Austerity: Class War Against Working People, An International Plague

Unless you think you'll be winning a lot of lotteries in the future, you're never going to be as rich as Warren Buffett. A significant number of Americans-- rational people in other countries don't think this way-- hold out hope that they will be the exception and that they want to be certain that tax rates on billionaires are low... just in case. Meanwhile, they could be making $40-50,000 a year and paying a higher effective tax rate than the billionaires they're protecting by voting for the billionaire protection racket known as the Republican Party. In yesterday's New York Times Buffett himself begged Americans-- and their representatives in Congress-- to stop coddling the super-rich. (You can watch Buffett discussing his editorial with Charlie Rose Monday night.)

Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill-- the income tax I paid, as well as payroll taxes paid by me and on my behalf-- was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income-- and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine-- most likely by a lot.

...Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone-- not even when capital gains rates were 39.9 percent in 1976-77-- shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion-- a staggering $227.4 million on average-- but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million-- there were 236,883 such households in 2009-- I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more-- there were 8,274 in 2009-- I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

We've been watching with alarm what the Austerity approach has done to social cohesion in Greece and England. I expect it will be even worse in France and Italy, which the international banksters are forcing in that direction. Italy's largest labor union threatened a general strike yesterday, after Berlusconi hastily pushed through an Austerity plan demanded by World Plutocracy.

Critics say the package-- a mix of spending cuts, job cuts and tax increases, including a "solidarity tax" for high-earners-- will strangle Italy’s stagnant economy, which is now expected to grow by only about one per cent this year.

Other critics, including nine members of Berlusconi’s own coalition, say it unfairly targets the middle class and fails to tackle Italy’s massive tax evasion problem.

Susanna Camusso, leader of the CGIL labour union, criticized measures aimed at liberalizing Italy’s labour market and targeting its pension system, saying a strike is the only way to "change the inequity of this package." She told the La Repubblica newspaper that union officials will meet Aug. 23 to set a strike date and invited other unions to join.

I don't trust Labor's Ed Miliband to get it any more right in England than Obama has here in the U.S., but yesterday Miliband launched a flashy (for him) attack on Cameron's reactionary approach to the riots, calling it "shallow and simplistic." Take that, fascist dog!

Reiterating his call for a national inquiry into the causes of the violence, he said the country had a "deep need" to explain and understand what had happened, but that Cameron had responded with "gimmickry."

The Labour leader said nothing could excuse or justify the actions of the rioters and looters but that, unless the causes were understood properly, the violence could be repeated.

...Miliband said writing the riots off as "pure criminality" or simply blaming parents would not get to the root of the problem. In a direct attack on Cameron, he characterised the government's response as "kneejerk gimmicks," citing talk of water cannon, "supercops" and the "harassment" of gangs.

"A prime minister who used to say 'hug a hoodie' now says the answer is to reform our health and safety laws," he said.

"A crisis like this tells us something about our political leaders. Day by day, the prime minister has revealed himself to be reaching for shallow and superficial answers."

Miliband said individuals were responsible for their actions, questioning why some parents were failing to teach their children right from wrong, but added that everyone had a responsibility for the society we live in.

He also questioned whether an economy that dictates that some parents have to work up to 70-hour weeks, meaning they are largely absent from their children's lives, might have a role in family breakdown.

But he added: "Children's ideas of right and wrong don't just come from their parents. And we can't honestly say the greed, selfishness and gross irresponsibility that shocked us all so deeply is confined to the looters, or even to their parents.

"It's not the first time we've seen this kind of me first, take what you can culture. The bankers who took millions while destroying people's savings-- greedy, selfish and immoral. The MPs who fiddled their expenses-- greedy, selfish and immoral. The people who hacked phones to get stories to make money for themselves-- greedy, selfish and immoral.

"People who talk about the sick behaviour of those without power should talk equally about the sick behaviour of those with power.

"Let's not pretend that the crisis of values in our society is confined to a minority only at the bottom when we see the morality of millions of hardworking, decent people under siege from the top as well."

He said the last Labour government, as well as the coalition, had failed to address the issues of inequality in society, arguing that there is a culture of aspiration for success that is out of the reach of people at the bottom, creating frustration.