Celebrate The Income Tax By Buying 2.41 Big Macs

Over the weekend, USA Today marked the anniversary of the income tax by publishing an article by Al Neuharth (“How income tax has changed in 100 years”), which was followed by a “Feedback” section. Since apparently no media organization can discuss taxes without interjecting the reactionary opinion of Grover Norquist, here is what the paper included with Neuharth’s story:

“All consumed income should be taxed once at one low, flat, internationally competitive rate. High marginal tax rates and redundant taxes on savings retard economic growth and make us poorer.”

– Grover Norquist, President Americans for Tax Reform

What Norquist means by “consumed income” is that part of one’s income that will be spent on goods and services and not saved. For many working class folks, this means almost all of their income, since these days they have to spend most or all of it just to get by.

Many conservatives believe that such a wealthy-friendly, “low, flat” tax rate as Norquist proposes would make us more “internationally competitive.” What does that mean?

Perhaps we can get a glimpse into what conservatives mean by saying that America needs to become more globally competitive by looking at what happened on Bill O’Reilly’s Reactionary Review on Friday night.

Laura Ingraham, subbing for O’Reilly, took a swipe at unions, when it was suggested by Demos think-tanker David Callahan that unions would help mitigate the enormous transfer of America’s wealth into the hands of the 1 percent:

INGRAHAM: Stronger labor unions? How do we compete with China, Vietnam, South Korea, India, when we are going to have stronger labor unions that insure that we have more work place regulations, more ways that business has to pay more money to make ends meet? The two things don’t add up.

Ahh. That’s what they mean by making us more internationally competitive: competing with low-wage economies like China, Vietnam, and India. I get it now. Even if it doesn’t add up for Ingraham, it’s starting to add up for me:

1. Conservatives believe that we need to keep taxes low on the wealthy in order to make us more internationally competitive.

2. And they believe we have to keep wages low for workers to make us, uh, more internationally competitive.

Now we can add it all up: The rich get richer and the poor get poorer, all in a race to the bottom for most Americans.

Speaking of competing with low-wage countries, Princeton professor of economics, Orley Ashenfelter, published a study last year famously using a “Big Mac Index,” which was an attempt to compare wages across the world by measuring “the number of minutes it takes for a McDonald’s worker to earn enough money to buy a Big Mac sandwich.”

Let’s look at what the professor found (red highlight mine):

Big mac index

Laura Ingraham asked, “How do we compete with China, Vietnam, South Korea, India“? How, indeed. In the U.S. the “McWage” is $7.33 an hour and will buy almost two and a half Big Macs. In China the McWage is 81 cents an hour and will barely buy half a sandwich. In India the McWage is even lower (45 cents) and will buy one-third of a Big Mac.

So, in order for us to “compete” with such countries we will definitely need to lose our affinity for Big Macs and then win the race to the bottom that people like Norquist and Ingraham and other conservatives would have us run.

Finally, I do want to include another quote from the Feedback section of that USA Today tax article, this one from someone who gets it:

“Our tax system’s evolution has produced a middle-class nation that takes care of our elderly, educates our children, protects our environment, etc., etc. These blessings are well worth the price.”

– Robert S. McIntyre, Director Citizens for Tax Justice

Mark Cuban And The “Democratic” Romney

Dawn Sticklen, a new contributor in the comment section, sent this in several days ago:

Did any of you have an opportunity to read Mark Cuban’s post yesterday in HuffPost? I think you might find it both interesting and enlightening. He gives a very good comparison of business related practices in government situations. Here is the link:http://www.huffingtonpost.com/mark-cuban/romney-election-2012_b_2020584.html.

My response:

Dawn,

Wow! Thanks for turning me on to that “ironic” Mark Cuban piece.

I really loved his discussion of the benefit to businesses provided by ObamneyCare, in terms of the relative “certainty” related to health care costs and benefits it provides.

And his advice to a “Democratic” Mittens, that he should be touting his investment savvy in terms of what he could do with all that “DIRT CHEAP” money from China, especially investing it in “American companies,” was right on:

[DEMOCRATIC ROMNEY:] No one knows how to get a return on capital better than I do. I’m great at it. Look at my history…We need to invest in new technologies. We need to invest in research and development. We need to invest in new medicines and health care options. Now, some people might say that it will be very difficult to pick winners and losers and they are right. It will be very difficult. There will be losers. More importantly there will be winners. Winning investments will create jobs. Winning investments will create new technologies and medicines that improve the standard of living for all of us and does so at a lower cost. We won’t compete with private investment, we will complement it.

How commonsensical is that? It is precisely what President Obama has been saying for at least four years.

But my favorite part of the piece was this, which Cuban put in the mouth, again, of a Democratic Romney:

My Republican friends on the other hand, believe that if you reduce tax rates, large corporations hoarding cash will miraculously bring that cash back to the U.S. and invest and hire. Trust me. I know investment. That won’t do it. They can borrow money so cheaply there is no reason to bring it home and it certainly won’t lead to jobs. If they had something to invest in that would generate a return, they would. They haven’t.

Again, they won’t invest in America. I will.

As a long-time investor, I have never turned down an investment because of tax rates. I was just as successful investing when capital gains were much higher. I was just as successful investing when individual tax rates were much higher. No smart investor turns down a good deal because of tax rates. I always remind people you only pay taxes on profits. And if you make more than $1 million in profits, whether through capital gains or ordinary income, you should pay more taxes.

As I said, wow. Thanks for calling my attention to that excellent article.

Duane

Doodoo Economics

Republicans never tire of telling us that the economic problems we have can mostly be fixed if we just let rich folks keep more of their money. Cut their taxes and these apparently fair-weather patriots will invest their excess dough in America and, voilà, all boats will rise in the resulting swell of economic goodness. Blah, blah, blah. We’ve heard it a gazillion times, including from the lips of Mitt Romney.

Given that, I found Romney’s recent exchange with Scott Pelley of 60 Minutes (the Romney interview wasn’t Pelley’s finest hour of journalism, to be sure) interesting, when Pelley asked him about taxes:

PELLEY: What would the individual federal income tax rates be? 

ROMNEY:  Well, they would be the current rates less twenty percent. So the top rate, for instance, would go from thirty-five to twenty-eight. Middle rates would come down by twenty percent as well. All the rates come down. But unless people think there’s going to be a huge reduction in the taxes they owe, that’s really not the case because we’re also going to limit deductions and exemptions, particularly for people at the high end. Because I want to keep the current progressivity in the code. There should be no tax reduction for high income people. What I would like to do is to get a tax reduction for middle-income families by eliminating the tax for middle-income families on interest, dividends, and capital gains. 

PELLEY:  The tax rate for everyone in your plan would go down. 

ROMNEY:  That’s right. 

PELLEY:  But because you’re going to limit exemptions and deductions, everybody’s going to essentially be paying the same taxes. 

ROMNEY:  That’s right. Middle-income people will probably see a little break, because there’ll be no tax on their savings.

[...]

PELLEY:  And corporate tax rates? 

ROMNEY:  Corporate tax rates, also, I’d bring down and with the same idea let’s get rid of some of the loopholes, deductions, special deals, such that we’re able to pay for the reduction. I don’t want a reduction in revenue coming into the government. 

Let’s forget for a moment about Romney’s vagueness on just which loopholes he will close. When compared with the philosophical presumption of conservatives, that giving wealthy people more money incentivizes them to create jobs, Romney’s comments are incoherent:

I want to keep the current progressivity in the code. There should be no tax reduction for high income people.

And,

Corporate tax rates, also…I don’t want a reduction in revenue coming into the government. 

One is compelled to ask: If high-income people don’t get a tax reduction, then how does Romney’s voodoo magic work? If corporations will still be forking over the same amount of revenue, how will that inspire them to salute the flag and spew forth their hoarded cash? Huh?

It would be one thing to argue (albeit falsely, as the CBO just figured out) that giving rich folks and corporations big fat tax breaks would make the economy grow—the old Reagan, supply-side voodoo—but it’s quite another to argue that simply rearranging the tax rules but still collecting the same amount of revenue will cause the economy to grow.

That brand of voodoo is distinctly Romney’s, as far as I can tell. It makes no sense to me. Heck, it makes much less sense than the old voodoo. So, let’s call Romney’s economic thinking “doodoo economics,” the idea that you can get rid of unspecified loopholes, lower rates, and still have the same amount of revenue coming in, which will both create economic growth and not increase the deficit. Pee-yew!

But the truth is, as almost always with Romney, he is lying.  For one thing, he said he wants to “keep the current progressivity in the code.” Except that less than a week ago he said the following, which earned him a Pants on Fire!:

I know there are some who believe that if you simply take from some and give to others then we’ll all be better off. It’s known as redistribution. It’s never been a characteristic of America. 

Obviously, a progressive tax code is redistributive. So, Romney himself believes in redistribution, if what he told Scott Pelley about keeping the tax code progressive is true. But then he says it’s not American. Between the two, what he said last week versus this week (always a choice with Mittens), which does Romney really believe? My money is on what he said last week, as it better reflects the feelings of Rush Limbaugh, Sean Hannity, Ann Coulter, and Glenn Beck, who, when it comes down to it, run the Republican Party.

The main lie, though, the one that could have practical effects should Romney win, was advanced when Romney told Scott Pelley that his tax plan, at least as he has tried to sell it, would be revenue neutral. This particular lie is being funded by millions of dollars of Rovian money, via Crossroads GPS. Apparently, Republicans believe money can triumph over math.

But even one of the most respected conservative economists in the country, Martin Feldstein, who tried like hell to make Romney’s doodoo economics add up and smell good, could only essentially confirm what other, less conservative, economists have discovered. Feldstein’s study, as TPM pointed out, found,

that there isn’t enough money in tax loopholes for people in top tax brackets to offset the trillions of dollars Romney’s promised rate cuts would cost. Perks that benefit middle income earners like the mortgage interest deduction, and deductability of employer-based health insurance, charitable giving and state and local taxes would need to be limited or eliminated.

As Bill Clinton told us at the Democratic convention, past Republican economic policies have “defied arithmetic” and have led to much deficit spending. He argued,

We simply cannot afford to give the reins of government to someone who will double-down on trickle-down.

And in Romney’s case, his version of trickle-down is even weirder and more arithmetically challenged than ever.

The Romney Tax Return: Turning A Lie Into A Truth And A Truth Into A Lie

Romney finally released his 2011 tax returns—ain’t no more comin’ folks—and it’s more good news for the Romneys:

Republican presidential nominee Mitt Romney earned $13.69 million in 2011, mostly income from his investments, and paid $1.9 million in taxes for an effective tax rate of 14.1 percent, his campaign announced Friday.

Romney earned $6.8 million from capital gains and another $3.6 million in interest, according to his tax return. None of his income came from wages, the primary source of income for most Americans. Capital gains are taxed at a substantially lower rate than wages and salaries for high-earners.

The man actually earned $260,390—think of that!—for “sitting on the board of Marriott International,” the Washington Post reports. Since he was running for president in 2011, what the hell could he have done to earn that much mulla?

Sitting on the board of Marriott for a cool quarter-mill? Damn.

There is much speculation about that should Mittens lose in November, he will go back and revise this return to recover some taxes paid that—believe it or not—he didn’t have to pay. The Post explains:

The Romneys only claimed a tax deduction for $2.25 million of those charitable contributions to engineer a higher tax rate than they otherwise would have paid. This move was to “conform” to the candidate’s statement in August that he paid a federal income tax rate of at least 13 percent of his income in each of the last 10 years, R. Bradford Malt, Romney’s trustee, said in a statement released by the campaign.

Romney campaign spokeswoman Michele Davis defend this bit of tax magic, and the fact that Mittens previously said he would not pay “a dollar more” than he owed, saying that Romney,

has been clear that no American need pay more than he or she owes under the law. At the same time, he was in the unique position of having made a commitment to the public that his tax rate would be above 13 percent. In order to be consistent with that statement, the Romneys limited their deduction of charitable contributions.

What does it say about the man and his riches that he has the power to turn a lie he told earlier in the campaign into a truth, at least for now? Money can’t buy love but it can turn a lie into the truth just like that!

The problem is that turning one lie into the truth made him a liar on something else he said, unless, of course, he does go back and re-engineers his return so as not to pay a dollar more than he has to.

And by the way, Romney released his estimated effective tax rate for the past 20 years and guess what? He says his effective rate was 20.2%, still mighty damn low for a man making bank.

Of course he won’t be releasing any of those returns so we can see for ourselves. Thus, despite the fact there is no reason to do so, we will just have to take his word for it because, dammit, there’s somethin’ in them there returns he doesn’t want us peons to see.

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