Tag Archives: tax rate

Obama: Billionaires and millionaires should pay more taxes – Dec. 7, 2011

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Obama: Billionaires and millionaires should pay more taxes – Dec. 7, 2011.

NEW YORK (CNNMoney) — In case you haven’t heard, President Obama wants the wealthiest to pay more in taxes.

Noting the rise in income inequality in recent years and the need to reform the U.S. tax system, the president on Tuesday said that some of the wealthiest in America pay far less in federal taxes as a percentage of their income than many lower down the income scale.

“A quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%,” Obama said in a speech in Kansas.

Here are some of the facts behind the claim: In 2006 roughly 25% of those with adjusted gross incomes over $1 million paid a smaller portion of their income in federal taxes — income, payroll and corporate — than 10% of those with AGIs below $100,000, according to a recent study from the Congressional Research Service.

Buffett rule could hit 25% of the very rich

As for the president’s assertion that some billionaires have a tax rate as low as 1%, Roberton Williams, a senior fellow at the Tax Policy Center, said that it’s definitely possible but hard to verify.

“Billionaires are still rare enough that we cannot get data for them without running afoul of privacy rules,” he said.

But for a lot of reasons, Chris Bergin, president and publisher of Tax Analysts, said, “It is certainly not implausible.”

Last year, 4,000 households with incomes over a million dollars owed no federal income tax whatsoever, according to Tax Policy Center estimates.

What’s more, of the top 400 federal tax returns with the highest adjusted gross incomes in 2008, 30 had an effective tax rate of less than 10%, noted Mark Luscombe, the principal federal tax analyst at CCH.

A big reason is that a large percentage of wealthy Americans’ income comes from investments, which are often taxed at lower rates than ordinary wages and salaries.

What’s more, some perfectly legal tax code provisions allow taxpayers to reduce their investment tax bills even further.

Bush tax cuts: The real end game

Of course, the wealthy aren’t the only ones who enjoy what Obama refers to as “loopholes and shelters.” Anyone who deducts their mortgage interest, saves money for retirement, realizes a capital gain or loss, or gets health insurance from their employer is enjoying a tax break.

The difference is that the rich use a broader array of tax-preferred investments, such as partnerships. Or they may invest in dividend-paying foreign stocks and can claim a foreign tax credit for the tax withheld from them by the foreign government.

Typically, too, the wealthiest are more likely to be retired or self-employed and are in a position to make big charitable contributions — all of which come with distinct tax advantages.

Obama: Billionaires and millionaires should pay more taxes - Dec. 7, 2011

And the wealthy can afford to be more risk-averse and park a lot of money in bonds, often tax-free.

To Obama, the fact that the wealthy can so whittle down their tax burden is “the height of unfairness.”

Fairness in the tax code is a real issue, but there is no absolute answer to the question “what’s fair?” And that’s one reason why reforming the tax code will be a tough fight.

Earlier this fall, Obama proposed what he dubbed the Buffett Rule, named after billionaire investor Warren Buffett, who has urged Congress to tax the rich more.

The Buffett Rule is intended as a guiding principle for tax reform to ensure that millionaires pay a higher percentage of their income in federal taxes than those who make less.

That may not be as easy to implement as it sounds.

But one thing is a sure bet: The president will be sounding the theme many times over in his re-election bid.

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Tax the Rich! In Fact, Let’s Double Their Taxes

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Tax the Rich! In Fact, Let’s Double Their Taxes | Crooks and Liars.

By Richard RJ Eskow

Conservatives say they want to “bring back” the old USA, the one that existed during those decades of the twentieth century they only seem to see through a gauzy golden haze. Whatever its problems, that country was a place where Republicans and Democrats agreed on two simple principles: That the most fortunate among us should pay their fair share, and that our government must invest in the nation and its future.

When Rick Perry says he wants to bring back “the America I where I grew up,” he’s talking about the era when Dwight D. Eisenhower, a Republican President, built the Federal highway system. One of the reasons Eisenhower was able to do that is that the top tax rate was much higher than it is today. While today’s highest marginal today is 35 percent and capital gains are taxed at only 15 percent, the highest tax bracket was 91 percent the year Rick Perry was born.

Whenever I talk about tax brackets I’m attacked by right-wingers who say I don’t understand, that high taxes discourage job creators. They’ll say things like “You hippies just don’t get it! If taxes are too high rich people will stop working and investing. The Job Creators will go away!”

Well, I do get it. When I was spent a student year in Great Britain the top marginal tax rate was 102%. Once a person reached a certain level of income, they had to pay more in taxes than they earned. And a few years before that, George Harrison made a compelling case against the 95 percent tax bracket on the Revolver album by singing “Taxman.” (The line is “that’s one for you, nineteen for me.” I make that a 95 percent marginal tax rate, but you can check my math if you like.)

So I’ll come right out and admit it: Taxes can be too high. But that doesn’t answer the biggest question of all: What’s the ideal top tax bracket? Where can we set the percentage so that it provides the most revenue for the Federal government without discouraging high earners from making more money?

Thanks to a new and very thoughtful paper by economists Peter Diamond and Emmanuel Saez, we have the answer: 76 percent. That’s right. The most effective top tax bracket in this country, the one that will provide the most revenue for the Federal government, is 76 percent. Know what that means, ladies and gentleman of Washington DC ? That’s the rate that will cut the deficit the fastest.

You see where I’m going with this, don’t you? All those self-proclaimed “deficit hawks” in Washington have their answer: Double the top marginal tax rate to 70%. I say 70 percent, rather than 76 percent, to show that we’re reasonable people. It’s true that the six-point difference would save some billionaires tens of millions of dollars. Sure, that’s a lot of deficit-cutting revenue to lose, but it’s important to make them feel good about themselves. A 70 percent rate will show them that we care about them enough to lose all that money. That ought to bolster their confidence.

Democrats have been framing the tax debate around the issue of letting the Bush tax cuts expire for the highest earners. That would bring the top tax rate to 39.5 percent from its current 35 percent. But why think small? Why embrace the radical, reckless, and irresponsible fiscal behavior of the Reagan era? A 70 percent tax rate will take us back to the tax levels we had during this country’s boom years.

Just to be clear, this tax rate wouldn’t double taxes for the wealthy. It would only apply to income about the highest cutoff point. What should that cutoff point be? Again, we’re willing to be reasonable, so let’s make it $1,000,000. No, wait! My manager’s in a good mood. Let’s make it $2,000,000, with graduated increases that begin at the $400,000 level. It wouldn’t even affect everybody in the 1 percent. Agree to these terms and you can drive your new, lower-deficit Federal government off the lot right now!

And no, I’m not kidding. They’ll say it’s politically impossible. Really? Dwight Eisenhower’s economic platform is politically impossible? Then change the range of possibility. There was a time when 15% tax rates for hedge fund managers was politically impossible, too, but they got it done. We need a little more can-do spirit around this place, people!

Conservatives will say, What about jobs? Lower taxes create jobs! There’s a simple answer to that one: Since the wealthy have had today’s low tax rates for ten years, where are the jobs? That theory’s been conclusively disproved. Higher rates don’t discourage the real job creators, the people who really create and innovate and build. 70 percent was the top tax rate when Steve Jobs and Steve Wozniak started Apple and it didn’t stop them.

These findings may feel intuitively “wrong” to conservatives (although they don’t feel wrong to Paul Krugman or others in a position to know). But if conservatives want to challenge these conclusions, they better be prepared to tell us why they think this is wrong:

Tax the Rich! In Fact, Let's Double Their Taxes | Crooks and Liars

Kevin Drum quite reasonably allows that “(government) revenue maximization isn’t our only social goal.” He’s right, of course. Job creation’s another big one, but we’ve covered that. So is eliminating poverty, educating our children, ensuring a secure retirement, and making sure nobody dies from a lack of food, shelter, or medical care.

People have other goals for our society, too, of course. They range from inspiring ones like freedom, liberty, and self-reliance, to unspoken and less admirable ones like the right to crush your competitors by any means necessary, the right to deceive consumers out of their hard-earned savings, or the right to indulge in gross overconsumption and meaningless excess at others’ expense.

I’m inspired by freedom, liberty, and self-reliance too. But I think the young Jobs and Wozniak were free and self-reliant under a 70 percent tax rate. I don’t think Dwight D. Eisenhower was a socialist oppressor of the masses. And while I’m open to an argument that says doubling the top tax rate offends core American values, I can’t think of one. Eisenhower seemed pretty American to me.

So the ball’s in your court, conservatives. Make your case. But until then let the new rallying cry be, Double the top tax rate! It’s time for those who have benefited from our system to pull their own weight again. Or as politicians used to say but don’t seem to anymore, “From whom much is given, much is expected.”

They’ll say I hate the rich, but I don’t. I used to work with them. I admire the ones who ignore their own self interest and work for the betterment of all. Are the Rick Perrys of this country suggesting that today’s rich people aren’t as patriotic as they were in the fifties? You’re not going to bring back the America you loved as a child with that attitude, Mister!

I don’t hate the other ones either, the greed junkies or the scam artists. I care about them. I want them to live in a stable, just, and vital society with a strong and growing economy. I want them to be able to deliver products to their customers using safe and efficient highways, railroads, and bridges. I want them to have a healthy, well-paid, and well-educated workforce, now and in the generations to come.

Most of all, I care about their consciences.

Everybody in the nation’s capital wants to reduce the deficit, so we know they’ll be thrilled with this solution. It’s like they’re always saying: Why, government has to act more like a family does! When Mom and Dad sit at the kitchen table paying their bills, they have to face facts. There comes a time when they’ve got to look up from the papers scattered all around them and say “Honey, we need more income.” Earning as much as you can is the responsible way to behave.

Raise the top rate to 70 percent? That’s just doing what any smart family would do.

Good news, Washington! Fiscal sanity is on its way. The solution to your deficit problem is here, and so is your new slogan: 70 percent or bust.

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Thirty companies paid no U.S. income tax 2008-2010: report – Yahoo! News

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Thirty companies paid no U.S. income tax 2008-2010: report – Yahoo! News

(Reuters) – Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform but seems unable or unwilling to act.

Pepco Holdings Inc, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world; but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp, Boeing Co and NiSource Inc as among the 30 that paid no taxes.

(For a related graphic, click on http://r.reuters.com/ryb84s).

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

“But that does not mean that low-tax corporations bear no responsibility … The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support,” the report said.

Some of the 30 companies disputed the report’s findings.

A Pepco spokesman said it “pays all its required taxes.”

Boeing paid its taxes “between 2008-2010 … Our effective income tax rate was 26.5 percent, 22.9 percent, 33.6 percent in 2010, 2009, 2008,” said a spokesman for the aerospace group.

PRESSING FOR MORE

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks and a lower corporate rate.

Taxes are on the agenda of the congressional “super committee” tasked with finding at least $1.2 trillion in additional budget savings by November 23, but it is so far deadlocked across a familiar divide — Republicans refusing any tax increases, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members they would fail the country if they did not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.

“Reagan solved the problem by sweeping away corporate tax loopholes,” said the report, which was coauthored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

“Big Business is getting away with taxation murder,” said Frank Knapp, vice chairman of the American Sustainable Business Council, a progressive business coalition.

“They pay little or no taxes on massive U.S. profits and then have the gall to lobby for … a tax holiday to ‘repatriate’ profits they have stashed offshore.”

MANY TAX BREAKS

What are some of the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

Power group Duke Energy Corp was one of the 30 companies listed as paying no income taxes in 2008-2010.

Chief Executive James Rogers told Reuters that Duke cut its taxes thanks to accelerated depreciation, which he said helped the company build new plants and hire construction workers.

Rogers is a frequent spokesman for a coalition of large multinationals seeking a tax break that would let them bring foreign profits into the United States at a reduced tax rate.

Others among the 30 companies included power producer American Electric Power Co Inc (AEP), chemicals company DuPont and toymaker Mattel Inc.

Like Duke, AEP said it benefited from accelerated depreciation. A Mattel spokesperson said the report’s claims were inconsistent with the company’s public financial filings.

“DuPont complies with all tax laws and regulations in every jurisdiction in which it operates,” said a DuPont spokeswoman.

The average effective corporate tax rate, as calculated by McIntyre’s group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan’s time, taming corporate tax breaks alone will not solve the deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction — a middle class sacred cow, on its own worth $104 billion.

Still, said the report: “If we are going to get our nation’s fiscal house in order, increasing corporate income taxes should play an important role.”