Our Real National Pastime – Tom Rossi

Here in the United States, whining about taxes is probably more popular than all of the major sports, combined. Forget about baseball – tax-whining is our true national pastime.

What’s amazing is that the distribution of whining, like so many things, is so illogical. In fact, tax-whining is positively correlated with a person’s or a corporation’s wealth. So, the more you have, the more you whine. It’s sort of like a team in Major League Baseball complaining that, in their run up to winning the World Series, too many strikes were called on their batters.

The favorite topic of tax-whiners is that the top income brackets pay all of the taxes while the bottom half of the so-called “middle class” (nobody want to be labelled “poor”) pays nothing. They love to go on about the 47% – the “takers.” That number was made up, by the way.

As justification, the tax-whiners always point to one statistic… the statistic that makes them look right. Here it is, in graph form:

But this is only part of the tax story. People pay taxes on much more than income. They pay taxes on property, gasoline, and sales tax on purchases of goods. The truth is that, when you add all those taxes up, the bottom 20% of earners pay about 17% of their incomes in taxes, while the top 20% of earners pay about 29%. That’s a significant difference, and I’m sure it frustrates those who live inside a calculator.

But it’s nowhere near the claims that are made, usually by Republicans and Tea Party types. And we should pay close attention to the effect that these percentages have on people. For someone who makes $250,000 per year (for example) paying 29% in taxes means that they are left with $177,500 to live on.

For someone earning 13,000 per year, paying 17% in taxes means that they are left with $10,790 to live on. That’s less per year than what the $250,000 earner has left per month. And, as I’ve argued before, the more money a person has, the more benefits he or she gets from taxes.

To the whiners, I say this: I realized that the prospect of paying an extra $500, or so, in taxes for a year might mean you have to put off buying a house for another month. Or it might mean that your kids actually have to go to public school. Or it might mean you have to buy the Lexus GS instead of the LS. But a difference of even $100 to a family on the receiving end of this shotgun economy might mean that their kids get “new” shoes (maybe from the Salvation Army) when their toes poke out through a hole. Or it might mean that they can afford to heat the house to above 55° in the winter. Or it might mean that they can pay the electric bill for another month or two.

These are two different worlds. What I’m talking about is called “Marginal Utility Theory,” and it’s a part of standard, old-fashioned, neo-classical economic theory. It just gets ignored because it is essentially an “inconvenient truth.” Without putting you to sleep, what this boils down to is that $1000 means nothing to the well-being of a millionaire, but it could mean the world to a poor person, or a poor person’s children.

President Obama and others are in the process of attempting to re-balance the tax code which has, in recent decades, come to favor the rich and the corporations. And now, we have an influx of veterans that often have an incredibly hard time finding a good job – or sometimes any job, for that matter. This is happening while government programs are being cut left and right.

If you really want to “support our troops,” if you are really “pro-life,” then realize that your tax dollars are helping people who really need it. And their health and well-being will come back to benefit you in ways you may not be able to imagine.

-Tom Rossi

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Tom Rossi is a commentator on politics and social issues. He is a Ph.D. student in International Sustainable Development, concentrating in natural resource and economic policy. Tom greatly enjoys a hearty debate, especially over a hearty pint of Guinness.

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List of Shame: The 1%’ers Who Dodge Taxes

Let me be clear from the start: this post is not about all those who occupy (excuse the pun) the top 1% of our nation in terms of wealth. This is about those who pay taxes annually to the tune of $1. There are many who worked hard to amass their wealth and are incredibly philanthropic. As the director of a non-profit, I have been honored with many opportunities to meet and work with such people.

These generous people are propelled by a moral code and take a meaningful portion of their money and time to promote social justice issues, to support those in our society who need help – the elderly, the poor, the homeless etc., and provide cultural and educational opportunities that might not be business-viable without such support. This article is NOT about them. I am sure they pay their taxes, understanding that the services they receive – an army to defend them, a police force, fire and emergency response force, the roads they drive on, the street lights…do I need to go on?

But unfortunately there are those billionaires who seem to take pride out of not paying their taxes. These people manage to show a salary of $1. They include such individuals as Eric Schmidt and Larry Page (both Google), Steve Jobs (Apple) from 1997 until his death last year, Larry Ellison (Oracle) and Meg Whitman (Hewlett-Packard). And apparently, recently wed and start-up-turned-public Mark Zuckerberg (Facebook) is about to join this shameful club.

Ironically, these ‘poor’ folk might actually be eligible to receive the kind of government aid that is available for low-income populations. If they keep their personal income under $13,000 they would be able to apply for an Earned Income Tax Credit. While I am sure they won’t collect on this, I hope they appreciate that the taxpayers provide this safety net, but they probably won’t.

There are many ways to ensure that you can live the lifestyle of the super-rich, amass wealth, and not pay taxes. One of these, for example is to hold multiple home equity loans, which is (I think) borrowing money against the values of many of your homes and property. This is debt and therefore not taxable, but it is money for them to jet around and live the life they want. In a country where good folk are losing their homes (their only homes) to foreclosure, isn’t this ironic? There are many other ways and I am not the person to expound on them.

Let us assume that one day the Zukerbergs decide to purchase an island in the Caribbean. Most people who show an income of $1 might be more inclined to buy food, clothes, medical insurance etc., but someone with significant net worth need only cash in a few shares (Facebook anyone?) to make the purchase. For sure, he might have to pay 15% capital gains taxes, but ain’t life a bitch.

To be perfectly clear (once again), I do not resent these people their wealth. I have a deep respect for the philanthropists that I have a relationship with. But I believe in paying taxes and I want everyone who can afford it to pay their share and pay it with grace.

Those billionaires who take pride out of cheating (yes, cheating) our society out of their taxes are screwing not only those of us who pay taxes today, but also failing to help prevent the nation accumulate debt that our children will be saddled with.

For some reason, what hurts even more, is that these people are paying more money for financial advice that helps them avoid tax exposure than I earn in a year…before I pay my taxes.

I work hard for my salary and pay my taxes as I should. I have a right to be angry.

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Alon Shalev is the author of The Accidental Activist and A Gardener’s Tale. He is the Executive Director of the San Francisco Hillel Foundation, a non-profit that provides spiritual and social justice opportunities to Jewish students in the Bay Area. More on Alon Shalev at http://www.alonshalev.com/ and on Twitter (@alonshalevsf).

Warren Buffet – Tax Cuts

A couple of weeks ago, Warren Buffet wrote an article in the New York Times that struck a cord. He begins:

“OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.”

Warren Buffet - very honest account.

The disparity of how much we all pay in taxes is incredibly annoying.  Again, Warren Buffet:

“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”

Class Wars

I agree with the Republicans. I don’t want to pay more taxes but i do want everyone to pay the same percentage. I fail to understand how so many people who define themselves as patriotic cannot see that they are hurting their country. The pride that people take, the money they throw at accountants to help them find every loophole, disgusts me.

The problem is that those who legislate for us tend to be a part of this higher income group, or rely on their donations to keep them in power, since it is money not actions that fuel this democracy. Warren Buffet acknowledges as much when he says: “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

The Majority Want Equal Responsibility

Who among the rich and the politicians would support paying the same percentage of taxes that I do? Probably only those who believe in their country and are patriotic. Sadly. wearing a flag pin on your jacket lapel is not enough.

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Alon Shalev is the author of The Accidental Activist (now available on Kindle) and A Gardener’s Tale. He is the Executive Director of the San Francisco Hillel Foundation, a non-profit that provides spiritual and social justice opportunities to Jewish students in the Bay Area. More on Alon Shalev at http://www.alonshalev.com/and on Twitter (#alonshalevsf).