As the primaries drag on, and the candidates make their cases for Nationwide hot button issues that effect their voter sway, a lot of us focus on the financial crisis that stares down on America. Mitt Romney, for example, has a tax plan that so clearly favors the rich, and from that stems the curiousity of his own personal wealth and how he himself files for tax.

Romney’s 2010 tax return has been quite damning of favoring the 1% – so much so, that this Infographic (below) was recently published to demonstrate exactly how wealthy he is compared to your typical millionaire, and your average “well-off” American.

Created by: Online MBA Programs

Written By Luke Walker

Despite the many unified voices of discontent, echoing from streets wherever the ‘Occupy’ protests persist, in cities all over the world, the question of whether a clear message has been made is still debatable.

So, what exactly is the clinical psychology of the ‘Occupy’ movement? Is there a unified message? Does a single philosophy, or even a common goal or interests exist?

When we study such phenomena we tend to gravitate towards a physical model where we associate all of the actors involved as a whole and in a very critical sense. This method can be successfully employed when, for example, observing a hive of bees, in which, the entire swarm works together as a unit, towards a common goal. In such a study, physical observations can easily reveal clues related to biology and breeding habits, instinct, and group behavior, and can reveal important social indicators.

The bee model however, may not be applicable in the OWS scenario, where the physical indicators may conceivably be construed as, for example, as inarticulate statements or crude placards held by select protesters, or the lewd and unruly behavior of others, as portrayed in clips and sound bites of network news.

There are simply too many differential factors involved in comparable human studies. OWS is a movement composed of thousands of different people, all with vastly different experiences, from drastically divergent geographical, national, religious, ethnic and socio-economic backgrounds. There are too many competing philosophies and far too many grievances to study in such narrow and strictly physical method. Far deeper consideration of all elements must be analyzed.

Critics will claim that the protesters are nothing but a rag tag group of spoiled, middle class white teens and young adults, all with obscure demands, crying over disparities that do not really exist for them, inequities they have not yet been burdened with, and for entitlements that the protesters have not earned, and thus do not deserve. They claim the protesters want a hand out, a portion of wealth that does not belong to them, that they want entitlements, welfare; socialism. This claim may be have some degree of accuracy, for we have yet to hear a clear demand. Advocates of the protesters too have made up their minds, but in contrast, that the protests represent a much-neglected and long overdue debate about it means to be poor or middle class in modern society, and if a difference even exists. To supporters, the movement represents a clear indication that the poor have been institutionally marginalized to a breaking point, and that the fine line, which once may have separated the economic spectrum of poor and middle class, particularly in America, has become so indistinct that perhaps it may no longer even exist.

Additionally, they believe that the governments of the world have committed grave injustices by financing banks and corporate fat cats to perpetuate extravagant salaries and gluttonous bonuses; a reward for their many misdeeds, not least including the global recession and all of the havoc it has generated; an indisputable result of these very institutions own flippant behavior and categorical misjudgments. Supporters believe OWS is a protest against economic injustice, not a rally against wealth or the wealthy, not against the free market, or capitalism, not even against excess. It is an objection against business as usual, in which the few in power reap the rewards of the many.

The question was TARP fair? Did the banks deserve a bailout when millions of working Americans could have been directly benefited had even a fraction of the inestimable bailout been redirected to the hands of working men and women, instead to the bankrolls of corrupt banks and other financial institutions; especially when it was their own greed which led to their peril to start with? This sentiment may be a prime war cry in the minds of many protestors, but it cannot be ignored that TARP may have prevented a great depression, the result of which, may have been far more bleak than they otherwise were. On the other end of the spectrum the very core of what America represents; its foundation as a free market capitalist bastion, the very fabric of our constitution, which in theory would allow every man and woman an equal opportunity to bask in the fruits of his or her own labor, regardless of race, sex, or class. No matter how lowly their status or humble their upbringing.

History has shown us that this notion is perhaps more a fable than fact. America was after all, appropriated by theft, larceny, and murder. It was literally built on the backs of enslaved peoples. America was made wealthy by oppression and exploitation, and made powerful by brute force, intimidation and its accumulation of all the aforementioned and newly acquired resources. Historically, it has always been a select few who have truly basked in the fruits of these exploits. This is not to argue the many merits and virtues of our country, democracy or constitution, but an underlying dark fact that cannot be dispelled.

The protesters believe they have seen a folly in TARP and corporate bailouts, and a fallacy of the American dream. A dream, they believe, that may have once been obtainable to some, but only during a very diminutive sliver of our nation’s history when all the winds were blowing in the right direction for a small moment in time. We had won the war, literally and figuratively, and there was perhaps room for more to share in that fleeting prosperity. OWS represents a belief that those times have passed, and that perhaps it can no longer be ignored that the inequities of the poor and quality of living for most has markedly diminished.

The Question, “Is it unreasonable to expect a small piece of the pie, especially when we have all contributed to its preparation? “, may offer a glimpse of insight into the clinical psychology of the political movement.

The bottom line is this. As where critics will argue it is the fault of the individual for not obtaining the same success that the top 1% of our nation that enjoys 99% of its wealth and prosperity, is due strictly you their merit and not to luck, is not only a mathematically incalculable improbability in a nation of 300 million, but a patent fiction. All one need do is look to the character and listen to the words of the elite class. It may very well be and could remain, precisely what it appears to be at face value; a is a mixed bag of elements, expectations, and broad discontent, which may never be summed up into a neat, unified or concise mission statement. Although the OWS message may not be as eloquent as some of us may like, but perhaps it is enough to perpetuate the conversation.

The winter is approaching, there is already a chill in the air, and we cannot expect the protest to last indefinitely, certainly not in the cold winds of the northeast, but one undeniable fact remains; a message has already been sent; and no matter how vague it may be, the dialog will persist.

After Warren Buffett spoke out about taxing the rich more, the rich were polled and overwhelmingly agreed with the billionaire.

Here’s more from Wall Street Journal:

A new survey from Spectrem Group found that 68% of millionaires (those with investments of $1 million or more) support raising taxes on those with $1 million or more in income. Fully 61% of those with net worths of $5 million or more support the tax on million-plus earners. [...]

Explains George Walper of Spectrem: “What this tells us is that there are a number of wealthy folks who said: ‘Gee, we need to increase taxes to stimulate the economy. No one likes to be taxed more, but the reality is maybe it has to be done.’ ”

Walper added that he was also surprised at the positive reactions to Buffett’s political agenda. “I thought that among this group there would be a feeling of ‘why doesn’t he keep his nose out of it?’”

Pretty astonishing, right?

And I think it’s also important to note what people said who favored more taxes and what people said who didn’t.

First the pro-Buffett crowd…

“When you have someone who made four and a half billion pay fifteen percent, and because it’s a hedge fund, I have a problem with that.”

“Quite frankly if Warren Buffett gets taxed an extra fifty thousand dollars or your typical investor of two hundred and fifty [thousand] or larger has to pay an extra thousand dollars in tax; It’s not gonna change his lifestyle. Whatever he or she was gonna buy, he or she is gonna buy.”

“I think theoretically it would be good for this country and put some more money in the coffers, personally it wouldn’t be good for my family so I’m kind of at conflict between self interest and what might be good for the country.”

Now the anti-Buffett crowd…

“I think some of that spirit of America is lost when you start penalizing so to speak, the folks who have more.”

“I think there should be a voluntary check box on the tax form that says, if you would like to send in more please do.”

“For myself, if there were an increase in taxes, I’m probably gonna button up some spending.”

By the way…how priceless is the first anti-Buffett quote?

Yeah, our American spirit will really be diminished if the rich start paying taxes on investments and dividends that Reagan proposed. Sure.

Not that this is any surprise. Usually when flat tax proposals are put out there, this is the common thread. The rich get a massive tax break and the middle class get the shaft.

Here are the numbers…

The old system would be replaced by the nines:
- A flat 9 percent income tax for everyone – no more, no less
- A 9 percent tax on corporations
- A 9 percent national sales tax [...]

If you have a family of four with an income of just under $50,000, they could end up paying more under the Cain plan. Currently, they are taxed around $3,850 in income tax. Under Cain’s plan, they would be taxed at 9 percent or pay $4,500.

That’s $650 more.

Although the family would save almost $4,000 in Social Security taxes, it would have to give up the child tax credit worth the same amount. Furthermore, it would pay an additional national sales tax of 9 percent on everything purchased, including groceries and clothes, which totals about $2,000.

That means under the Cain plan that family could end up paying $2,725 more.

So that family would have a 5.5% tax rate hike. And the folks at the top? Their taxes would be cut in half. And what about those at the bottom, roughly 18% of the population, who don’t pay income taxes because they make so little that they can’t afford to? They’re getting an 18% tax hike? Seriously?

And, by the way, how does Cain fund Social Security or Medicare if those rates are cut? The answer…he doesn’t. They’re defunded. So the middle class and the poor will be paying even more to maintain their current lifestyle.

Long story short, this plan is a joke. Or based on fantasy. Either way, it’s a no go.

“There is nobody in this country who got rich on his own.” — Over the last 30 years, the income of the richest 1% has skyrocketed.

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.”

Infographic below:

Created by: Online MBA Programs

Republicans don’t want the Bush tax cuts to expire for the wealthiest, but they’re fine with letting the payroll tax cut that Obama passed last do so?

Hmmm…

The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

So how much are we talking?

At issue is a tax that the vast majority of workers pay, but many don’t recognize because they don’t read, or don’t understand their pay stubs. Workers normally pay 6.2 percent of their wages toward a tax designated for Social Security. Their employer pays an equal amount, for a total of 12.4 percent per worker.

As part of a bipartisan spending deal last December, Congress approved Obama’s request to reduce the workers’ share to 4.2 percent for one year; employers’ rate did not change. Obama wants Congress to extend the reduction for an additional year. If not, the rate will return to 6.2 percent on Jan. 1. [...]

Social Security payroll taxes apply only to the first $106,800 of a worker’s wages. Therefore, $2,136 is the biggest benefit anyone can gain from the one-year reduction.

So why are they against one, but not the other?

Republicans cite key differences between the two “temporary” taxes, starting with the fact that the Bush measure had a 10-year life from the start. To stimulate job growth, these lawmakers say, it’s better to reduce income tax rates for people and for companies than to extend the payroll tax break.

“We don’t need short-term gestures. We need long-term fundamental changes in our tax structure and our regulatory structure that people who create jobs can rely on,” said Sen. Lamar Alexander, R-Tenn., when asked about the payroll tax matter.

House Majority Leader Eric Cantor, R-Va., “has never believed that this type of temporary tax relief is the best way to grow the economy,” said spokesman Brad Dayspring.

Long term tax relief for the wealthiest isn’t the best way to grow the economy either. Well, in general, neither are tax breaks. Infrastructure spending is much more stimulative in the long term.

Still, it’s pretty clear what’s going on here. If the idea comes from Obama, it’s bad. If it comes from Republicans, it’s good.

And so it goes…

An amazing editorial was published the New York Times yesterday. Not just because Warren Buffett lays waste to nearly every single “taxation kills investment” argument…but because he has lost his patience with those who don’t understand history.

To start…

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Indeed.

But wait…there’s more…

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

I bold that second paragraph specifically because it flies in the face of what many consider conventional wisdom about taxing investment income.

When engaged in debate over issues like this, people sometimes ask me what would be the incentive to invest if taxes are higher. I answer the same every time because the answer will always be the same: to make money. Is there another ballgame in town when it comes to making money off of money? Sure, you could invest in a small business or a startup, but many investors don’t have the time or patience for that. They want to able to read the tea leaves, pivot off of the market’s emotions and make a quick buck. It’s as simple as that.

All investors know this to be true, but only the intellectually honest ones will admit it. Count Buffett among that group.

And to that point…

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

That’s right. Over 20% of the richest people in the US didn’t make any income that would qualify for payroll taxes. And even if they did, it’s unlikely that made up any significant portion of their actual income. It’s all investments folks. Wake up.

Here are Buffett’s suggestions…

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

All sage advice.

…and it will never happen.

Thank you Tea Party!

This just in from Jake Tapper…

A government official tells ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value.

Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

Anybody think the Tea Partiers will go for any type of tax increases if there is a downgrade?

No, neither do I.

Welcome to our brave new world…where completely avoidable economic problems become unavoidable.

Just remember this next election.

In an op-ed I HOPE will get picked up across the country, Henry Bloch explains why taxes need to be raised on the rich ASAP.

From KC Star:

I do not understand some Republicans’ resistance to the idea of tax increases on the wealthy. The argument we have been hearing from some politicians about the rich being the “job creators” is misguided. First of all, let’s not forget that our economy was doing better and the nation’s unemployment rate was lower before the Bush tax cuts, which benefited the top 1 percent of earners the most. Secondly, one would be hard-pressed to prove that low tax rates result in increased job creation. Companies today are holding record levels of cash, yet unemployment remains stubbornly high.

I have been a student of the U.S. tax system for more than half a century. From the mid-1930s to the early-1980s, the marginal tax rate for the highest income earners in this country was between 68 percent and 94 percent. That’s double and triple of what it is today. Yes, it’s time we balance the budget, but it is also time we balance the tax burden.

He’s a registered Republican.

Your thoughts?

It’s pretty basic. Increase revenues and lower expenditures.

Here’s more from NY Times:

In his remarks, which come after Friday’s bipartisan deal to cut domestic spending by about $38 billion for the remainder of this budget year, Mr. Obama will not offer details but will set deficit-cutting goals, White House officials said. The numbers were still under discussion on Sunday.

“He’ll lay out his approach this week in terms of the scale of debt reduction he thinks the country needs so we can grow economically and win the future — a balanced approach,” David Plouffe, the senior White House political strategist, said on “Fox News Sunday,” one of four talk shows on which he appeared Sunday.

“Obviously, we need to look at all corners of government,” Mr. Plouffe said, adding, “We’re going to have a big debate.”

What are Republicans saying?

Republicans reacted skeptically to word of Mr. Obama’s speech. “I sit here and I listen to David Plouffe talk about, you know, their commitment to cut spending and knowing full well that for the last two months we’ve had to bring this president kicking and screaming to the table to cut spending,” Representative Eric Cantor of Virginia, the House majority leader, said on Fox.

This even though Obama has said he wants to cut spending…but just doesn’t want to do that during one of the worst recessions in history. Oh well, par for course with the Repubs.

If something substantive comes out of this, will Obama get credit for tackling yet another tough issue? Probably not. Republicans have no reason to cooperate with him and ever reason to keep saying no to nearly everything this President proposes.

We shall see…

Obama is baiting the trap and if the GOP candidate doesn’t take it in 2012, it could spell trouble for the Dems.

Last night the President said this…

I have no doubt that everyone will find something in this compromise that they don’t like. In fact, there are things in here that I don’t like — namely the extension of the tax cuts for the wealthiest Americans and the wealthiest estates. But these tax cuts will expire in two years. And I’m confident that as we make tough choices about bringing our deficit down, as I engage in a conversation with the American people about the hard choices we’re going to have to make to secure our future and our children’s future and our grandchildren’s future, it will become apparent that we cannot afford to extend those tax cuts any longer.

We already know that tax cuts for the wealthy are wildly unpopular and polling shows this again and again. And the sentiment among Tea Partiers is that the deficit needs to come down, and quick. Since Romney (I’m assuming he’ll be the GOP’s choice) can’t attack Obama on healthcare since he enacted virtually the same system in Massachusetts while Governor, the “big spender” message is what he’ll shellac Obama with…and it’ll stick.

But here’s the thing…voters aren’t going to let the GOP have their cake and eat it too. They’re already seeing how they’re saying one thing and then doing another with this tax cut compromise. So, if Romney makes a campaign pledge to let those tax cuts expire due to the rising deficit, he could win. If not, I don’t see much hope for the GOP.

Three caveats to this.

#1 – If Sarah Palin somehow manages to win the nomination, I don’t think there’s anything she can do to actually win the White House. So this argument will be moot. Well, there is one really outside chance and it’s talked about in #2. So let’s get to that…

#2 – If Huckabee gets nominated, and I see him as Romney’s biggest challenge, he’s probably going to run on the FairTax plan, which makes the above moot as well. So if Palin adopts this idea, that could be good for her campaign.

#3 – As always, a terrorist attack changes everything.

Your thoughts?

In order to get the votes he needs to make sure unemployed Americans get the relief they need (and deserve) and employed Americans continue to enjoy payroll tax cuts, Obama is cutting a deal with the Repubs on the extension of the Bush tax cuts.

As I’ve pointed out previously, this goes against the anti-spending sentiment of the Tea Party and yet here we are…talking about tax cuts for the wealthiest Americans being extended for another couple years.

Funny, I thought the election was about the deficit and spending…

From Wash Post:

The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don’t have the votes in Congress to extend only the expiring income tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.

Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.

And if you didn’t think one concession to the Repubs was enough, how about two?

The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates.

And just to make sure we’ll on the same page…tax rates are at the lowest point in 60 years.

And here’s some key points about our deficit crisis and tax revenue…

• Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America’s long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.
• Income taxes, in particular, both personal and corporate, are low and falling. That trend is not sustainable.
• Employment taxes, by contrast—the regressive bit of the fiscal structure—are bearing a large and increasing share of the brunt. Any time that somebody starts complaining about how the poor don’t pay income tax, point them to this chart. Income taxes are just one part of the pie, and everybody with a job pays employment taxes.
• There aren’t any wealth taxes, but the closest thing we’ve got—estate and gift taxes—have shrunk to zero, after contributing a non-negligible amount to the public fisc in earlier decades.

Also, Ben Bernanke notes that the good times are continuing to roll for the rich…

Here’s what Ben has to say about this…

“It’s a very bad development,” he said. “It’s creating two societies. And it’s based very much, I think, on educational differences. The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is 5 percent. If you’re a high school graduate, it’s 10 percent or more. It’s a very big difference.”

Mr. Bernanke added: “It leads to an unequal society, and a society which doesn’t have the cohesion that we’d like to see.”

Long story short, the rich are having a hell of a good time driving our debt up. If you believe the rich shouldn’t be taxed as much as the rest of us, well, I can’t argue that with you. But if you believe that the more you earn, the more you should get taxed (which is how it was always supposed to work) you have to wonder why this is happening.

More as it develops…

Why are Republicans insisting that the tax cuts continue when the election appears to have been a referendum on spending?

From CBS:

The poll finds that 53 percent of Americans want the Bush-era tax cuts extended only for households earning less than $250,000 per year. That roughly matches the proposal put forth by the White House, which wants to extend the cuts only for incomes less than $250,000 for families and $200,000 for individuals.

Just 26 percent of Americans say they support extending the cuts for all Americans, even those earning above the $250,000 level, which is the GOP proposal.

So 14% don’t want any tax cuts extended. That means 74% are against tax cuts being extended to those folks.

Wow.

Here’s how the numbers shake out when you look at political affiliation…

Note how many Independents want them to expire for all. 17%, the highest of any group.

Maybe that’s why House Dems felt emboldened enough to pass the tax cuts without the extension for the wealthiest Americans. And several Republicans joined them. Tea Partiers…you’ll be interested in one House member who voted for it…

From Roll Call:

The Republicans who voted for the bill were Reps. Walter Jones Jr. (N.C.), Ron Paul (Texas) and John Duncan (Tenn.). Several Democrats who hail from wealthier districts as well as a number of Democrats who lost on Nov. 2 were among the defectors.

Ron Paul sided with the Dems? Wha???

Still, going back to the poll…EconomistMom sums up with the cartoon above and the title of her post: Can We Do the Non-Crazy Thing with the Bush Tax Cuts?

An excerpt:

I am no longer going to “let the perfect be the enemy of the good.” I am no longer going to try to talk people into seeing that the “right” thing to do with the Bush tax cuts would be to let them all expire. (The even “righter” thing would have been to never have enacted them in the first place.) I am just going to urge the policymakers to avoid doing something with the Bush tax cuts that seems totally contradictory to the fiscal policy goals–both shorter-term and longer-term–that they claim to have. In other words, let’s try to avoid doing something with the Bush tax cuts that seems totally crazy given what we say our fiscal policy goals are for both adequately supporting the (still fragile) short-term economy and better encouraging economic growth by reducing the deficit over the longer term.

And for a point of comparison on what those those tax cuts means to the deficit…

The White House plan which would not extend the cuts on high earners would cost an estimated $3 trillion over ten years. (By point of contrast, the controversial deficit commission proposal released this week would save about $4 trillion in that time.)

Personally, I’m not in favor of giving individuals who make over $85,000 and families who make over $150,000 more tax cuts. To me, and maybe I’m in the minority here, but those are upper lower class, not middle class. Seems like you could save A LOT of money there and reduce our budget deficit even further. And let’s remember…they’re still getting a tax cut on the money they earn under those numbers.

In any event, what do you think? Extend them for all? Extend them for some? Extend them for none?

So much for Google’s mantra of “Don’t be evil.”

Bloomberg has more…

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Wait, that’s just $3.1B. What about the other $56.9B?

Well, the rest isn’t Google’s. The other money comes from corporations who have followed a similar path. And that includes Facebook and Microsoft.

And so…

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

But wait. There is definitely much, much more…

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

Is this fair?

Well, let me put it to you this way…

Is it fair that you pay your current tax rate, which includes local, state and federal income tax as well as FICA (Social Security) and Medicare withholdings, while Google pays an effective corporate income tax rate of 2.8%?

Discuss.

Kevin Drum shares this sobering chart, which shows the share of total earnings that go to each income bracket. It pretty clearly demonstrates how supply side economic policies have benefitted the rich and the super rich. Meanwhile, everybody else is left holding the bag.

Where’d he get the data? The CBO.

Here’s more…

If you look at the raw CBO figures, they show that a full tenth of the national income has shifted since 1979 to the top 1% of the country. The bottom quintiles have each given up a bit more than two percentage points each, and that adds up to 10% of all earnings. That 10% has flowed almost entirely to the very tippy top of the income ladder.

Is the middle class worse off because of this? Of course they are. Income matters even if plasma TVs are cheaper than they used to be or if CPI mismeasures middle class consumption or if average households now contain 2.6 members instead of 2.7. If this massive income shift hadn’t happened, middle class earnings would be higher, they’d be able to buy more stuff, and they probably wouldn’t be in debt as much. And the top 1% wouldn’t have quite so much idle cash lying around to do stupid things with.

Your thoughts?

Bloomberg has some news that reinforces what many of us suspected…the rich save their tax cuts:

Hand the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.

Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.

But tax cuts aren’t the primary driver of rich spending.

What is?

The stock market…

The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.

And here’s a bit more from the CBO about tax cuts for the rich vs. the lower income brackets…

“Policies that temporarily increased the after-tax income of people who are relatively well off would probably have little effect on their spending because they generally would be able finance their consumption out of their income or assets without such a change,” CBO director Douglas Elmendorf testified to Congress on Feb. 23.

On the other hand, tax relief for families with “lower income, few assets and poor credit would probably” spur spending, he said. Elmendorf said because of job losses and a drop in assets over the past two years more families “probably fit that description now.”

Meanwhile, John Boehner gives up even more ground in this fight and admits that only 3% of small businesses would be affected by not extending the tax cuts.

Long story short, extending tax cuts for the rich right now is not a smart idea. The government needs the revenue now more than ever and with the rick likely just holding on to it anyway, the stimulative effects for giving them more of their money back is probably worse than previously projected.

Moving on…

Not only that, only 54% of Republicans favor them staying in place.

Key graph…

Obama may not be doing some very popular things when it comes to moderate Republicans and Independents, but keeping this campaign promise seems like a must. Because people aren’t buying the Republicans’ lies about this being a jobs killer because it targets small businesses.

Here’s Gallup’s bottom line…

With about one in three Americans, including a minority of independents and Democrats, in favor of extending the Bush-era tax cuts for all taxpayers, Democrats may not be putting themselves at great political risk by allowing the tax cuts to expire for wealthy Americans. In fact, the middle ground of extending tax cuts for low- and middle-income Americans but allowing them to expire for wealthy Americans — the Democrats’ most likely proposal — is the specific option the public prefers most.

And scene.

Pretty straightforward and helpful for those who don’t realize that they’re taxed at different levels of their income, not just one bracket.

See, I’ve discovered, through the course of just asking around, that many folks don’t realize that they’re taxed at different levels. Many think that if they make over a certain amount of money, all of their money is taxed at that rate. That’s why you heard all that talk about taxes being a disincentive to making more money, which is obviously nuts and was meant to confuse the average taxpayer who doesn’t understand how our system works.

In any event, the graph via Wash Post…

And a little more about where this came from:

A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year — and transfer the bulk of that cash into the pockets of the nation’s millionaires, according to a congressional analysis released Wednesday.

New data from the nonpartisan Joint Committee on Taxation show that households earning more than $1 million a year would reap nearly $31 billion in tax breaks under the GOP plan in 2011, for an average tax cut per household of about $100,000.

Does everybody now understand how big of a giveaway this is to the wealthiest 2%?

Were the rich hurting in the 90s when the tax rate was 39.6%?

Can we all agree that people making between $200 and $500K can take a $400 hit?

And to those who make over $500K, well, you still don’t have to pay Social Security tax on hardly ANY of your income. And since many of the super rich derive their income from investments, which is taxed at 15% since it’s considered long term capital gains, you’re still gaming the system effectively.

Yes, rich people…you’re still rich and you still win.

Meanwhile, teachers, firefighters and cops don’t deserve to keep their jobs according to Republicans, but they want to give $10 billion more to people who are so wealthy that few of us will ever understand what it is to be in that company?

Good times.

Alex Gibney, the filmmaker behind Enron: The Smartest Guys In The Room, is back with his take on the Abramoff scandal and it seems like it’ll be illuminating…and scary.

Check out this featurette…

Basically…Money + Power = Problems. Especially when it comes to the upcoming financial reform legislation. Which is why I’m heartened that the Dems are pushing to get a bill to the floor sooner rather than later and force the Repubs to choose between voter discontent and campaign contributions.

However, Dems don’t get off the hook in Gibney’s doc. In fact, if you watched the vid, you’ll know that Chuck Schumer was called out as asking for concessions for hedge fund managers that are unsavory to say the least. Especially since their income does not fall into the long term capital gains category but is still taxed at 15%.

And this gets to the basic problem of economic fairness. Because folks who make their income off of investments shouldn’t be given preferential treatment above those who work day in and day out to make a hard earned dollar. Why? Well, currently, a guy like Warren Buffet who does nothing but shift money around pays a lot less income tax than his secretary…and even he doesn’t think that’s fair.

By the way, the Obama administration has come out forcefully from the start on closing this loophole and Schumer has recently signaled he may buck his constituents and back the change.

Either way, I can’t wait to see this film. Should be an eye opener.

(PS – By the way…if we raised the income tax on investment income…do we really think these folks would stop investing? Because the big dogs would still make so much money, even with a higher tax rate, that they wouldn’t care about the tax. We’re talking BILLIONS here, not a few thousand dollars that day traders would care about. I’m just saying…)

Michael Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. Today, in the Wall Street Journal, he proposes a temporary payroll tax reduction as a second try at a stimulus. He starts his argument with consideration of what would have happened with a temporary payroll tax reduction in February of this year:

My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed.

The payroll tax cut would have reduced firms’ costs by roughly the same amount as from the entire decline in employment. It would have cost less than half as much as the stimulus bill, gotten far more income into paychecks quickly and, most importantly, greatly reduced incentives for firms to lay off workers. In fact, it would have created incentives to hire.

Instead, we choose a stimulus that critics called “porkapalooza”, and have seen unemployment exceed targets by about 25% (to over 10% instead of the promised maximum of 8.6%).

Boskin’s recommendation is a “partial payroll tax reduction”, cutting the tax in half for a few months. That means the average wage earner would see a 3% raise for those months (and the employer would also see a 3% drop in payroll taxes). On the employer side, that might spur hiring or help employers retain employees slated for layoffs, but I don’t think its enough of an effect for the wage earner.

Boskin also recommends accelerating some spending “that has to be done anyway”, such as replenishment of military stores. I have my own reservations about opening the door to any more government spending. The level of military spending is certainly something open to debate, anyway, and the current administration is more likely to try to cut military spending after huge increases for the war in Iraq and Afghanistan.

In my view, a better idea would have been a three-month payroll tax “holiday”, with workers enjoying an increase in wages equal to 6%, and employers enjoying an immediate 25% reduction in taxes for the first quarter of next year.

Unlike income taxes, payroll taxes are levied disproportionally on the lower and middle income classes, with every dollar of their income taxed. The Earned Income Tax Credit is designed to offset some of that disproportionate burden, but it is reduced and eventually phased out for those earning over $43,279. People in the third and fourth quintile of income pay more of this tax as a percentage of total income than any other class. Because the payroll tax is collected on every dollar up to $106,800 in income, the richest families see payroll tax free income above that level. (All rates are 2009 figures.)

The middle class is the “engine” of consumer spending, and a reliable, defined 6% increase in wages for three months would do much to spur delayed spending on consumer goods. And it would be “kinder” to our budget deficit than “stimulative” spending.

While taxes on the “rich” are often decried by my fellow conservatives, when all taxes and tax credits are added together our system looks moderately progressive and not “confiscatory”. Economists separate household income levels into 5 equally sized groups, or “quintiles”, with income and effective tax rates per quintile, as shown:

Quintile Income Bracket Source: http://www.bls.gov/cex/2006/Standard/quintile.pdf

These are the estimated percentages actually paid in 2006, not what the tax tables state. Note that “the rich” don’t pay 39% on every dollar of income; with lower taxes on the income up to their top level, tax deductions and other credits, they end up paying 25.8% of their income. It would be simpler to incorporate these tax rates into a tax code of a single page instead of the 70,000+ page tax code we now have, but that’s another issue entirely.

The tax percentages above include payroll, income, excise and other federal taxes, minus deductions and credits, as estimated by the Cato Institute. The income levels for the quintiles, from the BLS, are “household” income (two wage earners if filing jointly). Many are shocked to find their family is in the 4th or 5th quintile, but you are in the top 40% of wage earners if your combined income is over $56,222. If you and your spouse earn $89,000 combined, you are “rich”, in the top 5th of all income earners.

Unlike the Making Work Pay tax credit, passed with the 2009 stimulus bill, a payroll tax holiday would not be accompanied by a temporary adjustment in the withholding tables that might “bite” some taxpayers. The $400 per person “Making Work Pay” tax credit was offset by automatic deductions in the withholding tables, providing the average wage earner with a few extra dollars each paycheck. But that affects the total amount withheld, and some tax payers may see a tax bill due instead of a refund at tax time in the spring. That tax surprise will not be pleasant for families already pressed by salary reductions, rising credit card interest and other effects of the recession.

Rep. Louie Gohmert had proposed a payroll tax holiday as an alternative to multi-national corporate bailouts in late 2008, but the proposal went nowhere. It is time to reexamine this proposal, perhaps even on a bi-partisan basis – one can hope – for the first quarter of 2010.

Cross-posted to FrankHagan.com