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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries tagged "Taxes"

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Rick Perry: Reverse Robin Hood

October 31, 2011 ·

Texas governor Rick Perry has unveiled, with suitable hoopla, his Presidential campaign’s tax plan. His new plan, released last week, differs on the details with the tax plans his rivals for the GOP nod had earlier offered up. But all the plans end up in the same place. They all generate huge tax savings for America’s rich.

A reporter asked candidate Perry if these windfalls for the wealthy — “millions of dollars” in savings for some taxpayers — bothered him at all. Perry shrugged. His response: “I don’t care about that.”

Those of us who do care about “that,” about policies that widen our already staggering economic gaps, now have two new resources. In this week’s Too Much, we review the first, a sprightly UK think tank online pamphlet that offers “ten reasons to care about economic inequality.”

The second, an engaging 17-minute video from the famed epidemiologist Richard Wilkinson, charts how inequality is eating away at how well — and how long — we all live. Rick Perry will likely never watch his video. The rest of us should.

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All Money Trails Lead to Wall Street

October 25, 2011 ·

Federal Reserve data shows that mortgage and consumer interest charges eat up around 15 percent of the average household income. Photo by  wwarby.How much of our income goes to Wall Street? Anthropologist David Graeber, a specialist in the study of debt, recently set out to find out how much of an average American income ends up “appropriated” by the financial industry “in the form of interest payments, fees, penalties, and service charges.”

Graebner would quickly find that no government agency is actually compiling all that exact information. But mortgage and consumer interest charges alone, he discovered from Federal Reserve data, are eating up 15 to 17 percent of average household income, and that figure doesn’t include either student loans or “penalty fees” on bank and credit card accounts.

Overall, Graebner estimates, at least one dollar of every five Americans earn is “now likely to end up in Wall Street’s coffers in one way or another.” That’s substantially more than average Americans pay in federal income tax. Maybe we need some “tax reform” on all the levies Wall Street imposes on us.

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Do We Need 'Student Loans' for Billionaires?

October 18, 2011 ·

Polly Toynbee, a commentator for Britain’s Guardian newspaper, plays a role quite similar to Paul Krugman, the Nobel Prize-winning economist who doubles as a New York Times columnist. Both regularly advance well-reasoned — and even inspirational — attacks on the concentration of income and wealth that have left the United States and the UK the world’s two most unequal developed nations.

Both also rate as eminently pragmatic. They champion the politically possible. But we live today in tumultuous times, and that may be why Toynbee last week found herself celebrating a proposal for taxing the rich that rather boldly stretches most anybody’s sense of political practicality.

Guardian columnist Polly Toynbee visits last year's occupation of University College London. Photo by ucloccupation.Why not levy, Toynbee asked, a one-time 20 percent tax on the total wealth of Britain’s richest tenth, a tax “graduated” to ensure that the richest 1 percent pay at a higher rate than households at the bottom of this top 10 percent?

This one-time “windfall taking” tax, Toynbee suggested, could help “save services, save jobs, expunge the national debt, kick-start growth, and set the economy on the road to recovery.”

“The worst ever crisis,” she added, “needs better solutions than any currently on offer for the grim decade ahead.”

The United States, of course, faces that same grim decade. And that makes Toynbee's proposal a matter of more than idle interest. Could a one-time 20 percent levy on the wealth of the rich really make an appreciable difference?

The source of Polly Toynbee’s wealth tax proposal, Glasgow University’s Greg Philo, certainly thinks so. Philo first laid out the proposal last year and even had a national poll commissioned to gauge public reaction. That survey found 74 percent of the UK population approving.

Britain’s richest 10 percent currently hold £4 trillion — about $6.3 trillion — of the UK’s £9 trillion in personal wealth. A 20 percent tax on that £4 trillion would raise £800 billion, enough, says Philo, to “pay off the national debt” and “avoid the need for deep and harmful cuts” in public services.

Philo’s plan anticipates one major objection. Few affluent households have 20 percent of their wealth in readily available cash. They have much of their wealth in property of various sorts that would have to be sold, perhaps at a great loss if all the wealthy had to sell at once.

Not a problem. The wealth tax, under Philo's plan, would not have to be paid all at once. But if a wealthy household wanted to delay payment, that household would have to pay interest on its outstanding wealth tax liability.

“It would be akin,” says Philo, “to a student loan for the rich.”

A 20 percent tax on the wealth of Britain’s richest 10 percent, points out the Guardian’s Polly Toynbee, would essentially “push back downwards the money hoovered upwards in the last decade.”

The billions “hoovered upwards,” Glasgow University’s Philo adds, have largely “been directed into inflated property values.” A wealth tax could recirculate this “dead money” into government expenditures that could stimulate growth.

A one-time 20 percent wealth tax, Philo sums up, “offers a real alternative” that would “move debt off the government's books, using money that is largely trapped in the housing market, from people who will not miss it.”

Could such a wealth tax have a similar impact on the United States? The U.S. numbers — on wealth distribution — make that question a natural. Our richest actually hold a far greater wealth share than Britain’s.

In the UK, the top 10 percent hold 44 percent of their nation’s personal wealth. In the United States, notes an analysis from the Economic Policy Institute released earlier this year, just the top 5 percent held 63.5 percent of the nation’s wealth in 2009. The top 1 percent alone held 35.6 percent.

As of April 2011, NYU economist Nouriel Roubini and two colleagues reported last week, total U.S. household net worth amounted to $56.8 trillion. If we assume that the distribution of U.S. wealth has not changed since 2009, our latest year with distributional figures available, then the top 10 percent today hold 75.1 percent of the nation’s current wealth, or $42.7 trillion.

A 20 percent tax on this wealth would raise over $8.5 trillion, a sum that equals about 85 percent of America's publicly held national debt.

And America’s richest 1 percent? How would they be faring if they had to pay a one-time 20 percent wealth levy? Their average remaining net worth would actually be higher, after adjusting for inflation, than the net worth of America’s richest 1 percent in 1983. Indeed, the top 1 percenters could pay a 25 percent wealth tax and still hold more wealth than their 1983 total.

Our next decade need not be grim. Our next decade does need to be more equal.

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WIN America Coalition Seeks to Pad Pockets with "Tax Holiday"

October 11, 2011 ·

Businesspeople WinAt a moment in U.S. history when the public and members of Congress are searching for new revenue streams that could be invested in ways that help create jobs in this country, a coalition of firms has launched a campaign for a massive tax holiday on overseas corporate profits. The WIN America campaign was formed earlier this year to aggressively lobby for a second tax holiday on repatriated offshore funds.

Last week WIN America succeeded in getting members of the Senate to introduce a bill that would grant a tax holiday on offshore profits.

In 2004, Congress gave them a tax holiday that allowed 843 companies to reduce their tax rate from 35 percent to 5.25 percent on $312 billion in offshore profits.

What did Americans get in return? Last week, our organization, the progressive Institute for Policy Studies, released a report showing that 58 companies that received 70 percent of the tax windfalls didn't boost employment. In fact, they actually destroyed a total of nearly 600,000 jobs.

WIN America has invested $50 million in lobbying Congress for hundreds of billions of dollars of tax breaks that would flow from a tax holiday. They have hired 42 former congressional staffers who worked for the House Ways and Means Committee or the Senate Finance Committee, the two legislative bodies that write the nation’s tax rules. WIN America is made up of 18 publicly traded corporations and 24 trade associations, including the U.S. Chamber of Commerce.

Fifteen of the eighteen corporations leading the charge for a massive tax holiday on offshore funds under the moniker “WIN America” repatriated a total of $55 billion after the 2004 tax holiday. Among WIN America’s supporters, only one, Brocade Communications, has not announced job cuts since then. One additional firm, Devon Energy, had only minimal layoffs related to an office closing.

The supposedly "one-time" tax holiday in 2004 didn't curb these corporations from continuing to squirrel profits away in overseas tax havens. The offshoring of capital has soared at the 18 WIN America corporations. Collectively they had $54 billion in offshore funds following the 2004 repatriation; today they have $205 billion, a whopping 279 percent increase.

Collectively these 18 corporations stand to save an estimated $61 billion if they pay a tax rate of 5.25 percent, rather than the 35 percent they would otherwise owe.

WIN America Coalition Member Companies

WIN America member, ranked by change in global employment

Amount repatriated, 2004-2005 ($millions)

Offshore funds, 2010 ($millions)

Change in global employment, 2004-2010 (from 10-K)

Change in U.S. workforce, 2004-2010

Announced layoffs, 2004-2011

Pfizer

40,100

48,200

-51,826

n/a

58,071

Eastman Kodak

580

2,398

-36,000

-19,600

19,600

Duke Energy

500

1,200

-10,335

n/a

expected

Brown-Forman

277

390

-2,200

n/a

250

CA Technologies

584

685

-1,900

-800

1,000

Cadence

500

133

-300

n/a

225

Loews

0

598

-200

n/a

449

Devon Energy

545

4,300

925

n/a

50

Brocade

78

338

3,491

n/a

0

Broadcom

0

1,711

5,577

n/a

200

Adobe

500

1,900

5,975

n/a

1,280

Qualcomm

500

10,600

8,200

n/a

some

Google

0

17,500

21,379

n/a

300

Cisco Systems

1,200

36,700

25,760

26,300

6,500

EMC

3,000

5,100

25,800

n/a

2,400

Microsoft

780

44,800

29,000

15,000

5,800

Oracle

5,100

16,100

29,128

-6,544

6,500

Apple

755

12,300

31,800

n/a

1,600

Total

54,999

204,953

84,274

 

104,225

 

Take Action. Tell your member of Congress that you oppose giving these corporations another "Tax Holliday."

When IPS and the Heritage Foundation Agree that Something's a Bad Idea, It Probably Does Stink

October 5, 2011 ·

Sens. Kay Hagan (D-NC) and John McCain (R-AZ) have announced plans to introduce a bill tomorrow that would let U.S. companies bring home as much as $1.4 trillion of overseas profits at a steeply reduced tax rate.

However, a new report by the Institute for Policy Studies says this proposed corporate "tax holiday" is unlikely to spur any net job growth. Surprisingly, IPS released its report almost simultaneously with a new paper from the conservative Heritage Foundation that draws the identical conclusion. Tax holidays don't create jobs.

"When Heritage and IPS, two think tanks on opposite ends of the political spectrum, actually agree on something, policymakers should take notice," said Sarah Anderson, a co-author of America Loses: Corporations that Take 'Tax Holidays' Slash Jobs, the new IPS report. "Our solutions to the problem are polar opposites — we want corporations to pay the full existing tax rate while Heritage wants to permanently lower them. But we welcome their honest assessment that the proposed tax holiday will not create jobs."

America Loses shows that most of the companies that snagged a big tax break in 2004, the last time Congress gave them this kind of deal, actually reduced their national and global workforces.

In fact, 58 of the large corporations that took tax holidays after the 2004 congressional action went on to shed almost 600,000 workers. This downsizing didn't stem from recession-linked red ink. These 58 companies today maintain combined cash reserves of more than $450 billion.

Take Action: Tell Your Member of Congress "No Corporate Tax Holidays"

Emily Schwartz Greco is the managing editor of OtherWords, the Institute's national non-profit editorial service.

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