taxes Archives — Page 19 of 43 — San Francisco Bay Guardian Archive 1966

Let cities raise taxes

Zelda Bronstein

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April 21, 2011

There’s a move in the California legislature to allow local government much broader authority to raise taxes — and the GOP types have their panties in a major bunch.

Dan Morain at the Sacramento Bee says it’s all a tactical move: The Republicans won’t allow any tax hikes at the state level, but the Democrats, by simple majority vote, can authorize cities and counties to do all kinds of things that the no-tax crowd hates. Maybe, Morain suggests, this is just a way to bring the recalcitrant Reps back to the budget table. But I don’t know about that: Senate President Darrel Steinberg may be playing games, but his legislative partner, Budget Chair Mark Leno, has been pushing for years to allow cities to raise their own vehicle license fees.

Leno’s brought that bill back this year, and it’s going to commitee next week. And I have to say, tactical or not, the Steinberg bill (PDF) is one of the best things I’ve seen out of Sacramento in years. It would allow local government agencies to impose an income tax, a car tax, an oil severance tax, and a series of excise taxes. It could make the budget deficit in San Francisco vanish.

I agree with Brian at Calitics: There are problems here.

What we’ll end up with is Bay Area counties with more stable revenue streams, while the Central Valley faces ever deepening cuts. The inequality would be both troubling, and possibly violate some laws.

And if the state Legislature weren’t paralyzed by a ridiculous two-thrids rule and a handful of die-hard no-tax Republicans, we might not need to go in this direction. But even so, it’s fair to ask: Why can’t the San Francisco voters decide they’d rather pay higher taxes than see the schools collapse?

It’s the same reason I’ve argued in favor of splitting California into three states. Those of us who live in the Bay Area have a very different vision of government than those who live in the no-tax districts. Why should they be able to hold us hostage?

Yes, there will be inequities. But there are only a few parts of the state that so utterly lack economic activity and wealth that there simply is nothing to tax (and the state would have to help them out). Much of Ag Land (and much of no-tax burbland) has plenty of wealthy people and businesses. The poverty is as much a result of inequality as it is a bum economy. In other words: those places can raise taxes, too.

And maybe over time the people in those crumbling tax-free towns will look over at San Francisco, with good schools, healthy, well-educated kids, clean, well-maintained streets, professional fire and police services and the like and say: Why can’t we have that?

And the answer will be: You can.

Battling the banksters

Andrew Lam

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April 19, 2011

1

news@sfbg.com

Late in the afternoon of April 15, in the quiet of the huge round Bank of America lobby on Montgomery Street, a young woman suddenly yelled “Bank of America made $4.4 billion in profits in 2009 but paid zero in taxes!” About two dozen bystanders converged in a synchronized dance routine, kicking, strutting, and shimmying to lively music from the Brass Liberation Orchestra while supporters held up signs reading “tax evader.”

The event was one of hundreds of “Tax Day” demonstrations around the country on April 15 and 18, sponsored by progressive organizations US Uncut, MoveOn, the AFL-CIO, and many more. US Uncut identified the targets as “corporate tax cheats and unnecessary and unfair public service cuts.” They point to big corporations’ use of offshore tax havens and specially tailored loopholes to avoid paying federal taxes while Congress is slashing popular programs from education to the Environmental Protection Agency.

Barely two weeks before, on April 4, thousands of union members and their allies gathered in Oakland and San Francisco in two of more than 1,000 rallies across the country expressing support for embattled workers in Wisconsin and elsewhere, protesting cuts in public programs, and pushing a simple solution to the country’s economic woes: “tax the rich.”

“I think what’s happening is the rebuilding of a movement,” said Josie Camacho, acting executive secretary-treasurer of the Alameda Labor Council. Nina Rubin, a participant in the April 15 Bank of America protest, agreed. “People started rising up in Wisconsin and now sparks are flying all around the country.”

At another Bank of America office on Market Street targeted by protesters on April 15, Oakland resident Peggy Maxwell said she heard about the flash mob actions on Facebook and joined “because these cuts [to public services] are going to bring down the country. Unless we make corporations contribute at least their share to offset their bad decisions, there’s no hope for anyone not in the top 1 percent.”

Marylee Fithian, 75, traveled from Guerneville to participate “because I am a senior who is going to be screwed by these Republican cuts. They claim we’re broke, but we’re not. If all the corporations paid taxes and we put higher taxes on the very rich, we wouldn’t have a problem at all.”

Cynthia Reed, a Hyatt Regency telephone operator active in UNITE-HERE Local 2, said she joined the April 4 march in San Francisco because of the attacks on public employee unions in Wisconsin. “If that governor gets rid of the unions, who will stand up for the people’s rights, their health care, their pensions, their wages?” she said. “Corporations have their lawyers — who will represent the people?”

Beyond the immediate events, “people really wanted to do something about the crisis we’re in and the right-wing manipulation of the political infrastructure,” Camacho said. Bob Mandel, an activist in the Oakland Educators Association, said that “lots of people really resent the [2008] bailout [of banks]. The anger is still there,” fueled by ongoing economic pressures.

San Francisco resident Christopher Roesner participated in the April 15 Bank of America flashmob wearing a business suit and sporting a faux Bank of America badge identifying him as a specialist in “tax accountability.” Formerly a nonprofit finance director, in the current recession, “I lost my job, I lost my house, I lost my health insurance,” he said. “I was forced into bankruptcy while the banks got all the money. That’s a typical American story now.”

In people’s lives, the issues converge. Because of the economic crisis, said UNITE-HERE Local 2 activist Reed, employers are “trying to take away our wages, make us pay for pensions and health care — and the cost of living is still going up.” Meanwhile, “as people get lower salaries, the [public] programs that are there to help people are being taken away.”

With these overlapping concerns, groups that don’t typically work together joined in the recent protests. Unions representing electricians, grocery store workers, and other private-sector employees defended public-sector workers and denounced cuts to public services at the April 4 rally in Oakland. The AFL-CIO joined with MoveOn to sponsor the nationwide “Tax Day” protests on April 18. US Uncut leader Joanne Gifford says she’s been meeting with labor and community groups.

The Alliance of Californians for Community Empowerment (ACCE), along with another community organization, People Improving Communities through Organizing (PICO), and Service Employees International Union (SEIU) Local 1021 joined together in a statewide campaign against foreclosures and for “bank accountability.” Camacho cited this coalition as an example of union and community “partnerships getting deeper,” adding, “We have members [in Local 1021] who have lost their homes in Oakland” to foreclosure.

The coalition brought about 100 people to Sacramento April 5 to lobby for bills that PICO says are “aimed at protecting homeowners from fraudulent bank foreclosure practices and making banks pay their fair share for the housing and foreclosure crisis.”

The combination of the 2008 federal bailouts, the ongoing foreclosure crisis, and revelations of “tax evasion” has made “the banksters” a special target of progressive anger. Under the radar, smaller protests aimed at banks continue.

The Oakland Education Association (OEA), for example, faced with the layoff of 600 Oakland teachers, scheduled a sit-in at the downtown Oakland Wells Fargo branch April 4 with the slogan “Bail out schools, not banks!” Forewarned, bank officials closed the office for three hours, so about 100 Oakland teachers and their supporters protested outside. The OEA wants Wells Fargo to use its influence to increase state support for education with money raised through progressive taxation and to stop foreclosures and reduce the debt of “underwater” mortgage holders to the current value of their houses.

On April 12, students at Berkeley Community College held a two-day “Move Your Money” teach-in. Student Gabriella Deyi, treasurer of the Civic Engagement Club, said cuts to the community college budget will mean higher tuition, thousands of students turned away, and services slashed. “Corporate bankers are stealing money from all of us and they don’t pay taxes,” she said. “So giving them your money is investing in a lost cause.” The club urged students to take their money out of big corporate banks and deposit it in community banks and credit unions, some of which had set up tables outside the auditorium.

Berkeley Community College students are also participating in student protests in Sacramento, joining what has become an annual spring ritual in which public employees and advocates for education and social services travel to the state Capitol to oppose budget cuts. Teachers, students, parents, mothers on welfare, people with disabilities, and others plead for programs they depend on and tell their personal stories of why proposed cuts would be devastating.

Typically political strategists advise them to avoid the question of where the money to fund the services will come from, lest they incur Republican wrath by using the “t” word: taxes. This year, though, the new spirit of activism seems to be emboldening some advocates to say out loud what they’ve been whispering for years: “tax the rich.”

“We’re not just fighting defensive battles,” said Fred Glass, spokesperson for the California Federation of Teachers (CFT). “We’re going on the offensive.” The CFT created ammunition with a poll asking California voters how they felt about raising the income tax on the rich. The results, released April 1, show that 78 percent of Californians support raising the personal income tax rate of 1 percent on the top 1 percent of taxpayers (those making more than $500,000 a year). Sixty percent of Republican respondents also agreed.

Assemblymember Nancy Skinner (D.-Berkeley) has introduced a bill for an increase of “1 percent on the 1 percent,” and the CFT is working to put together a coalition of unions and community organizations to promote it. Glass says he’s getting more invitations to deliver his workshop on fair taxes to unions and community groups.

Meanwhile the other teachers union, the California Teachers Association, charges that “the Legislature’s failure to protect basic, essential services is destroying our future,” has declared a “state of emergency” and is calling for a week of actions May 9–13 in local communities and Sacramento, beginning and ending with a “takeover” of the state Capitol by hundreds of teachers.

Will this new spirit of progressive activism grow into a force capable of challenging corporate power?

“I just feel the hope that people are resilient,” Camacho said. “We’ve been through difficult times. What we need to do is turn this into a movement that builds and builds, where people are energized, where people find their voice, find the energy to lift their heads and say, ‘We’re not going to take it any more. We’ve got to stand together.'”

For now, ACCE, SEIU, PICO, US Uncut, and other groups are planning a “militant protest” at the Wells Fargo shareholders meeting in San Francisco May 3. 2

Taxes, Tech, and Talking Back to the Man

Sasha Cuttler

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April 13, 2011

29

Taxes, Tech, and Talking Back to the Man

This issue’s story on the destructive fallacies pushed by advocates of supply-side economics — “The failed experiment” by David Cay Johnston, the country’s top tax policy journalist, a story that is running simultaneously in alt-weeklies around the country – really couldn’t come at a better time. Please, read it, and consider our current moment.
On the national level, President Obama has joined the Republicans in cutting up the social safety net and regulatory system in order to maintain indefensible inequities in our tax system. And on the local level, one-time progressive Sups. David Chiu and Jane Kim have joined fiscal conservatives on the board to approve tax breaks for corporations and landlords and promote the flawed but poll-tested argument that the payroll tax is a “job killer.”
Yet that argument – we all need jobs so we shouldn’t challenge the corporations and rich people that provide them – has become so widely accepted that politicians wave it like a get-out-of-scrutiny-free card at an increasingly desperate public. So it’s crucial that writers like Johnston point out that much of what these people are saying simply isn’t true. Supply-side economics is destroying our country, not helping it.
The evidence for the failure of this 30-year economic experiment is clear in Johnston’s piece, as well as on the streets of San Francisco and every major American city. It’s reflected in our pervasive public budget deficits at a time of record corporate profits and our insistence on running our fossil-fueled economic system at full speed even as the poor and planet lay bleeding by the roadside.
Our deference to corporate titans is so pervasive and deeply instilled that it even applies to Black Rock City LLC, the corporation that stages Burning Man, an event and culture based on equally participating in a decommodified gift economy, but where few burners are willing to question the board’s plan for cashing out and creating a new governance structure.
In this and almost all exercises of corporate power and unchecked decision-making, the people feel powerless. If Twitter, Zynga, and Yelp threaten to leave and take their jobs with them, we have to accept their demands, right? And if not powerless, then simply grateful for the jobs, culture, and technologies that they have so generously bestowed upon us. We’re like slaves who appreciate the food, shelter, opportunities, and security we’ve been given and know how unwise it would be to rebel.
But once upon a time, the people understood that corporations are originally created as instruments of public good, not just private profits. They are created with charters approved in the name of the people, permission that could be revoked at any time if there was the political will to do so. But that will has long since been broken, the wage slaves and their representatives too scared, self-interested, or content to even dream of their own liberation. And it really doesn’t matter whether the corporations are publicly held or privately owned, LLCs or nonprofits, we still see them as the keys to our survival and well-being, so the last thing we want to do is make demands on them that might be seem unreasonable and ungrateful.
And so it goes. We willingly accept that the value of our labors is not our own. We let the rich get richer and richer – now to levels unheard of in any other civilized country – and pass the bill on to our grandchildren, the people who will finally be forced to deal with our folly, fear, and foolishness as the oceans rise and civil society recedes.
But I’m not simply going along with it, and I’m not alone. We need to resist this doomed system, for posterity’s sake if nothing else. I’ll keep writing polemics like this one, covering the campaigns of people like Sup. John Avalos who are willing to buck this trend, exposing corruption and sleeping watchdogs, and giving a forum to malcontents like Chicken John who raise questions that demand to be answered.
I fervently believe that the decisions made by publicly accountable individuals, in open forums and with the best information available, are infinitely superior to those made behind closed doors by people who have a self-interest in the outcome. And that’s why I’m proud to work for a progressive publication like the Guardian that speaks truth to power and features stories like “The failed experiment.”

Infrequent flyer

Andrew Lam

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April 12, 2011

0

le.chicken.farmer@gmail.com

CHEAP EATS My flight was cancelled so I did my taxes. I tried to do my taxes. What I did, I wrote to Coach and said, “Let’s play catch. My flight was cancelled.” She was at work.

I went to get my nails done. After, I saw Sockywonk sitting on the step of her soap store, so I sat down next to her.

“I’m sorry I’m a bad friend sometimes,” I said. “Here.” And I handed her a small bag I’d been carrying around. Inside: the sexy nightie she lent me to go roller skating in last fall.

It was decided that I wasn’t a bad friend.

I went in the store and bought two tubes of Chapstick and deodorant. Then it was time to throw the football with Coach, but something had come up, for her, so I went home and unpacked my suitcase, then repacked it, only with Chapstick. The deodorant, I decided, smelled worse than me, so I filed it in my medicine cabinet.

Can I tell you how hungry I was? And I had eaten my refrigerator the evening before, in anticipation of two weeks away. Coach was in Dolores Park with cookies and crazy people, and kept texting me to say be patient, we would throw, we would eat. “Wait for it. Wait for it,” she said.

I have blood sugar issues, everyone knows. One thing, it gets harder for me to make decisions, the farther away I get from my last meal. So when, having waited for it, my time came, I was not as prepared as I should have been. I was, in fact, unprepared.

In other words, I needed Coach to step up, and, being Coach, she did! With flair and brilliance. She grabbed the first rubber-band-stuck paper flyer menu from the first gate we saw and said, before even looking at it: “Let’s go here.”

So we did. We walked to Market and 15th streets, to Bombay. The menu had a picture of an elephant parading a banner between its trunk and tail: “Best Indian Food in the Castro!”

I don’t know about that. I had eaten there once before but didn’t have much to say. I think they dogged me on the spice factor. This time I ordered better, in part because I was with a goddamn vegetarian, which shows to go you. So instead of ordering chicken tikka masala or something predictable, I got chana palak, which is spinach and garbanzo beans (two things I love) and, in honor of the sad fact that I wasn’t in New Orleans, a bunch of fried stuff. Pakoras, samosas …

All of which were just dandy, drenched in the tabletop hot sauce and green stuff. But what stole the show for me was my own personal li’l bowl of chicken and lemon soup that I tacked on by way of having some meat in my day, and therefore not going completely crazy.

This soup, it was fantastic! It was spicy, creamy, and wonderful, and it was called mulligatawny — which in itself is cause for celebration.

I was all set to love the best Indian food in the Castro this time around, except that something happened to ruin everything. And it wasn’t that we were fighting, which we were, kind of. I forget why. I remember I showed Coach my fingernails, how shortly manicured they were. She wants to help me be a better lesbian, see, as surely as I want to help her be a better outside linebacker. “Trim your fingernails,” she’s always telling me. “Lesbians don’t like long fingernails.”

I think I understand why, but then (not that I ever said this out loud, or ever would, it’s such a fucked-up thing to say:) most lesbians don’t have as many fingers as I do. Ba-dum-bum …

Um, but that wasn’t it, either.

The paper menu had a coupon for one free entrée, but we tripped up so much over the fine print ($25 minimum, one coupon per table, dine-in only and between 5 and 10:30 p.m.) that we neglected to consider the bigger print, the point: that to get one free entrée (of lesser value, not to exceed $8), you had to of course order two entrees. They dazzle you with so much fine print you miss the point. Tricky, innit?

BOMBAY

Daily: Lunch 11:30 a.m.–2:30 p.m.;

Dinner 5–10:30 p.m.

2217 Market, SF

(415) 861-6655

AE/D/MC/V

Beer and wine

New school

Andrew Lam

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April 12, 2011

1

CAREERS AND ED You don’t need a degree, or even the patience to sift through US Census Bureau reports on educational attainment, to know that each year this nation graduates more students from institutions of higher ed — public and private universities, colleges, junior colleges, and professional schools — than it did the year before. San Francisco is second only to Seattle in the number of papered persons running around, and statistics say that they, in turn, are more likely to raise little educational overachievers of their own. With this glut of matriculation on the horizon, it’s hard not to ponder the degree programs of the future: an associate’s in astrotourism? A bachelor’s of biosynthetic anatomy? A PhD of P4TA? (That’s “preparing for the apocalypse” for the cyber-stupid.) Hard to say. But before we get carried away, here’s a sampling of programs fit for a brave new world that can be found in the here and now.

SOLAR PHOTOVOLTAIC DESIGN AND INSTALLATION

California South Bay University sits smack-dab in the center of Silicon Valley, so it’s no surprise that the offerings are high-tech. The larger California zeitgeist seems to be rolling in on the San Francisco fog, though, and interesting patterns — like a master’s of science in green energy technology — have emerged. But the university really takes advantage of the Santa Clara Valley sunshine (and billowing demand for sustainable energy) with its Interstate Renewable Energy Council-accredited certificate program in solar photovoltaics, the science of connecting the two. If a full-fledged degree isn’t in your forecast, the school offers two 40-hour courses that might be a perfect fit.

California South Bay University, 1107 North Fair Oaks, Sunnyvale. (408) 400-9008, www.csbu.us

INTERACTION DESIGN

Degrees in video-game design and Web programming are old hat, but California College of the Arts takes the idea of the user interface beyond the screen, and plugs it back into real life. The school’s focus on design that users can interact with includes classes on platforms from cell phone to sculpture, game console to gallery, preparing students to “create meaningful and innovative designed experiences in the realms of work, lifestyle, and play.” Vague? Yes. Useful? Possibly. That three-dimensional holographic surround-sound computer interface that Tom Cruise uses in Minority Report? Get your virtual-reality gloves out ’cause it’s on its way …

California College of the Arts, 1111 Eighth St., SF. 1-800-477-1278, www.cca.edu

LANDSCAPE HORTICULTURE

Horticulture goes high-tech at Merritt College. The school claims to have all the most up-to-date equipment in the field, and with 5,000 square feet of computerized greenhouses, a 5,000-square-foot lath house, a floral and drafting lab, and disciplines such as “turf management,” we doubt anyone would argue. And to think, we were still relying on dirt, sun, and water to do our growing.

Merritt College, 12500 Campus Drive, Oakl. (510) 531-4911, www.merritt.edu

BOOK ART AND CREATIVE WRITING

This master’s program allows students to develop as writers and visual artists simultaneously, and encourages a “deep exploration of the book form in both content and materiality.” The interplay of form and content is not a new academic trope, but given that physical codices may soon be obsolete, taking a moment to ponder the book as object might not be a bad idea — lest future generations wonder why we wrote all over our toilet paper. Literary artifacts? Worth checking out!

Mills College, 5000 MacArthur Blvd., Oakl. (510) 430-2255, www.mills.edu

GREEN AND SUSTAINABLE TRAVEL

Tourists looking for a tequila sunrise and a tan may not realize that the pool they’re baking beside used to be a jungle. Each year, sensitive wildlife areas the world over are steamrolled under hotel strips. At the same time, environmentally-conscious tourism has become a booming industry. Given the facts, a student could do worse than this City College Business School program. The quickie certificate takes just a year — not a bad thing, considering ecotourism’s popularity and the rapidly decreasing availability of stuff left to tour.

City College of San Francisco, Ocean Campus, 50 Phelan, SF. (415) 239-300, www.ccsf.edu

HIV/STI PREVENTION

With a focus on risk reduction counseling, data collection, and outreach strategies, this one-year certificate in HIV/STI prevention studies from City College’s health education department just seems like a really good plan to bring a brighter future to all.

City College of San Francisco, Ocean Campus, 50 Phelan, SF. (415) 239-3000, www.ccsf.edu

FOLKLORE

Preparing for the future is all about remembering the past … or so might say a folklorist with a master’s or doctorate from UC Berkeley. An interdisciplinary degree from the department of anthropology, folkloristics (that’s the term) provide a new spin on the studies of ethnicity, nationality, gender, and sexuality, as well as the chance to revive vernacular tales, customs, beliefs, and plain ol’ stories from days gone by.

UC Berkeley, 318 Sproul Hall No. 5900, Berk. (510) 642-7405, www.berkeley.edu

RAZA STUDIES

That “melting pot” we all learned about in grade school is on the boil — bubbling with a range of issues both sweet and spicy, and some we haven’t even tasted yet. As our country continues to diversify, equity, social justice, and community empowerment will only become more important. San Francisco State University’s B.A. in raza studies seeks to offer future leaders the knowledge, skills, and social consciousness necessary to navigate an increasingly complex social landscape.

San Francisco State University, 1600 Holloway Ave., SF. (415) 338-1111, www.sfsu.edu

TAXATION

If everything else on this list is just a bit too futuristic and far out, Golden Gate University offers one of the country’s oldest and best-respected graduate programs in taxation. Looking for the ultimate in job security? This is your best bet since the San Francisco College of Mortuary Sciences closed in 2002. Death … and taxes. Golden Gate University School of Taxation, 536 Mission, SF. (415) 442-7880, www.ggu.edu

The failed experiment

Andrew Lam

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April 12, 2011

27

news@sfbg.com

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity — so much so that tax revenues will go up, despite lower rates.

The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Barack Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because the Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Tax policy is something the framers of the Constitution left to politics. And in politics, the facts often matter less then who has the biggest bullhorn.

The Mad Men who once ran campaigns featuring doctors extolling the health benefits of smoking are now busy marketing the dogma that tax cuts mean broad prosperity, no matter what the facts show.

As millions of Americans prepare to file their annual taxes, they do so in an environment of media-perpetuated tax myths. Here are a few points about taxes and the economy that you may not know, to consider as you prepare to file your taxes. (All figures are inflation adjusted.)

1. Poor Americans do pay taxes.

Gretchen Carlson, the Fox News host, said last year “47 percent of Americans don’t pay any taxes.” John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.

Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”

Actually, they pay lots of taxes — just not lots of federal income taxes.

Data from the Tax Foundation shows that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

2. The wealthiest Americans don’t carry the burden.

This is one of those oft-used canards. Senator Rand Paul, the tea party favorite from Kentucky, told David Letterman recently that “the wealthy do pay most of the taxes in this country.”

The Internet is awash with statements that the top 1 percent pays, depending on the year, 38 percent or more than 40 percent of taxes.

It’s true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.

Social Security, Medicare, and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

3. In fact, the wealthy are paying less taxes.

The Internal Revenue Service issues an annual report on the 400 highest income-tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2007.

Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks for a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6 percent. Adding payroll taxes barely nudges that number.

Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1 percent in 1961 to 22.5 percent in 2007.

(By the way, during seven of the eight Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that the Obama overturned almost instantly after his inauguration.)

4. Many of the very richest pay no current income taxes at all.

John Paulson, the most successful hedge fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero.

Congress lets hedge fund managers earn all they can now and pay their taxes years from now.

In 2007, Congress debated whether hedge fund managers should pay the top tax rate that applies to wages, bonuses and other compensation for their labors, which is 35 percent. That tax rate starts at about $300,000 of taxable income; not even pocket change to Paulson, but almost 12 years of gross pay to the median-wage worker.

The Republicans and a key Democrat, Sen. Charles Schumer of New York, fought to keep the tax rate on hedge fund managers at 15 percent, arguing that the profits from hedge funds should be considered capital gains, not ordinary income, which got a lot of attention in the news.

What the news media missed is that hedge fund managers don’t even pay 15 percent. At least, not currently. So long as they leave their money, known as “carried interest,” in the hedge fund, their taxes are deferred. They only pay taxes when they cash out, which could be decades from now for younger managers. How do these hedge fund managers get money in the meantime? By borrowing against the carried interest, often at absurdly low rates — currently about 2 percent.

Lots of other people live tax-free, too. I have Donald Trump’s tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets “professional” real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

Frank and Jamie McCourt, who own the Los Angeles Dodgers, have not paid any income taxes since at least 2004, their divorce case revealed. Yet they spent $45 million one year alone. How? They just borrowed against Dodger ticket revenue and other assets. To the IRS, they look like paupers.

In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for U.S. Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: everyone should pay less.

5. And (surprise!) since Reagan , only the wealthy have gained significant income.

The Heritage Foundation, the Cato Institute, and similar conservative marketing organizations tell us relentlessly that lower tax rates will make us all better off.

“When tax rates are reduced, the economy’s growth rate improves and living standards increase,” according to Daniel J. Mitchell, an economist at Heritage until he joined Cato. He says that supply-side economics is “the simple notion that lower tax rates will boost work, saving, investment, and entrepreneurship.”

When Reagan was elected president, the marginal tax rate for income was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George H.W. Bush and Clinton and then cut by George W. Bush. The top rate is now 35 percent.

Since 1980, when President Reagan won election promising prosperity through tax cuts, the average income of the vast majority — the bottom 90 percent of Americans — has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent’s average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top 10th of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show.

6. When it comes to corporations, the story is much the same — less taxes.

Corporate profits in 2008, the latest year for which data is available, were $1.8 billion, up almost 12 percent from $1.6 billion in 2000. Yet even though corporate tax rates have not been cut, corporate income-tax revenues fell to $230 billion from $249 billion — an 8 percent decline, thanks to a number of loopholes. The official 2010 profit numbers are not added up and released by the government, but the amount paid in corporate taxes is: in 2010 they fell further, to $191 billion — a decline of more than 23 percent compared with 2000.

7. Some corporate tax breaks destroy jobs.

Despite all the noise that America has the world’s second highest corporate tax rate, the actual taxes paid by corporations are falling because of the growing number of loopholes and companies shifting profits to tax havens like the Cayman Islands.

And right now America’s corporations are sitting on close to $2 trillion in cash that is not being used to build factories, create jobs or anything else, but act as an insurance policy for managers unwilling to take the risk of actually building the businesses they are paid so well to run. That cash hoard, by the way, works out to nearly $13,000 per taxpaying household.

A corporate tax rate that is too low actually destroys jobs. That’s because a higher tax rate encourages businesses (who don’t want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

The 2004 American Jobs Creation Act, which passed with bipartisan support, allowed more than 800 companies to bring profits that were untaxed but overseas back to the United States. Instead of paying the usual 35 percent tax, the companies paid just 5.25 percent.

The companies said bringing the money home — “repatriating” it, they called it — would mean lots of jobs. Sen. John Ensign, the Nevada Republican, put the figure at 660,000 new jobs.

Pfizer, the drug company, was the biggest beneficiary. It brought home $37 billion, saving $11 billion in taxes. Almost immediately it started firing people. Since the law took effect, it has let 40,000 workers go. In all, it appears that at least 100,000 jobs were destroyed.

Now Congressional Republicans and some Democrats are gearing up again to pass another tax holiday, promoting a new Jobs Creation Act. It would affect 10 times as much money as the 2004 law.

8. Republicans like taxes too.

President Reagan signed into law 11 tax increases, targeted at people down the income ladder. His administration and the Washington press corps called the increases “revenue enhancers.” Among other things, Reagan hiked Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax.

George W. Bush signed a tax increase, too, in 2006, despite his written ironclad pledge to never raise taxes on anyone. It raised taxes on teenagers by requiring kids up to age 17, who earned money, to pay taxes at their parents’ tax rate, which would almost always be higher than the rate they would otherwise pay. It was a story that ran buried inside The New York Times one Sunday, but nowhere else.

In fact, thanks to Republicans, one in three Americans will pay higher taxes this year than they did last year.

First, some history. In 2009, President Obama pushed his own tax cut—for the working class. He persuaded Congress to enact the Making Work Pay Tax Credit. Over the two years 2009 and 2010, it saved single workers up to $800 and married heterosexual couples up to $1,600, even if only one spouse worked. The top 5 percent or so of taxpayers were denied this tax break.

The Obama administration called it “the biggest middle-class tax cut” ever. Yet last December the Republicans, poised to regain control of the House of Representatives, killed Obama’s Making Work Pay Credit while extending the Bush tax cuts for two more years — a policy Obama agreed to.

By doing so, Congressional Republican leaders increased taxes on a third of Americans, virtually all of them the working poor, this year.

As a result, of the 155 million households in the tax system, 51 million will pay an average of $129 more this year. That is $6.6 billion in higher taxes for the working poor, the nonpartisan Tax Policy Center estimated.

In addition, the Republicans changed the rate of workers’ FICA contributions, which finances half of Social Security. The result:

If you are single and make less than $20,000, or married and less than $40,000, you lose under this plan.

But the top 5 percent, people who make more than $106,800, will save $2,136 ($4,272 for two-career couples).

9. Other countries do it better.

We measure our economic progress, and our elected leaders debate tax policy, in terms of a crude measure known as gross domestic product. The way the official statistics are put together, each dollar spent buying solar energy equipment counts the same as each dollar spent investigating murders.

We do not give any measure of value to time spent rearing children or growing our own vegetables or to time off for leisure and community service.

And we do not measure the economic damage done by shocks, such as losing a job, which means not only loss of income and depletion of savings, but loss of health insurance, which a Harvard Medical School study found results in 45,000 unnecessary deaths each year

Compare this to Germany, one of many countries with a smarter tax system and smarter spending policies.

Germans work less, make more per hour and get much better parental leave than Americans, many of whom get no fringe benefits such as health care, pensions or even a retirement savings plan. By many measures the vast majority live better in Germany than in America.

To achieve this, single German workers on average pay 52 percent of their income in taxes. Americans average 30 percent, according to the Organizations for Economic Cooperation and Development.

At first blush, the German tax burden seems horrendous. But in Germany (as well as Britain, France, Scandinavia, Canada, Australia, and Japan), tax-supported institutions provide many of the things Americans pay for with after-tax dollars. Buying wholesale rather than retail saves money.

A proper comparison would take the 30 percent average tax on American workers and add their out-of-pocket spending on health care, college tuition, and fees for services and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a tiny risk in Germany.

Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other modern countries. While soaring medical costs are a key reason that since 1980 bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among modern countries — almost twice the rate in Germany, which is close to the average of modern countries.

On the corporate tax side, the Germans encourage reinvestment at home and the outsourcing of low-value work, like auto assembly, and German rules tightly control accounting so that profits earned at home cannot be made to appear as profits earned in tax havens.

Adopting the German system is not the answer for America. But crafting a tax system that benefits the vast majority, reduces risks, provides universal health care and focuses on diplomacy rather than militarism abroad (and at home) would be a lot smarter than what we have now.

Here is a question to ask yourself: We started down this road with Reagan’s election in 1980 and upped the ante in this century with George W. Bush.

How long does it take to conclude that a policy has failed to fulfill its promises? And as you think of that, keep in mind George Washington. When he fell ill his doctors followed the common wisdom of the era. They cut him and bled him to remove bad blood. As Washington’s condition grew worse, they bled him more. And like the mantra of tax cuts for the rich, they kept applying the same treatment until they killed him.

Luckily we don’t bleed the sick anymore, but we are bleeding our government to death.

ABOUT THE AUTHOR:

David Cay Johnston is a columnist for tax.com and teaches the tax, property, and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management. He has also been called the “de facto chief tax enforcement officer of the United States” because his reporting in The New York Times shut down many tax dodges and schemes, just two of them valued by Congress at $260 billion.

Johnston received a 2001 Pulitzer Prize for exposing tax loopholes and inequities. He wrote two bestsellers on taxes, Perfectly Legal and Free Lunch. Later this year David Cay Johnston will be out with a new book, The Fine Print, revealing how big business, with help from politicians, abuses plain English to rob you blind.

No cuts-only pension deal

Andrew Lam

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April 12, 2011

5

EDITORIAL Mayor Ed Lee has released a draft set of proposals for pension reform, and union leaders continue to meet with financier Warren Hellman to try to craft an alternative. Meanwhile, Public Defender Jeff Adachi is narrowing his options and appears ready to move forward to put his own plan on the ballot.

Everyone involved claims to be interested in a compromise, in some proposal that would reduce the city’s burden of paying $350 million this year (and potentially as much as $790 million in five years) into the employee pension fund. We support that idea, too — there are plenty of necessary, progressive moves to fix the city’s pension system and free up more cash for local programs.

But so far, none of the proposals on the table include any new revenue sources — which means, in effect, that the mayor, Hellman, and Adachi all want city workers to bear the entire brunt of the impact of a Wall Street-driven recession. The message: only city employees should share the pain; the wealthiest San Franciscans and biggest, richest businesses don’t have to contribute at all.

It’s a dangerous part of the tax mythology that Pulitzer Prize-winning reporter David Cay Johnston discusses in his article in the Guardian this week. He notes that the argument in favor of tax cuts for the rich — that lower taxes will lead to more investment and thus more jobs — has been tested in this country for 30 years. And it hasn’t worked.

Most San Franciscans probably realize that. Most city officials vote for Democrats, opposed the Bush-era tax cuts on the rich, and argue for more federal aid to cities. This is a progressive town.

But when it comes to something as fundamental as local economic policy — who pays for city services and who gets the benefits — the story becomes completely different.

The mayor and eight of the 11 supervisors are celebrating a broad-based tax cut as a way to create jobs in the Tenderloin and mid-Market (although the evidence that tax cuts don’t create jobs is overwhelming). The mayor is looking at the equivalent of a cuts-only budget (although everyone at City Hall opposes the notion of a cuts-only budget in Sacramento). And while it’s almost certain that some sort of pension reform will be on the November ballot, none of the players involved in the negotiations have openly taken what seems to us to be the only logical position:

Pension reform has to be linked to tax reform — a commercial rent tax, a progressive gross receipts tax, a city income tax, an increase in the Pacific Gas and Electric Co. franchise fee or something else that hits those who can afford to pay. Otherwise, we can’t support it.

Even the city employee unions are being awfully quiet about the need for a deal that includes new taxes. They ought to be leading the charge here, telling everyone that a cuts-only pension deal isn’t going to be acceptable. (The tax measures could hold until the November 2012 budget, when they’ll be easier to pass — if there’s a firm assurance that the mayor, Hellman, Adachi, the supervisors, and all the other players will support them.)

City employees are being asked to take what amount to pay cuts — which will reduce their purchasing power and have a depressing impact on the local economy. Taxing the wealthy (who spend a much smaller percentage of their income) has no such depressing impact. Those are hard, cold facts. They need to be part of the discussion.

Robert Reich, the former labor secretary who now teaches at the University of California, Berkeley, has an interesting essay on his blog April 9 that discusses Obama’s budget capitulations. The president, he notes, “is losing the war of ideas because he won’t tell the American public the truth: that we need more government spending now — not less — in order to get out of the gravitational pull of the Great Recession. That we got into the Great Recession because Wall Street went bonkers and government failed to do its job at regulating financial markets … That the only ways to deal with the long-term budget problem is to demand that the rich pay their fair share of taxes.

“And that, at a deeper level, the increasingly lopsided distribution of income and wealth has robbed the vast working middle class of the purchasing power they need to keep the economy going at full capacity.”

That’s as true here as it is in Washington. And if city officials want progressive support for pension reform, they need to acknowledge it.

Editorial: Link pension reform to tax reform (Second in a series on pension reform)

Maria Poblet

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April 12, 2011

14

Mayor Ed Lee has released a draft set of proposals for pension reform, and union leaders continue to meet with financier Warren Hellman to try to craft an alternative. Meanwhile, Public Defender Jeff Adachi is narrowing his options and appears ready to move forward to put his own plan on the ballot.

Everyone involved claims to be interested in a compromise, in some proposal that would reduce the city’s burden of paying $350 million this year (and potentially as much as $790 million in five years) into the employee pension fund. We support that idea, too — there are plenty of necessary, progressive moves to fix the city’s pension system and free up more cash for local programs.

But so far, none of the proposals on the table include any new revenue sources — which means, in effect, that the mayor, Hellman, and Adachi all want city workers to bear the entire brunt of the impact of a Wall Street-driven recession. The message: only city employees should share the pain; the wealthiest San Franciscans and biggest, richest businesses don’t have to contribute at all.

It’s a dangerous part of the tax mythology that Pulitzer Prize-winning reporter David Cay Johnston discusses on page 10. He notes that the argument in favor of tax cuts for the rich — that lower taxes will lead to more investment and thus more jobs — has been tested in this country for 30 years. And it hasn’t worked.