contemporary political compromise: an illustration

From what I can tell, both political parties are interested in extending the payroll tax cut. Which is smart politics. Who wants to cause Americans to pay an extra $1,000 during an election season? They may not agree on how to pay for the extension, but if they can agree on the what, the how can be worked out.

Of course, agreement is not actually a political position these days. It is not possible for the Republicans to agree with Obama on any proposal without feeling like they are capitulating with the enemy. So in order to make this agreement into a full-on fight, the GOP are searching for some way to gum up the works. For some, that gum is the Keystone XL Pipeline. To Obama, the GOP said: we won’t pass the payroll tax cut, even though we want to extend the payroll tax cut, unless you attach approval of Keystone XL. To which President Obama said: if you attach Keystone XL, I’ll veto the payroll tax cut and the pipeline. To this GOP said: We’re prepared to fight this out. To which Obama said: I’ll take away your Christmas vacation. You get the idea.

In case you were wondering what this kind of compromise looks like, and how it compares to normal interaction, here is a diagram to illustrate:

You make money from money? So what do you DO?

I understand the differences between rich and poor pretty well, I think. For the most part. But what I don’t understand is the difference between making money from money and making money from a job.

This is a distinction highlighted by Warren Buffett, billionaire and (apparently) stand up guy in his op-ed in the NY Times today. In his editorial, titled Stop Coddling the Super-Rich, Buffett calls for an immediate tax increase on households making over $1 million, of which there were 236,883 (in 2009), and an even greater tax increase on households making over $10 million, of which there are 8,274 (in 2009).

This is all well and good and I totally agree. I actually think we should lower the bar from $1 million. But calling for higher taxes doesn’t need to be unpacked. It just needs to happen.

What really needs to be addressed in this conversation, in my opinion, is this: How have those individuals who have become super-rich by manipulating money gotten super-rich? The distinction as Buffett calls it is between people ‘making money with money’ vs. people who ‘earn money from a job.’ This is certainly not an anti-wealth question. When companies like Apple make piles of cash, who can blame them? They make a product that a generation of consumers want to buy and as such they earn money beyond people’s wildest dreams. Good for them. Wealth is not the problem, but how it is made is.

Bridging this gap might save the country, by calming the animosity that many (myself included lately) feel when they see so much wealth amassed by what, in the opinion of many (myself included) does not count as work, i.e. does not add anything to the United States (except more wealth for wealth’s sake). I’ve heard over and over how much profit companies have been making in this recession, and how much money is out there, but if a corporation makes a dollar, and a trader trades that dollar, and no one ever sees it, is it even a real dollar?

I don’t want this opinion of mine to be correct. I want to think that the wealthy money-movers are bringing something of value to the country other than wealth for the wealthy. But it’s hard not to be frustrated to hear about the low tax rates for these folks, when these  are the people who can most afford to pay a higher rate. And they can afford it. Much more so than the people I know.

The people I know, myself and my families and everyone in the social/cultural/economic spheres that I have ever inhabited, everyone has always worked a job, and gotten a paycheck for that job (or not gotten paid because it was volunteer work). This runs the gamut from farming and construction to desk-job at a clean energy policy shop to health-care to programming pacemakers. Jobs that work towards bringing something actual to the nation.

The  people out there (a lot of them, it turns out) who don’t quote have jobs unquote, but who manipulate money and then get more money have always been around, and always been silently moving behind the scenes, getting coddled by the government. Now they are a part of the national conversation, and it’s important that we know what the hell they actually do and what it does for the country. I don’t like not understanding what this means, and thus feeling antagonistic towards these folks. But lately I have felt this way.

So please, reader, help me understand what making money from money means, and who it benefits. Why shouldn’t money made from money be taxed at higher rates? Why should the wealthy not pay payroll taxes? These people obviously can pay. This piece from Buffett is not unique. The rich can pay, so why won’t we ask them to?

China and its delicious government

Salon has an article relating a rant from Vegas casino mogul Steve Wynn, which inspired TRC to go on a rant of our own.

In a recent conference call Mr. Wynn declared Obama to be (surprise) a socialist and essentially claimed that President Obama is terrible for business, and until he is gone, no business will make any moves but will “be sitting on their thumbs” because they are “frightened to death of the weird political philosophy of the President of the United States.” Unfortunately, this is not a terribly unusual view of the Obama Presidency, especially among the uber-rich. Excuse me, Job Creators. It’s not correct to say Obama is anti-business, but it’s not uncommon to say it, either. But this part is fine. This part is just sounding off with relatively common anti-Obamaism.

The part of the Wynn rant that is a bit more, well, atrocious, comes from his fawning over the Chinese political and business system. Wynn runs a casino in Macau, see, and it is just too efficient to be believed. Says Wynn of that operation:

We are so grateful to be part of [the Chinese] market and to be allowed to participate in that community. We find the political environment, the regulatory environment, the human resource environment that we’re in to be absolutely delicious. Life is quite straightforward in China. The government is predictable. Our employees are eminently trainable. They’re anxious to please. 

Ok. Now read that paragraph again, knowing it followed an anti-Obama tirade, and what exactly is Wynn saying about America and its labor force? The political, regulatory, and human resource environment of China is absolutely delicious. Are you kidding me? This is the 512th richest man in the United States, a billionaire anti-Obama Las Vegas mogul who loves the Chinese government’s business attitude and labor force and political structure. They are delicious, he says, while we are..run by a wealth redistributing pure socialist.

Yes, Mr. Wynn, if only the United States and President Obama would emulate the totalitarianism of China, maybe these middle class whiners would shut up and be thankful to start working shitty jobs in casinos in the worst idea of a city the US has ever had. Meanwhile the government will provide little to no regulatory oversight for businesses like the “wet blanket” that is the US President wants to infringe on us poor victimized business owners, and any media or dissenters against the brutal billionaire bosses can be forcefully shutdown by the absolutely delicious and predictable government.

No wonder the rich are worried about class warfare, they keep saying things like this. Tell me how raising taxes on Steve Wynn endangers our nation? Please. Because I really want to do it. I think we should impose a Steve Wynn tax. That alone could erase at least a billion dollars of our deficit.

When does wealthy become rich?

What is middle-class American? This is an honest question, and seems ever more relevant as our governments become more and more polarized on issues of tax increases on the “wealthy” and spending cuts on the “poor.” If you read TRC, you’ll have no problem knowing where I stand on this issue. So here’s a discussion question: what does it mean to be rich in the United States? I know little about the reality of taxation from the governing side, so this post is for self-education.

Joe Curl in the Washington Times (I know), draws a picture of the terrible plight of the life of an American family making $250,000 per year, who the President apparently referred to as “rich”. These families are not rich, says Curl, but pay their share, and more, to the government in taxes. Curl runs down the list of taxes paid by a family of 250,000 or more, and the picture he paints is, well, terrible. The lesson is: $250,000/year is no money at all, and President Obama, for thinking these people “rich” is extremely out of touch. After all, the President raked in $5.5 million last year. Concludes Curl: “So, scratch that beach house, that trip to Florida. And you can forget about these people setting up their own retirement. They’ll now have to depend on the federal government giving them back some of the money they paid in taxes.”

After reading this, the question arose: how many Americans are in this unfortunate position of clear middle-class economic over-taxation? And should the number of families living with $250,000 or more really matter as to how they are taxed? If they earned over 250K, is that 250K open to greater taxation?

In 2008, FactCheck.org reported 2% of American households made $250,000 or more in a year. In 2009, Soapboxers.com reported that “under 3 of tax returns” claimed $200,000 or more. Many sites and organizations find the same number, 2-3%. The benchmark of 250K seems to have been set the past few years, and the bar doesn’t seem to be moving. So we’ll say 2-3% of US households make 250K or more. Unless there is a newly expanded definition of “middle” it would seem difficult to paint the highest 3% of income in the US as middle-class.

But there are other factors. The disparity of wealth for example. Middle-class, as in the middle percentages of Americans, may not yet have reached 250K, but they aren’t too far behind. And while there may be a lot of people making 250K or more, a small percentage of those folks are making 1M or more, a much greater disparity. And a small percentage of those folks are making 5M or more. And a small percentage of those folks are making 10M. You see how this works. In the public consciousness of the United States, where millionaires are floating around on the TV and internets with a constant need for acknowledgment, a family of 4 making 250K probably doesn’t feel like they are in the top 3% (to which one might say: how do you think the rest of us 97% feel).
And then there are the taxes.

The tax argument surrounding the 250K line often seems to hinge on the notorious, beloved, ever-American “small business owner.” A great deal of our nation’s small business owners, we hear, make over 250K, thus raising taxes at the established benchmark would harm the small business owner, the business, the employees working in that business, those employees health care options, and any potential hire that may miss the chance of employment. Those are serious consequences, and if they are the result of using 250K as the benchmark, maybe we have to rethink it.

So here are the tax questions:
Aren’t there a whole lot of caveats in the tax code? Haven’t we built a tax system designed to protect these small business owners, or are those just to protect the energy companies and millionaires? Or are there no undeserved protections, and that’s simply a liberal line? Are we talking about raising taxes or are we talking about taking away loopholes and benefits we shouldn’t have provided in the first place?  Should we consider the removal of tax breaks or tax loopholes, as I understand a lot of these tax proposals are, the same as raising taxes?  If so, can we ever right mistakes in the tax code in hindsight or is that the same as raising taxes on the “small business owners” of America? Or do we always have to accept tax decisions from the past?Should it matter if that happens on those just over 250K or only on Oil Companies and the mega-millionaires? Do I have it all wrong and this is not how it works in the first place?

These questions might be mainstream left-leaning questions, eye-rolling to Republicans who see this issue as clear as day. But they are important questions that need responding to help folks like myself. Because when I think of myself and my family, who had a nice upbringing in a family of 4 in a solidly middle-class suburb with few (but our share of) hard-times, making it by fairly comfortably in the Reagan and Bush and Clinton days, our household income never even got the tail end of the breeze from the wake of a 250K annual income. Not Even Close. And now that I’m an adult and married, well 250K/year is the kind of household income we don’t even aspire to. So help me understand wealth in this country, because to me, this all makes no sense.

(*NOTE: there is a political discussion here, too, about the-Grover-Norquist-never-raise-taxes-ever-no-matter-what-pledge-theory of government. But good governance, in my opinion, rarely comes through pledges.)

Happy Fourth of July-

As my state government has now entered a shutdown over how to pay for the operating of the state government (Taxes! No, Cuts!, No Taxes!), I remain proud of my state, it’s government, and our country and its national government. Even when it gets ugly, and people are fighting over taxes. It always gets ugly over taxes.

Because taxes are hard. Washington may have been right when he said that there are no taxes that are not inconvenient and unpleasant, but Roosevelt was also right when he said that taxes pay our membership dues to an organized society.

So on that contradiction (which is no contradiction at all), and in the face of Minnesota’s total governmental failure, I say, happy fourth of July.

Who’s going to pay?

Relative to: Everything written today, which was all about the Deficit Reduction Recommendati0ns

The election cycle the country just experienced put a great deal of emphasis on balancing the budget. Well the rubber must hit the road, and for the young, new politicians with a mandate to balance the budget to make hard choices regarding taxes. You can’t just cut taxes, cut spending, and expect it all to work out. Someone’s going to have to suffer.

On top of which, if we’re going to balance the budget, we’ll have to let the Democrats in office know that they’ll have to make tough decisions regarding social services. We can’t just raise taxes and continue to spend and expect it all to work out. Raise taxes, cut spending, cut services, cut taxes: it’s not my job to solve, its yours now. But someone is going to have to suffer.