Ready to Break "The Pledge"

Perhaps the influence of Grover Norquist, Americans for Tax Reform, and their Taxpayer Protection Pledge is waning. Republicans, the party of low taxes, stand ready to raise the income tax rate of the approximately half of American taxpaying units that pay none. Why is that? Well, low income households are not likely to contribute to any political cause. When your major contributors are the very rich, politicians are going to follow the money in every sense of the phrase. There is also a narrative about the greater worthiness of the people who pay taxes and produce jobs for other Americans. Bruce Bartlett has gathered a few quotes.

  Last year, Senator Orrin Hatch of Utah, the ranking Republican on the tax-writing Senate Finance Committee, declared that taxes on the rich should not be raised until the poor are taxed. “I think many taxpayers are skeptical that the answer to our fiscal problems is for them to sacrifice more, when almost half of all households are not paying any income taxes,” Mr. Hatch said.
  In April, Representative Eric Cantor of Virginia, the House majority leader, said it was “unfair” that 45 percent of people don’t pay any federal income taxes. Asked if he wanted to increase taxes on these people, he replied, “You’ve got to discuss that issue.”
  In May, Richard Mourdock, the Republican Senate nominee in Indiana, likened the current split between taxpayers and nontaxpayers to the pre-Civil War division of the nation between slave and free. Consciously using Abraham Lincoln’s famous “house divided” terminology from 1858, Mr. Mourdock said, “When 47 percent are paying no income taxes — they do pay Social Security, but they are not paying income taxes — and 53 percent are carrying the load, we are a house divided.”

The poor's free ride is over! To quote our own Governor Perry, "We're dismayed at the injustice that nearly half of all Americans don'e even pay any income tax."

Mr. Bartlett's article is worth reading in its entirety, and I also recommend James Kwak's piece in The Atlantic, The GOP's Bizarre, Disturbing Passion for Raising Taxes on the Poor

Which Pledge? The Texas Budget Compact

Which Pledge? Governor Perry, already a signer of Grover Norquist's Taxpayer Protection Pledge, has sought to score political red blood density points by publicizing a "me too" pledge he calls the Texas Budget Compact. I was pleased to find out that Texas House Speaker Joe Straus (R-San Antonio) refused to sign based on his policy of not signing any such pledges. As Speaker, Straus fills a much stronger position in state government than the governor. It gives me faint hope, particularly for restoring some education funding, that he would refuse to limit his budget options before the next legislative session.

During a visit to Washington on Tuesday, Texas House Speaker Joe Straus also lauded the goals in Perry's "compact" - including a ban on assorted budget gimmicks, and a pledge not to raise taxes or create new taxes - while saying flat out that he doesn't sign pledges and won't sign this one. Dallas Morning News

As cause for despair, here is the list of Texas legislators on the Americans for Tax Reform website who have signed Norquist's pledge as of March 27, 2012. Presumably they will support Governor Perry's mini-pledge. I hope they all will give more weight to representing the interests of their districts than aligning themselves with Norquist's or Perry's goals. If the legislators themselves won't put Texas and Texans first, however, Texas voters can have their say in the Texas primary May 29th, The primary runoffs July 31st, and the general election November 5th.

6 Senators of 31
Brian Birdwell (S-22)
Chris Harris (S-9)
Joan Huffman (S-17)
Robert Nichols (S-3)
Dan Patrick (S-7)
Tommy Williams (S-4)

67 House members of 150
Jose Aliseda (H-35)
Alma Allen (H-131)
Doc Anderson (H-56)
Rodney Anderson (H-106)
Marva Beck (H-57)
Leo Berman (H-6)
Dwayne Bohac (H-138)
Fred Brown (H-14)
Linda Harper Brown (H-105)
Angie Chen Button (H-112)
Cindy Burkett (H-101)
Erwin Cain (H-3)
Bill Callegari (H-132)
Stefani Carter (H-102)
Wayne Christian (H-9)
Tom Craddick (H-82)
Brandon Creighton (H-16)
Myra Crownover (H-64)
Sarah Davis (H-134)
Joe Driver (H-113)
Gary Elkins (H-135)
Allen Fletcher (H-130)
Dan Flynn (H-2)
John Frullo (H-84)
John Garza (H-117)
Larry Gonzales (H-52)
Lance Gooden (H-4)
Kelly Hancock (H-91)
Patricia Harless (H-126)
Harvey Hilderbran (H-53)
Charlie Howard (H-26)
Dan Huberty (H-127)
Bryan Hughes (H-5)
Todd Hunter (H-32)
Jason Isaac (H-45)
Jim Keffer (H-60)
Phil King (H-61)
Tim Kleinschmidt (H-17)
John Kuempel (H-44)
Jim Landtroop (H-85)
Lyle Larson (H-122)
Jodie Laubenberg (H-89)
George Lavender (H-1)
Ken Legler (H-144)
Jerry Madden (H-67)
Dee Margo (H-78)
Geanie Morrison (H-30)
Jim Murphy (H-133)
Barbara Nash (H-93)
Ken Paxton (H-70)
Tan Parker (H-63)
Charles Perry (H-83)
Four Price (H-87)
Debbie Riddle (H-150)
Connie Scott (H-34)
Charles J. Schwertner (H-20)
Kenneth Sheets (H-107)
Mark Shelton (H-97)
John Smithee (H-86)
Larry Taylor (H-24)
Van Taylor (H-66)
Raul Torres (H-33)
Randy Weber (H-29)
James White (H-12)
Paul Workman (H-47)
John Zerwas (H-28)
Bill Zedler (H-96)

Recommended reading: Simon Johnson and James Kwak, White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You

International Women's Day - Texas Style

I couldn't leave this out of a blog titled Less Than the Truth. The Texas Tribune reports on Governor Perry's (and other Republicans) lies about the Texas Women's Health Program and Planned Parenthood. From The Texas Tribune:

Rick Perry Blasts Obama Over Women's Health Program

State Representative Villareal (D-San Antonio) rebuts in a press release.

Republican Claims of Supporting Women's Health Program are Laughable

Give It Back, Rick!

Governor Perry has requested permission to transfer his remaining presidential campaign funds to a SuperPAC for donation to Republican candidates and social issues. My former coworker, Carol Moya, is one of many Texans who want to be repaid for the $800,000 in Texans' taxes that were spent on the governor's security during his presidential debacle, so she created a Facebook page, Give it Back, Rick! Please "Like" it, post some content, and comment.

Governor Perry's Budget and the Austin Public Library

As of August 31st the Austin Public Library is changing the software used for interlibrary loans from ILLiad to Navigator. When I queried David Spradling, Division Manager of the Faulk Central Library, he estimated that the new system would be available in mid-October, with a significant chance of that prediction being off in either direction.

The other significance of the August 31st date was that Governor Perry's cuts to the Texas State Library budget resulted in the end of funding for the eight interlibrary loan employees. I had been unaware that their salaries were state-funded, although I knew that TSL grants were involved in APL's ILL system. The workload will be absorbed by other APL employees.

The above information came out of my original query to Mr. Spradling about whether the Navigator software would result in more interlibrary loan requests, which APL calls "active requests." If the system continues with five active requests, the usual result for me is that I actually have one book in my possession. The other active requests are in the process of wending their way through the interlibrary loan system. Since I have 199 books on my reading list that are not in APL's collection, I was hoping (in vain) for an end to this bottleneck.

"Do you not know, my son, with how little wisdom the world is governed?"

Swedish Lord High Chancellor Axel Gustafsson Oxenstierna af Södermöre, Count of Södermöre, wrote the title quote in a letter to his son, who was unsure of his abilities as a delegate to the negotiations that led to the Peace of Westphalia.

A different point can be made keeping the quote in mind while examining Governor Perry's college transcript.

This isn't the half of all Americans causing Governor Perry's dismay.

The 2008 report, Tax Haven Banks and US Tax Compliance, by the US Senate Permanent Subcommittee of Investigations stated: "Each year, the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses. These funds represent a substantial portion of the annual US tax gap, which is the difference between what US taxpayers owe and what they pay, most recently estimated by the IRS at $345 billion." This was towards the end of the UBS banking scandal. The report continues, "UBS alone has an estimated 19,000 accounts in Switzerland for US clients with assets valued at $18 billion." This isn't the half of all Americans causing Governor Perry's dismay: “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” The eight case studies from the report demonstrate the Americans involved (as summarized in the IRS Tax Audit News). Obviously these aren't the half of all Americans who don't owe any federal income taxes, these are the ones unwilling to pay the income taxes they owe.

1. Marsh. The Marshes of Ft. Lauderdale, Florida, hid $49 million in four Liechtenstein foundations over 20 years.
2. Wu. LGT [Liechtenstein Global Trust] helped William Wu hide ownership of assets, including his house in Forest Hills, New York, using an elaborate offshore structure.
3. Lowy. LGT used transfer companies and a foundation with a Delaware corporation to help the Lowys hide their beneficial interest in a foundation with $68 million in assets.
4. Greenfield. LGT private bankers, including Prince Philipp of Liechtenstein, met with Mr. Greenfield and his father to pitch the transfer of $30 million from Bank of Bermuda to LGT.
5. Gonzalez. LGT helped a Gonzalez car dealership inflate invoices, move funds offshore and, after getting sued for their pricing practices, hide assets in case of a court judgment.
6. Chong. LGT helped Richard Chong use hidden accounts to move millions of dollars related to his business ventures, routing them through an offshore corporation to avoid scrutiny.
7. Miskin. LGT helped Michael Miskin hide assets from courts, tax authorities, and his wife.
8. Olenicoff. Bradley Birkenfeld, a private banker employed by UBS AG, pleaded guilty last month to conspiring with a U.S. citizen, Igor Olenicoff, to defraud the IRS of $7.2 million in taxes owed on $200 million of assets hidden in Switzerland and Liechtenstein.

These people are criminals, and they don't even include the drug dealers and terrorists who depend on the same bank secrecy. Besides the Swiss and Liechtenstein tax havens, there are Manhattan, London, Singapore, Andorra, The Bahamas, Bermuda, British Virgin Islands, Cayman Islands, The Channel Islands of Jersey and Guernsey, Cyprus, The Isle of Man, Liechtenstein, Mauritius, Monaco, Panama, San Marino, Seychelles, Turks and Caicos Islands and more. About 15% of the world's sovereign nations are tax havens and not all tax havens are sovereign nations.

The tax justice network estimates that "the amount of funds held offshore by individuals is about $11.5 trillion – with a resulting annual loss of tax revenue on the income from these assets of about 250 billion dollars. This is five times what the World Bank estimated in 2002  was needed to address the UN Millenium Development Goal of halving world poverty by 2015." (Tax Havens Cause Poverty)

Where is the fair tax that these people owe?

"We're dismayed at the injustice that nearly half of all Americans don't even pay any income tax." - Burnt Orange Report

The Burnt Orange Report has started "The Light of Truth" series "on factually inaccurate and slanted information polluting Texas and National politics." For part one of the series Eric Robeson chose the quote from Governor Perry that I have used to title my posts on this subject, but he summarizes the national arena and then concentrates on Texas.

According to the Institute on Taxation and Economic Policy, the poorest 20% of Texans pay over 12% of their income in state and local taxes, but the richest 20% pay only 3%, making Texas is one of the Ten worst states when it comes to having regressive local taxes that hurt the poor.

 Second, when federal payroll taxes are included, a study by the Tax Policy Center, shows that 2/3rds of those who do not pay income taxes pay some form of federal income-based tax. 

Thus, before even counting federal consumption taxes like taxes on gasoline, aviation, alcohol and cigarettes, the Tax Policy Center calculates that only 13% of Americans are not federal tax payers.

 Further, if federal consumption taxes are included, analysis form [sic] the Tax Foundation, shows the bottom 20% often pay more than the richest 20% in many key categories.

Third, of the remaining 13% of Americans who do not pay income related taxes, the main reason is that they make little or no income.

Links to my posts:

“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.”

“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” - Update

Link to a post that is not strictly a part of my series, but is definitely related.

Who were/are the unproductive Americans?

Who were/are the unproductive Americans?

In the 1976 presidential campaign, President Reagan introduced America to the anonymous welfare queen who lived on the south side of Chicago. This meme replicated and mutated. In 1996 President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act. He had campaigned on the promise to "end welfare as we know it." Thus ended an entitlement program for the poorest of the poor in America, predominantly single women with children, who received cash benefits from Aid to Families with Dependent Children, reborn as Temporary Assistance for Needy Families. The new meme was Workfare. In return for training and transitioning to what was usually a minimum wage job, these women were promised child and medical care. The Center on Budget and Policy Priorities report the results on the fifteenth anniversary of TANF August 22nd. First, there are indeed fewer families receiving cash benefits.

As for the promises, only three states have increased their TANF benefits in real terms from 1996 to 2010.
.

In my previous quote from David Wiegel, a mutation of the meme to include the recipients of the TARP bailout is what set off the Tea Party rallies in 2009. Even more recently Michelle Bachmann has been described as a welfare queen for the farm subsidies she has received.

Still, neither the introduction of the Workfare meme nor the mutation of the welfare queen meme has killed President Reagan's original imputation of a black, unwed mother of several children by different fathers living on the south side of Chicago, using her cash benefits to pay for her Cadillac. I recommend the Myth of the Welfare Queen by Pulitzer prize-winning journalist David Zucchino if you have never met such a woman in person.

The New Meme: The Working Poor

Both Representative Bachmann and Governor Perry have characterized the working poor as unproductive, non-tax-paying Americans, and I again quote the governor, “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” As I mentioned later in that post, 30% of the working poor receive tax expenditures comprised mainly of child care credits and Earned Income Credits. These are the new welfare queens. The hopes versus the reality of creating a new meme and destroying an old one is very well summarized in this quote from Bill Kilgore:

But whatever you thought of the law in 1996, or of its performance since then, the biggest surprise has been the rapid erosion, especially during the last few years, of the hopes shared by liberals and conservatives alike that firmly connecting public assistance to a requirement to work would detoxify the social and racial poisons that had grown up around the old system. At first, that actually seemed to happen; the “welfare wedge politics” so common from the 1960s to the 1990s largely abated in the aftermath of the legislation. But now, even as the “working poor” (the bipartisan heroes of welfare reform) are bearing much of the brunt of the Great Recession, they have become the objects of a new and intense wave of conservative hostility that treats them as parasites just like the “welfare queens” of yore.

The richest Americans, on the other hand, are "wildly productive geniuses" and "the true aim of tax policy is keeping their tax burden low so they have sufficient encouragement to unleash their potential."

“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.”

The above quote from Rick Perry's announcement of his presidential candidacy is true. In July the Tax Policy Center released a report, Why Some Tax Units Pay No Income Tax, which estimates that 46% of tax units, American households, will not pay any income tax in 2011. They go on to show why this is true in the graph below:

You can plainly see that the standard deduction and personal exemption in the US tax code are designed so that anyone with a taxable income up to $10,000 gets back all their money withheld for income taxes. In the $10-20,000 bracket about 20% of American households don't get all their withholding back. A new category, tax expenditures, arises in this bracket as well. These are categorized in the pie chart below:

So, about 45% of the households in the $10-20,000 bracket get a bigger deduction because they are elderly, are not taxed on some or all of their Social Security benefits, or about 30% receive the child tax credit, the child and dependent care tax credit or the earned income tax credit because they are children or the working poor. The working poor are still required to pay the Social Security and Medicare payroll taxes, federal excise taxes, state and local taxes, and various government fees. About 75% of households pay more of these taxes than they do income taxes. An example from Roberton Williams, one of the report's authors is helpful:

"...about half of people who don’t owe income tax are off the rolls not because they take advantage of tax breaks but rather because they have low incomes. For example, a couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero. The basic structure of the income tax simply exempts subsistence levels of income from tax."

 So Rick Perry's quote, “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” is rhetoric for political advantage - nothing new there. However, having lived in Texas all my life, my opinion is that he is sending a coded message to a constituency that wants to see the progressive income tax system abolished and replaced with what is now called a "Fair Tax" on all income groups, although it is the proposal that became identified with Malcolm S. Forbes, Jr. in the late nineties, when it was called the "Flat Tax." The latter name emphasizes abolishment of the progressive income tax that presently exists and gives rise to the graph and chart presented above. The Fair Tax rate usually cited is 10%, so all the people at subsistence income levels would pay that amount without any deductions, exemptions, credits, or relief from payroll taxes and the various other taxes listed. In other words, calling the Flat Tax a Fair Tax is just more rhetoric. The Fair Tax has no relation to the ordinary meaning of fair, not trying to achieve an unjust advantage.