Billionaire Eradication: We'll Need Someone With A Lot More Intestinal Fortitude Than Barack Obama-- And Soon
As you know, until a scion of one of America's most corrupt plutocratic families managed to steal the White House, the highest marginal tax rate was a very rational 91%-- not highest ever (94% in 1944 and 1945) but high enough to prevent the establishment of an aristocracy based on financial power that could actually threaten democracy itself. That's what we have now. And the scion of the plutocratic family who started us down that path from after he defeated a more prudent President Eisenhower was... John F Kennedy. He lowered the rate from 91% to 70%, the kind of drop that usually only comes when Republicans are able to grab control of government.
When Eisenhower was president the marginal rate on regular income over $400,000 was 92% and then 91% and the max rate on long-term capital gains was a just 25%. This allowed people to get plenty rich-- but just not to take over the whole country the way Wall Street banksters and criminal sociopaths like Adelson and the Koch brothers are doing today. Ironically, it was Nixon who realized what was happening under Big Business-friendly Democrats JFK and LBJ and he raised the capital gains rates to 36.5%, although kept the marginal tax rate between 77-70% for income over $200,000. Ford kept the over $200,000 rate at 70% but increased the capital gains rate to 36.5% to a somewhat more healthy 39.875%, the highest level since the 50's. The capital gains rate started decreasing dangerously under... another Democrat: Jimmy Carter. He brought it down to 28%, a disastrously low level and then Reagan went nuts and wrecked the entire tax structure in such a way as to encourage the formation of an aristocratic society. The top rate on regular income came down from around 70% to 28% and lowered the capital gains rate to an unsustainable 20%, which would have bankrupt the country very quickly so that saner minds persuaded him to eventually bring it back up to the already horrible 28%. George H.W. Bush raised both income and capital gains, but not by enough to even make up for the systemic damages done to the country by Reagan. Clinton only raised taxes on the middle class. He left the wealthiest Americans alone and he gave them another Reaganesque tax cut on capital gains-- down about 8% to 21.19%. And you thought the Democrats were the good guys, huh?
Bush, of course, was the worst ever. He wrecked the economy completely-- and set the stage for the Great Recession by lowering income tax rates for the wealthy and by gutting the capital gains rate and bringing it down to 15.35%. Obama hasn't changed a thing. Nothing. The tax rates are historically low and completely unable to sustain a united United States. If the country appears to be falling apart, that's the reason why. And that takes us to an excellent post in Rolling Stone this week by Matt Taibbi on... what else?... Romney's taxes. He claims Harry Reid and the Democrats are wasting their time by sniping at Romney for the unreleased years of tax returns and the claims that there are at least some years he paid no taxes at all. "[W]hat they should be doing instead," he writes "is hammering Romney on the missing returns, yes, but focusing even more on the returns he did release. We’ve known for seven months now, for instance, that Romney paid $3 million in federal taxes in 2010 on $21.7 million in taxable revenue, an effective tax rate of 13.9 percent. Which, as most people know, is less than half the rate most people pay on their income tax."
When Romney released these numbers, he said they were "entirely legal and fair," and added, "I’m proud of the fact that I pay a lot of taxes."
The Romney tax returns are a prime example of our increasingly two-tiered bureaucratic system, in which there is one set of rules for poor and middle-class people, and another set of rules for people like Mitt Romney.
The most common method of giving preferential treatment to the rich is through semantics. The old classic was that you called a rich kid blowing coke in his dorm room one thing, and you called a black street kid smoking crack something else, and the two got different penalties for the same crime-- cocaine use.
Or, and this one is still true in some states, the rich white kid who uses a fake ID to get into a club gets hit with a misdemeanor and a fine, while an immigrant who uses a fake ID to get a job at a chicken plant gets dragged in for a felony and can get up to 15 years in jail. Both offenses are simple forgery, but one is also called felony fraud and you get real prison time for it.
In Mitt’s case, the money you and I make to support ourselves is called income and is taxed up to 35 percent, but the money Mitt makes raiding companies with borrowed money and extracting draconian management fees from captive companies that have no choice but to pay them is called "Carried Interest," and taxed at a top rate of 15%.
The ostensible excuse for this outrageous difference is based upon a built-in cultural value judgment, which says that the work Mitt Romney does raiding companies with borrowed money is more valuable than the work ordinary people do laying asphalt or teaching autistic children. Here's what one private equity spokesperson said by way of explanation for this difference:Steve Judge, the president of the Private Equity Growth Capital Council, a trade group for private equity funds, said carried interest is a way to reward risk takers in a way that tax havens do not. "They don’t have the purpose of incentivizing risk taking," Judge said. "That makes it inappropriate to blend carried interest with them."
So the carried interest tax break is a way to "incentivize" the kind of work Mitt Romney does. One wonders then if the relatively higher tax rates paid by teachers and librarians and cops is ... what? A disincentive? Anyway, it's this skewed set of obligations that Mitt Romney thinks is "fair."
The Obama administration, if it wanted to, could make a lot of hay over this. It could say, “Mitt Romney doesn’t want to release his tax returns for years and years during the last decade. But the years for which he did release returns, he paid a rate that’s less than half of what most ordinary American professionals make-- and he thinks that’s 'fair.'"
The reason the Obama administration hasn’t gone after this aggressively is probably the same reason it hasn’t fought harder to repeal that carried interest tax break (which Obama incidentally promised to do four years ago), and the same reason that everyone from Corey Booker to Bill Clinton has urged Obama to lay off the theme of private equity thuggery in his campaign against Romney. Big-time politicians are still afraid to explain to the American people how exactly it is that many Wall Street firms make their money, because they’re afraid to lose access to the crumbs those firms sometimes toss their way.
In the case of Romney, what we’ve mostly heard is that he’s a turnover specialist who sometimes creates jobs and sometimes eliminates them-- a kind of ideologically-neutral efficiency consultant who takes a cut when poorly-run companies cut out the fat. The Obama ads about Bain have been emotionally effective, but they’re still frustratingly vague about the actual mechanics of these takeovers. We learn from these ads that a bunch of rich guys took over plants and fired workers, but what we don’t learn is how companies like Bain raise the money for those takeovers, why the plants subsequently become cash-poor, how this industry works generally, and not just at Bain.
In fact the takeover method espoused by Bain and many other private equity firms is a lot closer to the Tony Soprano-takes-over-Davey-Scatino’s-sporting-goods-store "Bust Out" model (and we’ll be getting into this more in the magazine in upcoming weeks) than it is to anything like legitimate consulting.
Barack Obama is one of the few politicians with the communication skills to explain this to middle America, but he’s refusing to go there, probably because he’s still hoping for a post-election rapprochement with Wall Street. He wants to go after Bain Capital, but not private equity in general; he wants to go after Mitt Romney’s missing tax returns, but not the tax returns of all people like Mitt Romney.
That makes him look weak and indecisive, and it makes his message confusing.
In the meantime, there are going to be a lot of these battles-by-proxy, in which surrogates like Harry Reid try to egg Romney into releasing his tax returns. There’s no doubt the returns are embarrassing-- otherwise Romney would have released them by now. And there’s no doubt that Romney should take heat for not releasing those returns. But there’s enough information already for Barack Obama to tell a powerful story about wealth and privilege to most ordinary Americans. He just doesn’t want to tell it.
And, then, why all this is so important... and this is just for my state. You can check out your own state here.