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Home / Articles / Views / Perspectives /  Tycoons and their taxes
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Thursday, December 20,2012

Tycoons and their taxes

By Dave Anderson

Corporate fat cats are prowling the halls of Congress and scratching up all the furniture. These tycoons are peddling the old line that if they get tax cuts and subsidies, they will create jobs for us. That hasn’t worked yet. They say ordinary Americans should “lower their expectations,” but their plans actually propose to shred the social safety net.

They call for “shared sacrifice,” which sounds reasonable until you realize that the rewards haven’t been shared in the last few decades.

Each year, the top 1 percent of taxpayers gets more income than the bottom 40 percent. They have more wealth than 90 percent of Americans. But their tax rates are almost the lowest in post- World War II history. Multinational corporations based in the U.S. pay the lowest effective tax rates in the developed world.

The Congressional Progressive Caucus (CPC) has an answer to them called “The Deal for All” (http://cpc.grijalva.house.gov/deal-for-all/):

“(1) No cuts to Medicare, Medicaid, or Social Security benefits;

(2) Must contain serious revenue increases, including closing corporate tax loopholes and increasing individual income tax rates for the highest earners;

(3) Significantly reduce defense spending to focus the United States Armed Forces on combating 21st century risks; and

(4) Promote economic growth and expand economic opportunity by including strong levels of job-creating federal investments in areas such as infrastructure and education, and by promoting private investment.”

None of the Colorado Democrats in Congress support this resolution, including Rep. Jared Polis, who is a CPC member. He seems to be more involved with the New Democrat Coalition (the congressional affiliate of the now-defunct Democratic Leadership Council which was mocked by Jesse Jackson as “the Democratic Leisure Class” because of its big business funding and political positions). When an NDC leader was asked if he supported significant cuts to the social safety net in the “fiscal cliff ” negotiations, he said his group is “open to everything.”

Polis can be quite liberal on most issues. But sometimes on economic issues, he seems like a Republican.

Here is an example. In the 2011 debt ceiling debate, Obama and the Democrats were pushing hard to eliminate the “carried interest” loophole. Polis and another House Democrat sent a letter to Obama begging him to preserve it. “Such a tax increase,” they wrote, “would not only damage our already fragile economic recovery, but it would also cripple the spirit of innovation and entrepreneurship that makes our country so strong.”

During the presidential campaign, this tax loophole came up again when it was revealed it saved a lot of money for Mitt Romney. In an article in The New Republic, Matt O’Brien explained “carried interest”:

“Capital gains generally only apply to profits investors earn from risking their own capital. This is not so with carried interest. Indeed, the magic of carried interest is that some financiers book capital gains far in excess of any capital they ante up — or, put differently, they get to count performance fees as capital gains. This is an enormous boon due to the low taxation of capital gains. After equaling the top marginal rate of 28 percent at the end of the Reagan years, the capital gains rate has fallen to 15 percent over the past two decades (versus a top marginal rate now of 35 percent). This is why the über-wealthy — the top 0.1 percent earn half of all capital gains — have had their effective tax rate plummet over this period. This lower rate is usually justified due to the double taxation of capital from corporate income taxes, but this isn’t necessarily true. It’s well-known that many corporations pay little or no income tax, and there are certain corporate structures called “pass-throughs” that avoid all tax as well. Private equity funds like Romney’s Bain Capital are, of course, organized as pass-throughs.”

Senate Democrats have tried and failed to force these executives to pay normal income tax rates in recent years, a change that would bring in about $17.7 billion in new revenue over 10 years.

This income is effectively a salary and should be taxed as such.

Anderson is a retired CU librarian and a member of Democratic Socialists of America.

Respond: letters@boulderweekly.com

This opinion column does not necessarily reflect the views of Boulder Weekly.

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