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Economic Death and Millionaire Taxes

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Posted on Dec 26, 2008

By David Sirota

For most of us, Benjamin Franklin’s words in 1789 still apply: “Nothing is certain but death and taxes.”

However, millionaires, by definition, are not most of us. While they can’t stave off the grim reaper, they can convince lawmakers to shield them from the taxman and balance budgets on the backs of everyone else.

That’s what’s going on in revenue-starved states right now: governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy.
Nowhere is this class war more pronounced than in New York—the home of the financial thieves who killed the economy. Having halved its top tax rate over the last three decades, New York today faces a $15.4 billion deficit. In response, Gov. David Paterson, a Democrat, might have asked his state’s Gordon Gekkos to pay higher taxes, especially considering the idea’s popularity in polls and the news that Wall Street’s elite are still swimming in money. Indeed, according to CBS News, the allegedly beleaguered financial industry is so flush with cash it plans to dole out $14 billion in executive bonuses this year.

Yet, far from forcing robber barons to pay their fair share, Paterson told The New York Times that taxing millionaires is “the last place you want to go.” Instead, he proposes to punish Joe and Jane Six-pack by hiking the taxes and cutting the programs that disproportionately impact them. Specifically, he wants to increase sales taxes, college tuitions and licensing fees and slash education and low-income health programs.

Paterson defended his proposals by telling PBS’s Bill Moyers “that when you tax the wealthy in the downturn of an economy, you have an automatic link of a loss of job opportunities and then a loss of population.” The rationale sounds intelligently pragmatic—until you peruse the relevant data.

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When New Jersey recently raised taxes on the wealthy, Princeton University researchers found that most of those who later left the state moved to places with higher taxes, meaning there is no causative link between levies on the rich and residential flight. Likewise, when New York temporarily raised high-income taxes after 9/11, the state added 127,000 jobs, meaning no link exists between higher taxes on the rich and job loss.

During times of surpluses, governors could get away with the unsubstantiated nonsense Paterson is peddling. But now, 43 states confront shortfalls, and because states cannot run deficits, the dollars and sense of these arguments matter. Lawmakers must choose what policy will create the best chances for economic recovery: spending cuts or tax increases, and if the latter, on whom?

The answer isn’t rocket science. As Nobel prize-winning economist Joseph Stiglitz says, “Reductions in government spending on goods and services (are) likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”

That’s because government cuts automatically decrease the consumptive spending programs that broadly stimulate the economy whereas tax increases, when aimed at the wealthy, more often impact funds socked away in savings. “The more that the tax increases (are) focused on those with lower propensities to consume (i.e., the rich),” Stiglitz notes, “the less damage is done to the weakened economy.”

Incredibly, Paterson acknowledges how destructive his budget is, admitting that his own “education cuts are draconian, the health care cuts are prohibitive [and] the taxes that are being levied ... are not fair.”

So why would he—or any governor—nonetheless try to legislate such idiocy? Because millionaires are the ones who finance gubernatorial candidacies, and their campaign contributions buy tax protection. The result is what another New York royalist promised.

“Only the little people pay taxes,” said Leona Helmsley—a doctrine that will exacerbate this recession if states keep making it true.

David Sirota is the bestselling author of the books “Hostile Takeover” (2006) and “The Uprising” (2008). He is a fellow at the Campaign for America’s Future and a board member of the Progressive States Network—both nonpartisan organizations. E-mail him at ds@davidsirota.com.

© 2008 Creators Syndicate Inc.


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By KDelphi, January 27, 2009 at 3:54 pm Link to this comment

ocjim—Right on!! for lack of a better term…!

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By Uncle B, January 26, 2009 at 12:51 pm Link to this comment
(Unregistered commenter)

All but the Elite, Uber-rich Investor sentimental capitalist class got their little brown spots reamed good and bloody by George Bush and his undemocratic, imperialist extra-rich bastard associates. This was his parting shot at the people he was raised to despise from the elitist towers of his mis-spent youth by his elitist, white protestant surroundings. America is the victim of unregulated sentimentalist Capitalism of the worst form, government sponsored sentimental capitalism! This oligarchy systematically raped America, and transferred the wealth to the Uber-rich, remember, no money was destroyed, it only changed hands! no wealth was lost, it merely changed place! Somebody has it all, now, and it ain’t “We the People” so who is it? Georgie boy, before you conveniently disappear into a safe anonymity, please tell us where it went!

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By ocjim, December 28, 2008 at 12:06 am Link to this comment

The equal and fair taxation propaganda includes flat taxes, proportional taxes, and payroll taxes being the ultimate in fairness.

Americans have been fed this propaganda for many years but it has gained respectability since Reagan because of the head games played by neocon think tanks.

Popular and believed culture for Americans, many are duped into believing, that anyone can be rich (lotto fever) and that the rich earn their money fairly.

Neocon propaganda intimidates people into believing that they are some kind of lowbrow deadbeat if they want to soak the rich with higher taxes.

These are the effective cultural wars. At the same time there are class wars played mostly against the working class, vilifying them as those seeking entitlements and a free ride at the expense of the productive captains of industry. This was evident at the hands of the likes of McConnell who trashed the auto-loan deal and with the criminal Bush with the terms of his loan.

Such manipulations put down human investment of any kind and preach the entitlement of the rich.

Shockingly, even in the current environment of corporate criminality, too many people still believe it.

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By TAO Walker, December 27, 2008 at 5:30 pm Link to this comment

Seems like it oughta be real obvious by now the “fever” gripping america and the “global economy,” in which americans are entrapped along with domesticated peoples everywhere, is going to run its course….come Hell AND high-water!  High-end politicians are betting they and their families will be rewarded for their service to the plutoligarchy with refuge from the social chaos that is already taking its toll on the lesser orders. 

That looks from here in Indian Country like just another damned fools bet, but no doubt appears to be a safe one from within the “security perimeter” beyond which these “special” pets seldom if ever venture.  Those deceiving appearances may continue to mask for awhile yet the crumbling “foundations” upon which the entire mercantile edifice has been built….and also prop-up the rotten “fortunes” derived from its operations.

Best not to be taken-in by the intensified media-generated smokescreen, Sisters and Brothers.  Those not putting their feet back on the Tiyoshpaye Way will suffer greatly through the disintegration of this world-o’-hurt that’s been pawned-off on you as an “improvement” on the natural Living Arrangement of our Mother Earth.

Join us surviving free wild People, instead, here in the neverending Song ‘n’ Dance of Life Herownself.

HokaHey!

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By KDelphi, December 27, 2008 at 1:23 pm Link to this comment

The “Bush tax cuts” need to be overturned—now! Dont buy the theory that they “cant be overturned in a recession”—they are what helped get us into the recession.

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By BigJer, December 27, 2008 at 12:34 pm Link to this comment

Dear Sir,
I can’t disagree; may I add that passive wealth is not subject to taxes (excepting the very small amount taken in estate taxes even then that outrages the rich) but should be.  See writings of Edward N. Wolff and also his book “Top Heavy”.
The so called Supply Side argument is based on the simple minded truism that income taxes take money out of circulation and therefore taxes hurts the economy.  Clearly nonsense but based on a certain logic.  In the case of taxing the passive wealth no monies are taken out of circulation rather the opposite.
Finally with most of the passive wealth being held by less than 5 per cent of the population taxing passive wealth should be very doable.

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By Virginia777, December 27, 2008 at 12:21 pm Link to this comment

Well, I’m not surprised that Paterson is a Democrat.

So many Democrats have sold-out over the past years (how many? when did the sharp turn to the Right in our country take place?) that they have, in some instances, become worse than Republicans.

Is it campaign donations he is trying to protect? Or has he merely fallen to the senseless doctrine of the Right - which stubbornly clings to its belief

in “Big Daddy” taking care of things.

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By GW=MCHammered, December 27, 2008 at 11:17 am Link to this comment
(Unregistered commenter)

Debt is where they want us all: renting our entire lives from the wealthy ... it’s the new PayGo (until you are dead) system.

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By GW=MCHammered, December 27, 2008 at 10:45 am Link to this comment
(Unregistered commenter)

U$.gov is like M$.vista: con-voluted

In a true democracy with open markets, voters could use globalization to locate and install a better nation Operating System.

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By dihey, December 27, 2008 at 7:33 am Link to this comment

How interesting that you cited Benjamin Franklin. He would be appalled by the cause of the current economic and financial free-fall.

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By P. T., December 26, 2008 at 11:04 pm Link to this comment

Charging exorbitant fines for traffic tickets and parking tickets is another trick for getting revenue without taxing the rich.

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By KDelphi, December 26, 2008 at 10:51 pm Link to this comment

Little Brother—Yes, and, this is exactly what PE Obama said in a news brief—”
The last thing you want to do in a recession is raise taxes”. He said it in response to a reporter who asked him if he was still going to reverse the Bush Tax cuts. Evidently, not.

USAns are so damn tax-phobic! You hear it every day—“welfare! Medicaid !” on and on! I can guarantee you , the amount spent on , even S-CHIP will never come to $850 billion! Not even $15 billion.

Sirota—I dunno, I think that the rich CAN stave off the Grim Reaper.! They can certainly buy better health care, food, etc, and, hence , live longer than the rest of us!

There is nothing left to cut, in the Rust Belt. Even Medicaid uses private HMOs now! They take up 1/3 of the entire cost of Medicaid! Drop the insurance conpanies—not the people..if people could just see what they spend their money on…

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By Yankee, December 26, 2008 at 5:11 pm Link to this comment
(Unregistered commenter)

greenferret,
“My hypothesis: the reason that Paterson and other governors are making middle class and poor people pay for the damage done by Wall Street is that the political power structures to which these governors owe their positions depend on money from Wall Street and multinational corporations.”

Bingo!

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By Little Brother, December 26, 2008 at 1:39 pm Link to this comment

If you would but follow the ascendant star of Pragmatism, you would speedily overcome your confusion, trepidation, and needless consternation in this matter.

For, speaking pragmatically, which is the rational alternative—robbing a vast mass of defenseless and powerless citizens of a small sum, or robbing a powerful, well-armed, and vigilant elite?

The art of the possible dictates that one may shear an entire herd of skinny, scrawny sheep with negligible risk to one’s career and ambitions. 

Why even consider the problematic alternative of waving shears at a corral full of raging bulls and bears?

It is far safer and more expedient to squeeze the poor than soak the rich.

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By P. T., December 26, 2008 at 11:26 am Link to this comment

That is the Keynesian economics I was taught years ago in college.  Government spending provides more stimulus than tax cuts because all of the money is spent and none saved.  Tax cuts for those on the bottom provide more stimulus than cuts for the rich because those on the bottom spend a bigger percentage of their income and save less—the so-called marginal propensity to consume (MPC).

Tax cuts for the rich are less effective because the rich save more and won’t engage in productive investment in a declining economy.

Rich conservatives have always hated John Maynard Keynes, though.

Governor Arnold Schwarzenegger does the same thing in California as New York State does.  He tries to get additional tax revenue from regressive sales taxes, not progressive income taxes.

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By KISS, December 26, 2008 at 11:21 am Link to this comment

In Amerika the richest are the most entitled. In a revolution the richest are the targets. Like water, in the end all things become level.
Why you people that are complaining and groveling can’t feel the rich man’s pain is disgusting.

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By felicity, December 26, 2008 at 11:00 am Link to this comment

Recalling the Depression years, in California at least mail was delivered twice a day; libraries were open seven days a week; museums,state, and national parks were free; schools provided books for every subject (and art supplies and musical instruments) - all this in a starved economy.

It’s not a matter of money, it’s a matter of priorities.

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By troublesum, December 26, 2008 at 9:05 am Link to this comment

One thing Franklin did say was that the concentration of wealth and power in fewer and fewer hands would destroy democracy.

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By samosamo, December 26, 2008 at 9:02 am Link to this comment

Let me see if I read this, there can be no tax increase on the wealthy, right? There will be continued taxpayer support of financial institutions, right? These institutions will still be able to pass out $14,000,000,000.00 in executive bonuses, right?
Now, the middle class will have to pay higher taxes all around the board(income taxes, sales taxes, college taxes/tuition, and license fees), right? And the all social support to make up for the loss of jobs and income are to be slashed, as medicaid is in a lot of states are doing, also with education, right?
Milton friedman must be jacking off in his grave on this. Patterson needs to be horse whipped in public, healed and horse whipped again in a never ending cycle until he gets the idea that supporting the rich fucks in this country with our taxes ain’t going to work and patterson admits it.

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By troublesum, December 26, 2008 at 8:59 am Link to this comment

I think it was Mark Twain who said that nothing is certain but death and taxes.  It’s hard to imagine Franklin saying anything like that.

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By Purple Girl, December 26, 2008 at 6:58 am Link to this comment

I’m guessing but It’s very possible these carnivores have not yet finished cleaning the last bit of flesh off the US Carcass.

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By oldog, December 26, 2008 at 5:41 am Link to this comment

The argument behind trickle-down economics is that big corporations and wealthy investors are best suited to drive the national economy. So we have been pouring the lion’s share of our wealth into the top of the food chain while the economy was growing.

O.K. I’m willing to follow this policy to it’s logical conclusion.

Now while the economy is failing, the wealth will be flowing the other direction, right?

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By Dave Schwab, December 26, 2008 at 3:22 am Link to this comment

A more relevant study would be the effects of high-income tax hikes by governors on the partisan political contributions of wealthy individuals.
My hypothesis: the reason that Paterson and other governors are making middle class and poor people pay for the damage done by Wall Street is that the political power structures to which these governors owe their positions depend on money from Wall Street and multinational corporations.
It’s a lesson that Bill Gates learned after the Microsoft anti-trust suit: enough big campaign donations, and you become too big to fail or pay taxes.

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