On April 15, the Real Crime is the Radical Redistribution of Our National Wealth to the Bloated Rich: It's a Mugging

BuzzFlash: What about hidden taxes for people who aren't rich?  When we cut taxes for the rich, all of us end up paying higher fees for what were formerly free public services -- for example in Chicago the parking meters were just privatized and the costs for drivers skyrocketed.  While we keep reducing taxes for the wealthy, the public services are still needed, so we end up paying for them through privatization and increased fees.

Chuck Collins: Great example of the parking meters.  I recently was asked to pitch in to buy a new chair for my daughter’s public school.  And here I thought that’s what my taxes were for! 

When you get nickel-and-dimed for services that used to be public -- or watch public services get slashed -- or have to wait longer in line or on telephone hold -- I want you to repeat this mantra: “Stop the Shrink, Shift and Shaft.” 

It is important to step back and see the dramatic tax shifts that have taken place over the last several decades. The neo-cons worked to shrink certain parts of government -- the parts that help non-wealthy people have decent lives and economic opportunity. Remember anti-tax activist Grover Norquist’s stated goal: “I want to shrink government to the size where we can drown it in a bathtub.” 

Tax responsibilities have shifted off of large wealth holders and onto wage earners, off corporations and onto individuals, off the progressive federal tax system and onto state and local tax systems, which tend to be more regressive.  Tax cuts for the rich have shrunk federal services -- and shifted responsibilities to states for health, anti-poverty, transportation and more.  That’s the shaft part.  

The result is a weakened regulatory state -- which by the way was the goal of the neo-con anti-tax, anti-government activists.  So speculators boost up housing or oil prices –- and we all pay more.  It’s a form of taxation –- though the money goes to speculators.  With the lack of strong government oversight, we all end up paying more to private corporations and speculators. 

One challenge is this happens in slow motion and we adjust our expectations.  But there was a time when working class students used to get grants to help with college expenses.  There was a time when there were homebuyer assistance programs that didn’t require you to work through a predatory lender. 

BuzzFlash: Your group just released "Reversing the Great Tax Shift: Seven Steps to Finance Our Economic Recovery Fairly." Can you share some of the highlights?

Chuck Collins: We offer some very concrete examples of the tax shifts I just mentioned. For instance: 

In 1955, when the U.S. first instituted “tax day,” America’s top 400 taxpayers paid three times more of their income in taxes than the top 400 of 2006, the most recent year with IRS data available. If these 400 ultra-rich folks had paid 1955 tax rates, the federal treasury would have collected an additional $35.9 billion more in revenue in 2006. 

Our report found that the 139,000 U.S. taxpayers who made over $2 million in 2006 averaged $5.9 million in income. They paid an effective tax rate of 23.21 percent, compared to 49 percent effective rate that those of equivalent income paid in 1955.  If these individuals had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006, an additional $202 billion.  That’s enough money to send massive “aid to the states” and make more overdue investments in transforming our economy to be more sustainable. 

The main part of our report identifies seven tax proposals to reverse the tax shift and raise $450 billion in revenue from the wealthy and global corporations that are playing games with the tax system.  For instance, we propose that income from wealth (capital gains and dividends) should be taxed the same as income from work and wages.  That reform would generate $80 billion in revenue. 

BuzzFlash: Can you compare the U.S. tax policy toward the rich to some other nations?

Chuck Collins:  The U.S. has among the lowest tax rates for an advanced industrial economy.

BuzzFlash: How come so many salaries and bonuses for CEOs have grown to such enormous amounts, regardless -- in many cases -- of their performance on the job?

Chuck Collins: The problem of runaway CEO pay has been alarming for twenty years.  In 1980, the gap between highest and average paid workers in a company was about 42 to one.  Today, it is over 300 to one.   

Excessive pay to top managers promotes a very short-term outlook, encouraging CEOs to do whatever it takes to boost their share price for the next quarter.  It provides a disincentive for long-term company health and growth.   

Wall Street’s culture of greed has wrecked our economy.  Most ordinary taxpayers don’t know we subsidize excessive pay –- by allowing corporations to deduct bloated pay packages.  Our group supports legislation to limit the deductibility of excessive CEO pay, such as the Income Equity Act introduced by Rep. Barbara Lee.