The 2014 Budget does not go far enough to tax the 1%.
“Mr. Obama would raise an estimated $580 billion in new revenues over a decade mainly through two ways. For the fifth time he is proposing that affluent taxpayers in higher tax brackets must limit their deductions to the 28 percent rate; while Congress has annually ignored that idea, there are signs of growing support as lawmakers seek new ways to reduce deficits. The second change would impose his so-called Buffett Rule, requiring that people with annual taxable income above $1 million pay at least 30 percent in income taxes.”—-NYTimes.
It hints at restoring equality to an income tax system which is oriented to exempting income from taxes through tax exempt retirement accounts. The Fig Leaf of capturing some of that income for taxation does not work for two reasons. First, it is politically unfeasible and second, because it does not capture the vast sums of income which are allowed to escape, untaxed, into the retirement accounts of the 1%. Transactions within tax exempt accounts are also often able to escape taxation. Overall, in sum, these escapee taxes amounted to 6.5% of GDP in 2001.
Non-business related tax expenditures are a vertical transfer of wealth from average taxpayers to the very rich. 6.5% of GDP in 2001. Some examples of tax expenditures are tax deductible contributions to retirement accounts. 401k, IRAs are the foundation of these tax expenditures. They amounted to 6.5% of Gross Domestic Product in 2001.
Compare that figure to Social Security. 6.5% of GDP is close to the projected future cost of future Social Security benefits. Social Security is a contribution-based, social insurance program which the greatest number of low and middle income retirees will rely on for their sole means of retirement income. But instead of serving the needs of 70 million retirees like Social Security is projected to do, tax expenditures will extract 6.5% of GDP to serve the needs of the few.
Many ordinary people have 401k and IRA accounts, but ordinary savers and retirees accounts are much smaller than the tax expenditure protected accounts of the 1%. As a group, American taxpayers are accelerating the wealth of the 1% by exempting it from taxation, and by paying higher taxes to compensate for the loss of taxes not collected from the 1%.
Low capital gains tax rates for unearned income from investments are a form of unequal tax treatment of income. Current capital gains taxes are at a historical low. While a one event—low capital gains tax may benefit the lowly retiree who sells their home to pay for their expenses in retirement, or not; low capital gains taxes are a gift to the rich and to the 1% who can build extreme wealth through low taxes on large accounts and on exempt transactions. To my knowledge, the 2014 budget does not address this glaring unequal treatment of taxable income.
The Social Security FICA Cap Needs to Be Scrapped.
Instead of proposing an across the board cutting measure such as the chained CPI, the Administration could have proposed to scrap the existing limitation on the collection of Social Security taxes. At this point, all income above the cap (above 113K) is not taxed and this creates a long term funding gap. If the administration was truly concerned about strengthening Social Security, they would insist that those affluent people earning more than 113K should pay in their fair share of FICA taxes. But the 2014 budget does not contain this change.
Radical Attacks on The Social Safety Net.
This 2014 budget cuts social safety net programs:
Another $1.2 trillion in savings would come from cutting spending over the next decade on programs across the federal government. But the most politically significant reductions would come from trimming payments to Medicare beneficiaries and providers, and applying a less-generous measure of inflation to government programs, including Social Security.”—–Washington Post.
Everyday Americans do not benefit from the retirement tax expenditures which benefit the very rich. Instead, everyday Americans rely on Social Security, Medicare and Medicaid. But these programs are under attack by the oligarchic class. Their corrupt politicians and media announce loudly that the programs which are the essential safety net of the common man and woman are ‘unaffordable’.
“But many lawmakers — both Democrats and Republicans — are worried that the coming waves of retiring baby boomers will put too great of a financial strain on the system that supports retirees. They are looking for ways to reduce the cost of Social Security without radically restructuring the popular program.” —–-NPR.
Radical Centrism Insists on Austerity For Everyday Americans.
The current attacks on the social safety net programs through the Sequester and through the Grand Bargain are deliberate efforts to cap the total cost of government. Even the President’s spokesperson admits this:
“Wednesday’s budget will actually propose slightly more deficit reduction than the current, and much-hated, sequester: targeting $600bn in new revenue from taxes and $1.2tn from spending cuts over the next 10 years.
Carney said: “The president’s budget will replace the sequester, which was designed to be bad policy for everyone with not just $1.2tn in deficit reduction, but $1.8tn in deficit reduction. In other words, it will go further than the sequester.”—--Guardian
The pattern of more and deeper cuts has now been firmly established. And the proportion of cuts asked of Social Security beneficiaries and Medicare and Medicaid patients is much larger than the miniscule proportion of taxes asked of the 1%.
The Guardian has released the embargoed copy of the Administration’s budget proposal. It contains suggested limits on preferred tax treatment accounts but without any specifics and it also mentions the need to address the taxation issues of carried interest income. How far these suggestions go remain unclear.
I suspect from past behavior that these are meant to imply “political equivalence” between cuts to Social Security through the chained cpi to the elimination of special tax breaks implied by their vague proposals. If I could show you the chart demonstrating how the top 20% own almost all of the wealth in the country, you could experience the false equivalence being drawn between what the Administration is asking from all seniors, Vets, the disabled, present and future beneficiaries, and what they are asking from those whose income is predominantly free from income taxes.
Here is the Income Inequality youtube to show you how there is no equivalence, no “shared sacrifice” possible.
Image by 401(k) 2013 released under Creative Commons License