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Why the rich pay most taxes

Letter to the Register-Guard, and the letter I was replying to.
Sean McMahon (letters 4/17) wrote that rich people pay most of the taxes in this country. He neglected to mention that is because they have most of the money. They got it by exploiting the rest of us, forcing us to work for low wages.

Keeping wages low is official public policy in the U.S., although you'll never hear that from the politicians we keep electing, bought and paid for by the rich. That policy will never change as long as we keep electing Democrats and Republicans.

Lynn Porter

Rich taxpayers pay for services

With the reminder of the April 15 income tax deadline, the majority of Americans should thank the rich. This is due to the fact that our nation's wealthiest citizens contribute the most to our society.

Most people in our community are probably not aware that the wealthiest 1 percent of taxpayers paid 34 percent of all federal income taxes in 2002, according to a May 22, 2003, report from the Internal Revenue Service. In addition, the top 50 percent of wage-earners paid 96 percent of the total bill.

This means that half of the nation contributes almost nothing in federal income taxes. Phrased another way, the wealthiest 50 percent of the population provides almost all of our public services, national defense and social programs.

Many people in our state claim to be advocates of fairness, equality and justice. Lowering the tax bill on the most productive members of our society would be in line with these principles. However, opponents of lower taxes do not want justice; they want redistribution of wealth. They want to confiscate the income earned by the wealthy and give it to people who have not earned it.

Next time you hear someone in this community claim that the rich need to pay their fair share, ask yourself what really is the definition of fair share. This tax season, choose to support tax cuts by promoting the idea of a truly just society, where all individuals keep what they earn.


The Super Rich Are Out of Sight 19.Apr.2004 01:39

Michael Parenti

The super rich, the less than 1 percent of the population who own the lion's share of the nation's wealth, go uncounted in most income distribution reports.

The top 0.25 percent owns more wealth than the other 99¾ percent combined.

The U.S. Census Bureau surveys regularly leave Big Money out of the picture: for years they never interviewed anyone who had an income higher than $300,000. Or if interviewed, they were never recorded as above the "reportable upper limit" of $300,000 allowed by the bureau's computer program. In 1994, the bureau lifted the upper limit to $1 million--still excluding the very richest who own the lion's share of the wealth, the hundreds of billionaires and thousands of multimillionaires who make many times more than $1 million a year. The super rich simply have been computerized out of the picture.

not only that, Lynn 19.Apr.2004 01:52


"Lowering the tax bill on the most productive members of our society would be in line with these principles."

--where does this McMahon clown get "most productive members"?

specifically who in the fuck would that be?

is Dubya or Rummy a "productive" member of society?

Ken Lay? what'd he "produce"? Bill Gates?

how about the $850 million John Kerry? is that guy "productive"?

just because a person's assets / income tally up to a certain dollar amount does NOT by any logical or quantitative measure infer that the individual person is also "productive", nor even necessarily in control of / has access to some sort of "productive" capital.

if it does signify anything at all, it's only that that person has ACCUMULATED a lot of cash / assets in their name. nothing more. and nothing whatsoever to do with "production" or some arbitrary measure of individual "productivity".

"They got it by exploiting the rest of us, forcing us to work for low wages"

--if that. most of these wealthy stooges inherit their wealth and assets. Horatio Alger is just that - MYTH.

and it's the inherent STRUCTURE and heirarchy of capitalism - artificially propped up and enforced by violence - that keeps labor in its 'place'. when the workers OWN the means of production, that heirarchy is dissolved.


the current U.S. and Global economy is predominantly a SERVICE economy. Planet Earth no longer "produces" much of anything, except automobiles and toxic waste (and even those in lesser per-capita quantities each year). it's all about selling your ass in SERVICE to the master class tiers above you.

Replying to Register-Guard letter 19.Apr.2004 02:15

Lynn Porter rgletters@guardnet.com

If anyone else wants to respond to McMahon's letter, the Register-Guard letters email address is  rgletters@guardnet.com . Include your phone number and address. I think their length limit is around 200 words, although they sometimes print longer letters. There are a lot of points that could be made.

A better understanding 19.Apr.2004 04:43

Mike stepbystepfarm <a> mtdata.com

First of all, although this will piss the Marxists off, I am going to use the word "powerful" insteade of rich. That is intended to generalize what I am about to say to any human society. See, the marxists have it a little backwards, imagine that the powerful have power because they are rich rather than realizing that in a society that values material things, the powerful will have riches because they have the power --- and if the soaciety valued something other than material goods then THAT is what they would be able to sieze and unjust share of.

OK -- let's try an oversimplification and assume that there are just three "power classes", the very powerful (V), the moderately powerful (M), and the weak and powerless (W). Further we assume that this society uses money.

Now the V's control the society, decide on what the collective projects will be, and by and large these will be things that THEY want, that serve THEIR puposes. Who pays for these things, who funds these projects? Why those who pay taxes. Who pays these taxes? We'll come to that later. But the V's have enough power to resist being forced to pay taxes IF THEY DECIDE ITS IN THEIR INTERESTS

The M's do not have enough power to determine which projects get funded. But they have some power with which to negotiate the funding of a couple of their pets. They may lack enough power to resist taxes but they have enough to put up a fight which helps in these negotiations.

The W's do not have enough power to determine where money gets spent nor to resist taxes. Whenever tax money gets spent on projects apparently to the benefit of the W's that is because either the M's or V's decide THAT is in their own interests. The limits to how much the W's are taxed is "diminishing returns". You can't get blood out of a turnip, sheep shorn too close die in the winter winds, etc. etc.

The M's accept the taxes they have to pay which fund their own projects but in return are forced to accept paying more taxes which fund projects of the V's. They usually pay the highest percentages but are not cut as close to the edge by this as the W's are. In otehr words, they aren't being taxed to the "diminishing returns" level.

Surprisingly enough, the V's usually DO end up paying taxes. Not a high percentage of their wealth but because they ARE very wealthy, this may make up surprisingly large percentage of the total raised. IT'S THEIR PROJECTS BEING FUNDED. They also try to convince the M's that these projects are ALSO in the M's interests, and perhaps manipulate the society so that is even true to slight extent. They usually also try to convince the W's of that (and often succeed), convice the W's that they would be even worse off without the V's projects -- but that is silly since no matter who rules the W's get fleeced to the point of diminishing returns.

So yes, the rich DO pay taxes, and in terms of all taxes paid, a large amount --- to fund THEIR projects if they can't extract any more from the weak (it's just not there) and trying to do so from the moderately powerful would affect the "negotiations" (they could squeeze more here, but the moderately powerful would have enough power to direct those additional taxes to fund THEIR projects)

corporations pay almost nothing, while poor suffers 19.Apr.2004 08:50


60% US Corps Avoid Federal Taxes; State Fails to Close Corporate Tax Loopholes
by Lee Dutman, Wall St. Journal, HANNYS
Phone: 518-286-3411
Address: PO Box 35; Troy NY 12181 06 Apr 2004


A new GAO report shows that 60% of US corporations pay no taxes to the federal government. Meanwhile, the NYS legislature shows little interest in closing loopholes that allow multistate companies to evade hundreds of millions of dollars of taxes on income they earn from doing business in New York.

By 2003, [corporate taxes] had fallen to just 7.4% of overall federal receipts, the lowest rate since 1983, and the second-lowest rate since 1934, federal budget officials say.

The analysis found that even more foreign-owned companies doing business in the U.S. -- about 70% of them -- reported that they didn't owe any U.S. federal taxes during the late 1990s.

The report examined a sample of tax information for the years 1996 through 2000; for 2000, it covered about 2.1 million returns filed by U.S.-controlled corporations and 69,000 filed by foreign-controlled corporations. It showed that big companies -- defined as those with at least $250 million in assets or $50 million in gross receipts -- were more likely to pay taxes than smaller ones.

Still, the GAO said 45.3% of [defined above] large U.S.-controlled companies and 37.5% of large foreign-controlled companies had no tax liability in 2000. More than 35% paid less than 5% of their income.

The basic federal corporate-tax rate for big corporations is 35%. But the federal tax code also offers many credits and loopholes that allow many companies to pay far less than that.

(In the 1940s, corporations contributed almost half of federal taxes.) And though corporations are technically taxed at 35 percent, large corporations on average pay about half that. All this while the federal deficit sinks deeper...

Articles by Citizen Works, Wall St. Journal


Over 60 Percent of Corporations Didn't Pay Taxes

Large Firms Dodged Federal Taxes From 1996-2000 As Profits Soared
By JOHN D. MCKINNON, Wall Street Journal

WASHINGTON - More than 60% of U.S. corporations didn't pay any federal taxes for 1996 through 2000, years when the economy boomed and corporate profits soared, the investigative arm of Congress reported.

The disclosures from the General Accounting Office are certain to fuel the debate over corporate tax payments in the presidential campaign. Corporate tax receipts have shrunk markedly as a share of overall federal revenue in recent years, and were particularly depressed when the economy soured. By 2003, they had fallen to just 7.4% of overall federal receipts, the lowest rate since 1983, and the second-lowest rate since 1934, federal budget officials say.

The GAO analysis of Internal Revenue Service data comes as tax avoidance by both U.S. and foreign companies also is drawing increased scrutiny from the IRS and Congress. But more so than similar previous reports, the analysis suggests that dodging taxes, both legally and otherwise, has become deeply rooted in U.S. corporate culture. The analysis found that even more foreign-owned companies doing business in the U.S. -- about 70% of them -- reported that they didn't owe any U.S. federal taxes during the late 1990s.

"Too many corporations are finagling ways to dodge paying Uncle Sam, despite the benefits they receive from this country," said Sen. Carl Levin (D., Mich.), who requested the study along with Sen. Byron Dorgan (D., N.D.). "Thwarting corporate tax dodgers will take tax reform and stronger enforcement." A 1999 GAO study on corporate tax payments reached similar results.

The latest report has given new ammunition to the campaign of Democratic presidential challenger Sen. John Kerry, who has criticized President Bush for failing to crack down on corporate tax dodgers. Mr. Kerry wants to end corporations' ability to park their overseas earnings in tax havens, in order to discourage outsourcing; in return, he is proposing a lower U.S. corporate tax rate.

A spokeswoman said that Mr. Kerry "wants to make America more fair, so that average Americans don't have to pick up the tab for corporate-America profits."

Tomorrow, Mr. Kerry is expected to outline his ideas for reducing the budget deficit. Yesterday, he criticized Mr. Bush for dropping a budget rule, used in prior administrations, mandating that any new tax breaks be paid for by revenue or spending cuts elsewhere in the budget.

To be sure, Mr. Kerry has supported some of the most recent big corporate breaks, such as those contained in a 2002 economic stimulus bill. And the latest GAO report focused on tax avoidance that took place entirely during the Clinton years.

A spokesman for the Bush campaign said Mr. Kerry's own campaign has acknowledged its plan wouldn't stop outsourcing. "Sen. Kerry has a habit of putting forth political statements that wouldn't achieve the policy goals that he says they would," Bush spokesman Scott Stanzel said. An IRS spokesman noted that the agency recently has stepped up enforcement activity for business taxpayers. The Bush administration's 2005 budget request includes a 10% increase for IRS enforcement, mostly to go after more corporations.

The GAO report also may further fuel a drive in Congress to crack down on a variety of corporate tax-dodging strategies, such as a recently discovered leasing maneuver that allows companies to buy up depreciation rights to public transit lines, highways and water systems. Senate tax-committee leaders have released a list of companies involved that includes a number of well-known financial firms, such as First Union Commercial Corp., a unit of Wachovia Corp. Wachovia has defended its involvement, saying the transactions are legal.

The new report also could spur further IRS action against tax-shelter peddlers and their customers. The IRS is closely examining tax-shelter deals sold by accounting firms such as KPMG LLP, for example. That firm recently experienced a management shake-up in response to the inquiry.

Conservatives depicted the GAO report as an argument for tax-code overhaul for both corporations and individuals. Dan Mitchell, a fellow at the Heritage Foundation, a conservative think tank, also noted in corporations' defense that they have an obligation to shareholders to pay as little tax as they legally can.

The report examined a sample of tax information for the years 1996 through 2000; for 2000, it covered about 2.1 million returns filed by U.S.-controlled corporations and 69,000 filed by foreign-controlled corporations. It showed that big companies -- defined as those with at least $250 million in assets or $50 million in gross receipts -- were more likely to pay taxes than smaller ones. Still, the GAO said 45.3% of large U.S.-controlled companies and 37.5% of large foreign-controlled companies had no tax liability in 2000. More than 35% paid less than 5% of their income.

The basic federal corporate-tax rate for big corporations is 35%. But the federal tax code also offers many credits and loopholes that allow many companies to pay far less than that.

Despite the rising rate of tax avoidance among corporations, collections from the federal corporate income tax rose to more than $200 billion in 2000, from $171 billion in 1996. But over the next three years they fell each year, reaching $131.8 billion in 2003 -- the lowest annual total since 1993. They are projected to reach $168.7 billion this year.
(Rob Wells contributed to this article)


Corporate Tax Shelters and You
by Lee Drutman

published by Tom Paine

How is it possible that individual Americans shoulder a disproportionately large part of the overall tax burden while the portion paid by corporations is at its second lowest level in U.S. history? Complexity, plain and simple. By cooking up tax shelter concoctions that are difficult to understand, Michigan Senator Carl Levin says, corporations are able to "escape scrutiny and public ire." Exact calculations of how much corporate tax shelters cost the U.S. Treasury are hard to come by, but estimates put the loss of tax revenue as high as $18 billion a year.

Though corporations trying to avoid taxes is an old story, what is new is the rise of so-called "tax products"¯essentially schemes designed by morally-challenged tax professionals who then peddle them aggressively to corporations looking for an extra tax savings boost.

The ranking Democrat on a panel investigating tax havens, Levin described the tax shelter business in a recent hearing: "The tax shelter industry of today is fundamentally different than it was a few years ago. Instead of individuals and corporations going to their accountant or lawyer and asking for tax advice, the engine driving the tax shelter industry today is the effort of a horde of tax advisors cooking up one complex scheme after another. . . and then using elaborate marketing schemes to peddle these products across the country."

KPMG Lightens Its Load

The dense report that Levin's Permanent Subcommittee on Investigations put out a few weeks ago does not make for light reading. It explores, in painstaking detail, how just one firm, KPMG, set up four tax shelters that cost the U.S. Treasury $1.4 billion with the help of a cadre of lawyers, bankers and financial professionals. These schemes¯whose playful names (BLIPs, FLIPs, OPIS and SC2) belie their tax-avoiding prowess¯helped KPMG pull in $124 million from 350 clients.

And though the devil may indeed be in the details, when it comes to corporate tax shelters, the devil is pretty much everywhere else, too. What's not complicated to see is that tax shelters are increasingly big business for accounting firms, lawyers and financial professionals. And, as the hearings made clear, the IRS is woefully ill-equipped to fight back, trying to stop a $18 billion leak (the estimated annual cost of tax shelters to the U.S. Treasury) with a weak $1,000 plug (the IRS fine for tax shelter promoters). Worse, some of these schemes are perfectly legal abuses of an incredibly complicated tax code rife with special exceptions and loopholes.

Still, the most disturbing trend may be the aggressive way that tax professionals are now peddling these schemes. One e-mail, dug up in the year-long investigation that produced the report, reveals the importance of aggressive marketing campaigns to push these products: "I want to personally thank everyone for their efforts during the approval process of this strategy," reads the e-mail. "It was completed very quickly and everyone demonstrated true teamwork. Thank you! Now let's SELL, SELL, SELL!!"

"These are the tactics you might expect out of a boiler-room operation selling phony land deals," Levin said in a recent speech. "But here they are coming from people in our top professions."

At the hearings, KPMG executives attempted to distance themselves from the tax schemes under heated questioning. They said they had gotten out of the tax shelter business, and besides, those schemes were primarily investment strategies. Of course, KPMG could pass these schemes off as legit because they were lent legitimacy by respected investment firms, like Presidio Advisors (which took a percentage of all tax savings), by respected law firms like Brown & Wood (which made more than $12 million providing 250 opinion letters at $50,000 a pop), and even by respected banks like Deutsche Bank and Hypo-und Vereinsbank (which together made more than $5 billion helping clients finance the tax shelters).

Indeed, as the report concludes: "Dubious tax shelters are no longer the province of shady fly-by-night companies with limited resources. They are now big business, assigned to talented professionals at the top of their fields and able to draw upon vast resources and reputations of the country's largest accounting firms, law firms, investment advisory firms, and banks." According to a recent GAO report, an estimated 6,400 individuals and corporations have bought tax shelter "products" from more than 300 firms.

Toothless Penalties

So how are all these professionals getting away with this? Well, to start, the fine for tax shelter promoters is a measly $1,000 per offense. Compare that to the $124 million KPMG earned from just four shelters, and you can see why perhaps a $1,000 fine might not be a deterrent.

And that's when the IRS even catches the promoters. Right now, the IRS's main detection weapons are weakly enforced laws that require tax professionals to register tax products. However, asking tax professionals to tell the IRS when they are breaking the law does not appear to work that well. For example, of KMPG's 500 active tax products, exactly zero are registered.

In the larger context, tax shelters are one part of a massive effort by corporations to lower their tax bills, an effort that has been quite successful in recent years. In 2003, for example, corporate tax revenues fell to only 7.4 percent of federal tax receipts, the second-lowest level on record. (In the 1940s, corporations contributed almost half of federal taxes.) And though corporations are technically taxed at 35 percent, large corporations on average pay about half that. All this while the federal deficit sinks deeper into the red and government dollars dry up for education, health care and other essential social programs. Because abusive tax shelters are pursued so brazenly, and as a form of tax evasion they are among the most egregious, they're a good place to start cracking down. Still, righting the tax shelter ship is not going to be easy. The federal government needs to make a serious effort to give the IRS the tools and resources it needs. One obvious place to start, however, would be to hike the fines for tax shelter promoters. The government also needs to devote more resources to detecting tax shelters, working with federal bank regulators and the Department of Justice. Meanwhile, accounting regulators need to start cracking down on accounting firms, who earn billions each year by selling tax products. These firms are supposed to guarantee honest financial statements, not abet tax shelter abuse.

Finally, the rules on what counts as an illegal tax shelter need to be tightened. Many of the tax schemes peddled these days skirt the boundaries of legality by exploiting loopholes for purposes never intended. Though they are sometimes technically legal, the IRS can crack down using what is known as the "economic substance" doctrine, which basically disallows transactions that are done purely for tax purposes and have no legitimate economic substance. Strengthening this "economic substance" doctrine is an important way to battle tax shelter abuse.

At stake are basic issues of economic justice and tax fairness. There is simply no justification why honest, working-class taxpayers should have to shoulder more of the burden while greedy corporations and their avaricious accountants, lawyers and financial professionals are FLIPing and BLIPing their way to new heights of tax trickery.

Lee Drutman is communications director for Citizen Works.


Proposals by Hunger Action Network, FPI, SENSES and others on corporate tax loopholes to be closed in NYS.

Eliminate Corporate Tax Avoidance Schemes So All Corporations Pay Their Fair Share of Taxes and Only Receive Tax Incentives for the Jobs They Actually Create up to $1 billion annually.

a) Eliminate Specific Corporate Loopholes that Do Not Create Jobs $200 to $250 million annually and an additional $250 million in SFY2004 05 and SFY2005 06. Such loopholes include reform of the Empire Zone program ($50 $100 million annually), reducing the abuse of "point of service" exceptions ($75 million), limiting Industrial Development Agencies' ability to abate sState taxes ($60 million), and recovering subsidies from companies that do not live up to the conditions of their tax abatements ($15 million). In addition New York should implement a two year freeze on the ability of corporations to carry over Investment Tax Credits which under current law can be carried over to reduce corporate tax liability for fifteen years ($250 million per year for two years).

b) Reform New York's Corporate Alternate Minimum Tax (AMT) $150 to $200 million annually. New York's current AMT has had several loopholes that have been added since its original adoption. It should be replaced with a variation of the recently enacted New Jersey Alternative Minimum Assessment which applies to businesses with gross profits of $1 million or more. In order to ensure that such a revision would not hurt small businesses, this change could be applied to businesses with gross profits of over $5 million.

c) Tax Corporate "Nowhere Income" $50 to $150 million annually. Corporations like AOL Time Warner do not pay taxes on profits derived from sales made in states in which they do not have a physical presence. 25 states, including Texas, Utah, Oregon and California, have enacted "throwback rules" to ensure that profits earned in a state in which a corporation may not be subjected to an income tax are taxed instead by its home state.

d) Adopt "Combined Reporting" $340 to $400 million annually. 16 states, including California, Colorado, Illinois, and New Hampshire, require multi state and multi national corporations to file a combined return for their entire "corporate family" rather than being able to use inter-subsidiary transactions to move income to countries or states where that income is not taxable. Under combined reporting, a corporate family files a single tax return covering the income of all of its subsidiaries, with that income apportioned among the states based on the locations of all its property, payroll and sales.

e) Expand the Definition of Taxable Business Income to Encompass Corporate Profits from Irregular Transactions - New York State's current definition of business income provides that the income must arise from transactions and activity in the regular course of the taxpayer's trade or business. Corporations have convinced numerous state courts that any profit earned on the disposition of property that is an irregular transaction is "non-business" income. It is our understanding that the securities industry has aggressively used this scheme to significantly reduce their state corporate franchise taxes and avoid paying their fair of state taxes. Six states ¯ Florida, Iowa, Minnesota, North Carolina, Pennsylvania, and Texas¯ have statutes that explicitly or effectively define apportionable business income as all income that may be apportioned under U.S. Supreme Court standards, and define allocable non-business income as all other income of a corporation. New York should adopt this definition; it is unclear how much revenue this reform would raise.

f) Enact a Corporate Disclosure Law. (A3424) New York State should require every publicly traded corporation that does business in the State to report its gross and net income, deductions and credits, and the amount of New York State taxes paid, much as publicly-traded corporations already do at the federal level. This would allow taxpayers and policy makers to identify companies in the State that may be making profits but, through the use of clever business structures and tax expenditures, are paying little or no New York taxes. Only with that information can the State truly know how well its tax policies are working. Such information would also be critical in successfully lobbying the Legislature to raise corporate taxes.

2. Broaden the Sales Tax Base to Include Additional Services and More Aggressively Enforce the Collection of Sales Tax Revenue on Remote Sales * Up to $2 billion annually.

a) Many states are considering sales tax base broadening. Hawaii, New Mexico, and South Dakota already tax virtually all services the same as they tax goods. According to the Center on Budget and Policy Priorities New York does not currently tax 15 "readily taxable services" like veterinary, health club, and hair styling services in addition to not taxing legal counseling, investment counseling, accounting, and computer and data processing services.

b) While New York State is now actively participating in the Streamlined Sales Tax Project, a multi-state effort to even the playing field between "main street" retailers and the large remote sellers like amazon.com and L. L. Bean, this project will ultimately require authorization by Congress or the courts. In the meantime, Albany attorney Rob Plattner has set forth an enforcement strategy under which states can, under current law and court decisions, more aggressively enforce the requirement for the collection of sales tax on sales to New Yorkers by remote sellers. These suggestions are currently being reviewed by the NYS Department of Taxation and Finance.

In addition, the New York Department of Taxation and Finance may be able to force more internet companies to collect NY sales tax when the companies either establish affiliate or agency nexus. An affiliate nexus may be established when an internet company has an affiliate within the same corporate family that has a physical nexus in New York. An agency nexus may be established when a company with physical presence in the State is receiving commissions for referrals to an internet company's web site that result in sales.


A Gravy Train for the Rich 19.Apr.2004 09:16

Gary Sudborough IconoclastGS@aol.com

This statement that the rich pay the most taxes in the United States is asinine. Ronald Reagan lowered the corporate tax rate from a level of 70% to near 30%. Through loopholes in the law and offshore tax shelters many major US corporations not only pay no taxes, but get rebate checks in the millions of dollars from the US government. Corporations like General Motors, Texaco, Chevron, J.P. Morgan and many others actually get money back from the federal government year after year. Add to that all their federal subsidies, export promotions and research and development at government institutes done at taxpayer expense, and they are profiting enormously, rather than contributing to government expenditures. Don't take my word for it. There is a web site established by Citizens for Tax Justice. It is  http://www.ctj.org and there is a compilation done for the year 2000 on all the corporations who actually received rebate checks from the US government. The largest capitalists in the US not only pay little or no taxes, but they are on a government gravy train at our expense.

The Middle Class 20.Apr.2004 21:14


The middle class pay the most taxes. They are the ones that supplied most of the money that was recently looted by the Bush Administration. Rich people have so many right-offs they can often pay no taxes. Sometimes they grace us with kindness and don't take all their deductions however. They have the choice, lucky them.

How to Skin a Rabbit 21.Apr.2004 01:29

Sean Gonsalves

Published on Tuesday, April 20, 2004 by the Cape Cod Times

How to Skin a Rabbit

by Sean Gonsalves

Little Tommy had just caught a rabbit. On his way home, walking down a dusty road carrying the furry, squirming little creature he tried to console his captured carrot-eater.

"Mistah Rabbit," he said. "Pretty li'l rabbit, sweet li'l rabbit, why are you wiggling so much. I ain't gonna do nothin' but knock you upside your head an' skin an' cook ya."

Attention: my dear rabbit readers, analysts at United for a Fair Economy have just released a new report called "Shifty Tax Cuts: How They Move the Tax Burden off the Rich and onto Everyone Else."

Here are some of the key findings in the report. (Go to  http://FairEconomy.org/ press/2004/ShiftyTaxCuts_pr.html to see the full report).

For fiscal years 2002-2004, state governments filled approximately $200 billion in budget gaps by raising state taxes and fees and by cutting services. And during those same years, newly enacted federal tax cuts delivered about as much money - $197.3 billion - in new tax breaks for the wealthiest one percent of Americans (households making more than $337,000 a year).

"Had that money instead been directed to state fiscal aid, it could have prevented virtually all recent tax hikes and service cuts at the state level, which fall hardest on low- and middle-income Americans," write the report's authors.

The choice to send nearly $200 billion to the top one percent rather than to state governments underscores just one way the federal tax cuts of 2001 and 2003 are actually "tax shifts," not tax cuts, for the vast majority of Americans.

Between 2000 and 2003, the United States saw a federal-to-state tax shift of historic magnitude: the share of the total tax burden borne at the state and local level jumped 15 percent.

"This is the largest such shift in the tax burden since the period 1947-1950. This shift is making the tax system more regressive."

Amazingly, in 2002, Americans in the bottom 20 percent of households paid 11.4 percent of their income in state and local taxes, while those in the top 1 percent paid only 5.2 percent of their income in state and local taxes - less than half the rate of the poorest fifth.

Since 1962, the share of total federal receipts collected from the regressive payroll tax, which collects proportionately more from low-income workers than high-income workers, has risen from 17 percent of total receipts to 40 percent - an increase of 135 percent.

Meanwhile, the total share supplied by progressive income and corporate taxes has dropped from 63 percent of total receipts to 52 percent, which is a decline of 17 percent.

Between 1980 and now, the main tax on wage income - the payroll tax - has jumped 25 percent.

In the same period, top tax rates on investment income and large inheritances have been cut between 31 percent and 79 percent. "Taxes on wealth are falling fast with shrinking taxes on capital gains, dividends and estate taxes." Oh, it gets better.

Since 1962, the share of federal revenues contributed by corporations has declined by two-thirds, while the share contributed by individuals has risen 17 percent.

Current tax policies are fueling the national debt, imposing an average $13,000 in additional debt on each man, woman and child in America between 2002 and 2007 -or more than $52,000 in added debt per family of four.

During the summer of 2003, millions of parents received $400-per-child checks from the IRS - an advance payment for the expanded federal child tax credit. But, at the same time, many of those same parents saw their local and state taxes increase.
Some will consider this a propaganda piece encouraging class warfare. Call it what you want.

As billionaire Warren Buffet points out, "If class warfare is being waged in America, my class is clearly winning."

Let them eat rabbit!

Sean Gonsalves is a Cape Cod Times staff writer and a syndicated columnist.

Copyright © Cape Cod Times.