Ever long for the days of Dow 1000? If you have a job but no money, maybe you should.
Felix Salmon has a great post today about, basically, why we need to tax capital gains at a higher rate. I made a rare Tuesday appearance on "America Now" — the radio program hosted by the always lively Andy Dean, with whom I usually discuss and debate economics and business on Fridays — and wound up talking about this very topic, as it relates to Mitt Romney's taxes.
In a nutshell, capitals gains is income derived from investment returns — selling stocks and bonds, or collecting dividends, that type of thing. The argument in favor of keeping them lower than income tax is that people with money to invest, i.e. the affluent, need an incentive to keep investing. The idea is that a virtuous circle will be created, with investment creating jobs and jobs creating income and that income being invested, by people who wouldn't otherwise invest. Presto! Economic growth!
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Sorry, wealthy corporate folk. President Obama wants to take away your precious private jet depreciation schedule.
President Obama released his 2013 budget today. Conveniently, the U.S. Treasury emailed me a summary of the so-called "Green Book," its explanation of the President's recommendations. It's fairly dense. But if you're rich, this is the part you'll want to study, because it's all about how the wealthy in America are taxed, right down to their private jets and interest on hedge-fund earnings (I've edited for length):
Allow the 2001 and 2003 income tax cuts to expire (including the low tax rate on dividends) for households making more than $250,000 per year and restore the estate tax to 2009 levels....Sustaining these unaffordable high-income tax cuts would require either borrowing more, increasing taxes on the middle-class, or deep cuts in other parts of the Budget that help seniors, the middle-class, and the most vulnerable. The President’s Budget would instead reflect shared sacrifice by allowing income tax rates that exclusively affect upper-income households to return to the levels they were at throughout most of the 1990s...
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It’s hard to look at the wealth worshiping of American culture and conclude that Americans hate the rich. Rather, Americans hate people who become rich through rent-seeking, and then use their power and influence to pull up the ladder for everyone else. Financial elites crashed the economy, but rather than suffer any adverse consequences for their reckless behavior, they’ve prospered. Worse, they’ve yet to show any contrition for their actions, even as millions of Americans—who had no part in the sideshow—languish in a wounded economy.
This is the end result of what some have called the "financialization" of the U.S. economy, with the financial-services sector accounting for a historically disproportionate share of GDP.
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The top of a form 1040 individual income tax return.
I'm generally a fan of NPR's Planet Money, but I'm a little perplexed by what one of its founders, Adam Davidson, has been writing since he took up residence at the New York Times Magazine.
This weekend, for example, he argued that the middle class needs to get over the idea that rich people and corporations should pay higher taxes. And while he runs the numbers quite well, the conclusion are, to say the least, troubling:
It serves the interest of both parties to argue about taxes on corporations and the wealthy because neither wants to discuss the alternative, which is where things get touchy. To solve our debt problems, we have to go to where the money is — the middle class. People who earn between $30,000 and $200,000 a year make a total of around $5 trillion and pay less than 10 percent of that in taxes (owing mostly to tax incentives and the fact that most families make less than $68,000, where larger tax rates begin). Increasing the middle-class tax burden an additional 8 percent, however, would actually have a bigger impact than taxing millionaires at 100 percent.
It's a tough but manageable financial math problem. And America's middle class is actually a lot luckier than its counterparts in Greece, Spain or Ireland, who will be paying higher taxes while their countries' economies shrink, or stagnate. Even the Fed's dark forecasts anticipate that the U.S. economy will return to healthy growth (about 3 percent annually) within a couple of years. Unless we hold on to the fantasy that the solutions to our problems lie in the bank accounts of rich people and corporations.
As the economic downturn grinds on, with really pitiful GDP growth and really high unemployment — it's 12.4 percent in L.A. county — a debate about whether the vaunted American middle class is being obliterated has gained momentum. Elizabeth Warren, now running for Senate in Massachusetts, has been hammering on this for years. So have many other left-leaning and progressive economists. Others are asking questions. Stephen Rose points out that the problem with the middle class is that there's a structural shift in the work that's available to less-educated men.
KPCC's Patt Morrison Show recently took a look at the situation, indirectly, with a segment on the "New Normal" in the economy and so-called "two tier" wage structures that have been adopted in unionized industries, most prominently the car business. UCLA's David Lewin said that the two-tier gambit, in which new workers are hired at lower wages or with less lavish benefits that older workers, can be used to establish the lower tier as the only tier, as older workers are phased out.