Tax policy study: Flip it to fix it
A new study has found that inverting state tax structures—whereby the highest income earners would be taxed at the current percentage of income for the lowest income earners, and vice versa—would collectively raise $6.9 billion more in revenue, a 21.4 percent increase over Virginia’s current tax structure.
“Flipping” the tax structure would eliminate future budget deficit woes and would help offset the serious state and local budget cuts Virginians have experienced for the last four years.
The report, titled “Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls” was released today by Boston-based United for a Fair Economy and is supported by state organizations like Virginia Organizing.
“While Gov. Bob McDonnell and our legislators in Richmond pat themselves on the back for creating a surplus, all Virginians continue to suffer as a result of years of unwise budget cuts stemming from a refusal to make common-sense revisions to our antiquated, upside-down tax system,” said David Shreve, report co-author and Virginia Organizing supporter.
“Flip It to Fix It” attributes a large part of states’ current deficits to the regressive tax structures that the report shows are designed to fail. “Trying to raise adequate revenue through a regressive tax structure—where a greater percent of income is demanded of the poor than the well-off—is like trying to squeeze water from a stone,” said Karen Kraut, coordinator of state tax policy at United for a Fair Economy and co-author of the report.
The report highlights Virginia’s regressive tax structure where the poorest taxpayers pay a larger percentage of their income than the richest taxpayers. Virginia’s richest 1 percent of taxpayers pay 5.2 percent of their income in state and local taxes while the state’s poorest 20 percent pay nearly 8.8 percent. Most of Virginia’s middle class pays between 8 percent and 8.4 percent of their income.
“The inadequacy of regressive tax structures puts everything we value at risk: the well-being of families, the future competitiveness of the American workforce, and the nation’s ability to rebound from the recession and prosper,” said Kraut.
The report contends that an inverted tax structure not only solves budget crises, but increases equity and best spurs steady and strong economic activity.
“Instead of flipping our upside-down tax structure, a proven way to spark new economic activity and jobs, our elected leaders are gutting our infrastructure and education system. They are also relying disproportionately on federal spending and federal jobs to create the illusion of sound state policy,” said Shreve. “We cannot continue to kick the can down the road and place a relatively meaningless accounting balance ahead of the state’s economy and the needs of its citizens.”
The report calls on states to adopt its proposed progressive tax reforms, many of which are immediately achievable and will help solve state deficits.
The full report and state-by-state information is now available at www.faireconomy.org/flipitreport.
The AFP Show: Tuesday, March 30
Hosted by Chris Graham
freepress2@ntelos.net
Today’s AFP Show features an interview with AFP editor Chris Graham and economist David Shreve. Shreve joins the show to talk about a report released Tuesday by United for a Fair Economy and the Virginia Organizing Project looking at what states should do in terms of fiscal policy to address their ongoing issues with budget shortfalls.
[audio:http://media.libsyn.com/media/thenewdominion01/AFP_SHOW_Dave_Shreve.mp3]
The earnings report for Main Street
Column by Prakash Laufer
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To add insult to injury to working America, in came the earnings reports from Goldman Sachs and JPMorgan Chase. At these mega banks, balance sheets are healthy, profits are up and bonuses for top executives are bigger than ever. JPMorgan Chase just reported $11.7 billion in profits and $26.9 billion in compensation and bonuses. Goldman Sachs made a record-high profit of $13.4 billion in 2009 and is slated to hand out $16.2 billion in compensation and bonuses.
These are some of the same institutions whose predatory and unethically risky actions brought our economy to its knees. But, thanks to billions of dollars in government resuscitation, they seem to be recovering nicely from their near-death experiences.
The “earnings report” for the rest of the U.S., however, includes – drum roll, please – higher unemployment and continued foreclosures, with no relief in sight. It sounds like a raw deal because it is. Big banks and Wall Street financiers ignited the foreclosure crisis, setting our economy ablaze, resulting in the loss of millions of homes and jobs. Continue reading “The earnings report for Main Street” »
The case for a strong estate tax
Column by Brian Miller
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On New Year’s Day the estate tax, an essential part of the U.S. tax system for nearly 100 years, will disappear because Congress failed to act in December. Congressional leaders now are pledging to act in early 2010 to reinstate the federal estate tax retroactive to Jan. 1. In the meantime, rhetoric over the estate tax will heat up while Congress grapples with what to do now. Continue reading “The case for a strong estate tax” »
Brian Miller | A Labor Day for the 21st century
Every year, we celebrate Labor Day to honor the work of everyday Americans who built this country brick by brick, community by community. It’s an honorable holiday that pays tribute to honorable work.
While it’s always good to give thanks, we need much more than well wishes and a cheer of support. We need to ensure that the rules that govern our economic system, whether those rules come from Wall Street or from Washington, treat all Americans, particularly those who are the backbone of our economy, with dignity and respect. That’s what Labor Day is truly about.
Continue reading “Brian Miller | A Labor Day for the 21st century” »
Brian Miller | Taxes and the wisdom of our forebears
One hundred years ago, on July 17, 1909, Sen. William E. Borah (R-ID) wrote the words, “The income tax is the fairest and most equitable of the taxes. It is the one tax which approaches us in the hour of prosperity and departs in the hour of adversity. Certainly, it will be conceded by all that the great expense of government is in the protection of property and wealth. There is no possible argument founded in law or in morals why these protected interests should not bear their proportionate burden of government.” Continue reading “Brian Miller | Taxes and the wisdom of our forebears” »
Brian Miller: Restoring a vibrant middle class
Posted by afp on July 22, 2010 · Leave a Comment
As you ponder the fairness of this board game, Congress is debating the very real future of our federal estate tax, a tax on inherited wealth designed in part to prevent one player from owning most of the board before the game even begins.
Recently, a new proposal was introduced in an effort to break through the stalemate that has led to the current tax holiday for the super wealthy. Because of the inability of Congress to reach agreement back in December, the year 2010 is slowly passing as the first since 1916 with no estate tax. Billions of dollars are now being transferred tax-free, while our national deficit grows. The heirs of the late Texas billionaire Dan Duncan stand to inherit, free of any estate tax, more than the average American earns in 4,000 lifetimes. No one questions the right of parents to pass on a legacy to their children, but how much is enough?
Despite its kitchen table status today, the Monopoly board game can trace its roots to Lizzie Magie, who created the game in 1903 as an educational tool to help people understand that free market economies, absent rules to ensure otherwise, naturally move toward monopoly control as wealth is increasingly concentrated into the hands of the few. It takes public policies, from anti-monopoly rules to progressive tax systems, to protect free markets from this self-destructive tendency. The fact is: any economic system is effective only to the extent that its more extreme aspects are reined in.
Our progressive tax system, including the estate tax, helped guide our economy and fuel the broadly shared prosperity our nation experienced during the post-war period. However, that progressive tax system came under a 30-year assault which began in the early 1980s. We’ve seen the consequences of this backsliding and the misguided tax cuts for the wealthy. Instead of the promised trickle-down, we got stagnant wages for most Americans and the widest disparity of income our nation has seen since 1928, just before the Great Depression. It’s time to recapture the core values that made our economy work, beginning with the preservation of a strong estate tax.
The importance of this proposal cannot be overstated. Transfers of wealth from generation to generation impact every aspect of our economic landscape, even the persistent racial wealth divide. While we’ve made significant strides at closing the income gap in the half-century since the great Civil Rights victories, the gap in actual wealth is much harder to shake because wealth transfers forward. Even today, African-Americans have only 10 cents of net wealth for every $1 of net wealth that whites have. Latinos have 12 cents. Without a strong estate tax, the inequalities of the past will forever haunt our nation, leaving the Monopoly board permanently tilted.
Sen. Jon Kyl, R-Ariz., Sen. Blanche Lincoln, D-Ark., and other estate tax opponents are wrong in trying to weaken the estate tax. Congress should instead work to preserve a strong estate tax for the benefit of all Americans. This estate tax proposal represents the kind of commonsense solution that balances the desire to protect small businesses and farms with generous deductions, while ensuring that the super-wealthy give back to support the country that made their prosperity possible.
Even in a game – like Monopoly – we can see the need for rules to ensure that opportunity continually circulates throughout our economy to create a broadly shared prosperity for all, not just a select few. Preserving a strong estate tax is essential to ensuring that each subsequent generation has a chance to achieve the American dream. Without it, we have to ask ourselves, is the game hopelessly stacked? Should we even bother playing?
Miller is executive director of United for a Fair Economy. Online at www.faireconomy.org.
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