Of the 1%, by the 1%, for the 1%
Here’s a teaser:
It makes for pretty good reading.
http://blogs.bellinghamherald.com/politics/washington-state/tax-the-rich-not-as-simple-as-it-sounds/comment-page-3/#comment-104598
I disagree with Stiglitz about John D. Rockefeller, whose power came from his ability to drive prices down because of his manufacturing economies.
Take care to remember that the monopoly price is always above the equilibrium market price. In Rockefeller’s case, that was not true, and, in fact, Rockefeller was merely a fierce competitor and was ruthless about cost-control.
The prosecution of Rockefeller was merely the first of many misguided anti-trust prosecutions.
Concerning Gates, you might recall that Microsoft attracted the attention of the Federal Trade Commission because it decided to fold in Internet Explorer at no additional cost as a feature in Windows.
Before this time, Microsoft spent no money on lobbying or rent-seeking of any kind, but it learned its lesson with this episode.
The act of offering IE for free was found to be anti-competitive, and Microsoft learned that political connections are at least as important as innovative technology and price competition.
Stiglitz’ references to “Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system…” is not much more than partisan rhetoric.
I don’t say there is no rent-seeking. I just say that it’s bi-partisan, and that Stiglitz’ reference to “republican administrations” cheapens his argument.
These days, most high-rollers are democrats who contribute to democrat political candidates.
You quoted Stiglitz, “The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency…”
You just reinforced my point, argued in previous posts and in links.
Part of the reason the the Fed (not the “government”, by the way) loans money to financial institutions at the window is because they wish to clear the treasury auctions that finance government borrowing. The alternative is for the Fed to print money to clear the auctions, and they’ve been doing plenty of that, lately calling it “QE2″. As soon as they stop, the treasury goes tits.
“Regulators turned a blind eye…”
Please.
The regulators are always going to get their jockstraps handed to them.
I’ve explained here many times about about how regulation is an exercise in futility. The regulators are always going to be behind the curve.
If you’re worried about transparency, go back to my post about Warren Buffet.
I don’t have enough time for a thorough reply, but I will offers some observations.
Stiglitz isn’t referring to Rockefeller’s rise to power. His statement that “Monopolies and near monopolies have always been a source of economic power” is largely true.
Your synopsis of the rise of the Standard Oil monopoly is inaccurate, except for the part about Rockefeller being “ruthless.” He was certainly that, as well as underhanded, as he engaged in all kinds of nefarious, unfair, and immoral competitive practices to crush or buy-out his competition.
After Standard Oil had achieved a monopoly on petroleum refining in the U.S., Rockefeller used his excess profits to take over railroads, steel manufacturers, rubber and tire companies, chemical manufacturers, and more. He also used his untoward profits to eventually gain control of large portions of the banking industry and the financial sector of the economy. That’s where the real power lies, because all corporations are dependent upon financial institutions for short- and long-term loans, many of which are conditional loans that come with strings attached.
But, more importantly, Rockefeller used his considerable economic power to curry favor with politicians and exercise an undue and corrupting influence over the various branches of our government. Anyone who has studied the history of American politics has learned about the corrupting influence of a monied elite, especially at local and state levels of government, albeit our history is littered with a long list of scandals at the federal level also.
The Standard Oil anti-trust case did not achieve its objective of substantially increasing competition among the resulting oil companies, much to the detriment of the nation’s petroleum consumers. Oligopoly power is near monopoly power and often quite as effective.
I’m sorry, but your understanding of Central Banks’ use of interest rates to affect economic activity or control inflation seems misguided.
The argument that we should forgo regulations, because regulations are always ineffective is patently false. Regulations are most often extremely effective, unless “regulatory capture” is allowed to happen or is encouraged by compliant administrations, which seems to have been the case in many instances during the most recent Bush presidency.
“The Standard Oil anti-trust case did not achieve its objective of substantially increasing competition among the resulting oil companies, much to the detriment of the nation’s petroleum consumers. Oligopoly power is near monopoly power and often quite as effective.”
See?
Microsoft’s lesson was that the rent seeking works both ways: corporations seek favors, and politicians demand bribes (contributions) in return for favorable treatment.
“I’m sorry, but your understanding of Central Banks’ use of interest rates to affect economic activity or control inflation seems misguided.”
I merely described what is happening now. I fully understand how interest rates might be used in statutory fashion, but that’s not what we’re seeing.
Fair enough.
Incidentally, the New York Times has an important op-ed today by Joe Nocera,
Who Could Blame G.E.?
http://www.nytimes.com/2011/04/05/opinion/05nocera.html?hp
Here’s another interesting article appearing today in the San Francisco Chronicle about corporations gaming the system,
Jeffrey Immelt, the jobs czar from hell
It reads like an op-ed, but apparently it’s a news article in the business section.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/04/04/EDAD1IPMPN.DTL
He’d make a great Jobs Czar!
