U.S. income gap widest on record – that’s what happens when we don’t Tax The Rich!

News stories have hit this week with titles like, “U.S. income gap widest on record.” The stories mention UC Berkeley economist Emmanuel Saez, and should point out a strong correlation he found during his research:

If you lower the income tax rates on the highest income brackets,

inequality of income is increased.

If you raise those rates, inequality is reduced.

A blog post with more information and graphs is here,

http://laurawellssolutions.com/2012/12/05/tax-the-rich-to-reduce-the-disparity/

At the end of Eisenhower’s presidency in 1960, the rate on the highest tax brackets was 91%. As we know, the rich could still get richer even with those high tax rates, just not obscenely richer. Now the titanic Dems and Reps haggle over a top rate of 35% and 39.6%. Why wouldn’t CEOs start shifting more wages to their own pockets when they get to keep most of it? It’s too much temptation. When they only kept 9% of the highest portion, greed was not encouraged.

The 0.1% use their resources to keep us thinking all taxes hurt all of us. Not true.

In addition to increasing taxes on the super-rich, we can also reduce government spending, and lower taxes on the rest of us. Which government spending should we reduce first? Let’s start with the dumbest expense: high interest paid to Wall Street banks. When we vote people into office who are not sold out to big banks and other corporations, we can create publicly-owned banks that partner with local banks and credit unions, and provide good loans to students, home owners, and community businesses. And we can fund our own projects without high interest tacked on top. See blog http://laurawellssolutions.com/category/public-banking-state-bank/

 

California Budget Blues: Jerry Brown’s May Revise

It’s hard to believe what’s going on in Sacramento.

  • More Revenue. We just got more revenue than the state of California expected – this should lighten up the austerity plans, no?
  • More Billionaires. The economy must be improving. We have more billionaires than ever in California. Forbes came out with their annual list and California has 96 billionaires, up from 94 last year, and 85 the year before that. The billionaires’ total wealth is $360 billion, up 16% from last year. A small portion of that could make up for past budget cuts that affected everyone in one way or another. For years taxes on the wealthy have been lowered, and their wealth has gone up – that’s how it works. (See http://laurawellssolutions.com/2012/12/05/tax-the-rich-to-reduce-the-disparity/)
  • More Taxes from the Rich? Maybe revenue increased because the super-rich paid a bit more in taxes, eh? Could have been even more if Jerry Brown had gone with the real Millionaires Tax, before he watered it down for Prop 30, and added regressive sales tax. People preferred the real Millionaires Tax. (See the behind-the-scenes story in http://laurawellssolutions.com/2013/01/01/no-corporate-money-vs-jerry-brown/)
  • More Prisoners. By a lot, we have more people incarcerated in California than in any country in the world. Many should be in treatment, not jail, and many are in private out-of-state prisons. Jerry Brown recently filed a last minute, court-ordered plan to reduce the state’s prison population, and did not include a single sentencing reform.
  • Less Healthcare; More Health Insurance. Why did Sacramento pass single-payer healthcare when Republican Schwarzenegger was Governor and not pass it now, when Democrat Jerry Brown is Governor? Obamacare will not provide the kind of healthcare provided by all other wealthy, industrialized countries, but it will subsidize health insurance corporations.

Why is all this – and more – happening when the Democratic Party holds every single statewide office and now has 2/3 majorities in both houses of the legislature? Isn’t it the political party that is supposed to be the “people’s party”?

Worse than I Thought

I have to confess, it’s worse than I thought it would be, and I of all people should have known better. After all, I ran against Jerry Brown in 2010, as the Green Party candidate for Governor.

In the race for Governor in 2010, I decided to focus on two signature economic proposals rather than focus on a “laundry list” – a list that includes such vital issues as education, environment, health, housing, jobs, justice, and peace. I made that decision because I expected the huge, corporate-controlled media would give very little attention to candidates who are not from the huge, corporate-controlled political parties. (I admit that at times I refer to them as Titanic Parties. Let’s face it, they’re huge; they’re heading straight for the iceberg; their captains are not turning aside; and passengers came on board because they thought the Titanic would take them where they wanted to go, and on the way they could party!)

I focused primarily on two proposals because I wanted to draw as much attention as I could to the California economy and budget. If the money’s off, it’s all off. The budget needs to be handled well if we are to have hope for all the other areas of life that matter to us.

Two Signature Economic Proposals

My first proposal was and still is to create a State Bank for California that will partner with community banks and credit unions; ensure good loans for residents, small business, and students; and enable us to stop throwing public money away in interest. The State Bank and other public banks will invest in California, not Wall Street. (See also my blog http://laurawellssolutions.com/category/public-banking-state-bank/ and see http://www.publicbankinginstitute.org/.)

My second proposal is summarized in my valentine to Prop 13, “Honey, I love you, but you’ve got to change!” I proposed that we keep the good (keep people in their homes, including our seniors) and fix the bad. The bad has two parts: the property tax imbalance, that now favors huge corporations, and the 2/3 super-majority required to raise revenue, that now favors the richest of the rich individuals and corporations. That last bad part – about the super-majorities – was where I was naïve.

Toward Solutions: Champions in the Halls of Government

I am no longer focused on Prop 13’s super-majority rules. Even with 2/3 majorities politicians in Sacramento are bent on developing excuses rather than solutions. We are focused on replacing our elected officials.

We have all seen candidates who say one thing and then get into office and do something else altogether. Then they run again – and expect our votes – on the grounds that at least they’re better than the candidate from the other huge political party.

Corporate money is a way to distinguish between those candidates who will be on the side of the 1% and candidates who will champion the causes of the 99% that elected them. The No Corporate Money Campaign is strategizing to show how candidates and voters – who are not controlled by corporations – can win.

We are aligned with efforts to change the laws governing our democracy, but not waiting for that. We need champions in Sacramento and in other halls of our government in order to change the laws. Champions of people’s causes have been elected with great results as to the environment, banking, education, equality and so on, in places as diverse as Iceland, Germany, Quebec, many Latin American countries, and Richmond, California. We can continue that trend.

There are solutions. When we use our individual efforts and social movements to promote solutions, we need to elect people into the government who will help us move them forward, not stand in our way and block our solutions.

That’s why a group of community and political activists are focusing our efforts on creating a powerful No Corporate Money Campaign. The Campaign consists of two simple but powerful elements that work together. Candidates sign a pledge to take no corporate money, and voters declare our intention to vote for candidates who take no corporate money.

And now, I’m going to post this blog and get back to work on one piece of that campaign, a book with the newly revised working title, Signs of Hope: You, Corporations and Government. 

Thanks for all you do, and for staying with it!

Jerry Brown’s Budget: We Can Do Much Better!

An Important Preamble

We as the human species really have one job on our to-do list, one responsibility, and that is to take care of the next generation. This means not just our kids or kids of people close to us, but the kids of the species. Everything else is secondary. Fortunately, we can live happy and meaningful lives while we’re handling this basic responsibility. As a matter of fact, that might be the only way we’ll be happy! As current times show, when we aren’t doing such a great job taking care of the next generation, we are likely to be leading lives filled with fear, resentment, excuses, and scapegoating.

We in California have power in this quest to set things up well for future generations across the planet. We have been looked up to in the past, not just for Hollywood but also for our education system. There is no reason our school system should be deteriorating. The current budget proposal is hailed by its author Governor Brown as turning a corner toward balanced budgets and better funding for education, but before we say, “Hail to the chief!” let’s take a moment to think about what we really want in California, and see how far we are from having that.

“We want him to win big!”

When I ran as the Green Party candidate for Governor in 2010, Jerry Brown won, easily, by 13 points. A friend asked his fellow voters, since there was no worry about Brown winning, would they please vote Green if that’s where their values really were – social justice, nonviolence, healthy environment, grassroots democracy and candidates who walk their talk by taking no corporate money. People responded, “We know Brown is going to win, but we want him to win big!” Same thing happened with Obama in 2012. People said, “We know Obama is going to win California, but we want him to win the popular vote in the country.”

“Who Are Our Champions?”

OK, so Brown won in 2010 and Obama won in 2012. They won, and won big, and yet why aren’t we happy with them? It reminds me of a plaintive question from the back of the room at a California Budget Project conference, “Who are our champions?” Apparently our “winners” are not our “champions.” They do not champion our causes. Why?

Pressure and Support

There is a basic approach in negotiating an agreement, whether it’s among peers, between parent and child, or between voters and candidates. Don’t “support” them by giving them everything they want and then expect they’ll do what you want! (Can I get a “Duh!”)

Elected officials have lots of pressures to deal with, and if voters vote for them no matter what they do (excusing their past behavior by saying at least they’re better than the other one), the elected officials would bow not to the voters, but to the pressures of the corporations who fund their political parties and campaigns. The people who decide how to allocate their candidate-purchasing funds do not say, “Oh well, you tried!” They will lower your pay. With voters, our elected officials just devise, issue by issue, a way to tell us what a great job they’re doing for us! They will remind us that, “Politics is the art of the possible,” and imply that, unfortunately, what we want and need for the future generations and ourselves is just not possible in this political climate. “This is the best that could possibly have been done!”

Jerry Brown vs. California

This leads us to Jerry “Look at what a great job I’m doing!” Brown. He is without question the most powerful political figure in California, so much so that it’s hard to figure who comes in second. And although he has responded to pressure, he had the power to do much more than he did. Last year he brought down the real Millionaires Tax and then began using the same name for his watered-down Prop 30. That was the focus of my blog “No Corporate Money vs. Jerry Brown” http://laurawellssolutions.com/2013/01/01/no-corporate-money-vs-jerry-brown/

The annual Forbes list of the richest people in America should come out in the next few months, and we’ll see if the progression continues. In 2011 the state had 85 billionaires and I put that on a sign and carried it to rallies until the new list came out in 2012 and I had to revise the sign to read 94 billionaires. The economy was improving, for a few! (See also blog  http://laurawellssolutions.com/2012/12/05/tax-the-rich-to-reduce-the-disparity/)

That’s where the money is – in the hands of the super-rich and their corporations. Jerry Brown is calling it a success that he allowed a tiny chip to be taken out of the huge cuts that he and his predecessor Schwarzenegger presided over during the past several years. There are lots of taxes that could be implemented; lots of proposals are in the pipeline; voters just gave the Jerry Brown and his Titanic party super-majorities in both houses of the legislature; and so what will our Gatekeeper-in-Chief allow to progress?

What can we do about it?

We have lots of power, and nobody knows that better than the 1%. There’s a lot we can do, and one of them is to join with the No Corporate Money campaign that you will hear more about – from grassroots sources not mainstream media – in the coming months. When we have 1 or 2 or a majority in our governmental bodies, No Corporate Money candidates will champion regular people and our next generation without having to toe the line and bow to pressure from corporations. Which reminds me of a third blog for you to check out, http://laurawellssolutions.com/2012/10/19/no-corporate-money-campaign/

There are many other things that we can do, and that we are doing. We won’t stop strategizing for change, organizing, using the power we already have, using our wallets according to our values, taking to the streets, taking to the voting booth, whatever it takes to take care of the next generation, and ourselves in the process. And we know we can lead happy and meaningful lives too.

Tax The Rich to Reduce the Disparity

Emmanuel Saez, professor of economics at UC Berkeley, has done in-depth studies of income disparity between the 1% and the 99%, across the world and across a century of U.S. data. At a public lecture last night, he presented many enlightening graphs – see bibliography in this blog and check out his articles.

One graph showed the relationship between Top 1% Income Shares and Top Marginal Tax Rates. The income and tax lines mirrored each other, showing that when the tax rates go down, the 1% shares of income go up, and vice versa.

Significantly, when a young audience member asked whether the current Democratic federal income tax rate proposals would be better than the Republican tax rate proposals regarding the disparity, his answer was “It would not make much difference.” Saez said the debate needs to be between the 35% top rate of today, and the 70% top rate of the 1970s, not between 35% and 39.6%.

And yet the media calls the Republicans and Democrats polarized on this issue?! Gee, who owns the media, and speaking of income, where do media outlets get their income? Our dollar bills for the newspaper, or their advertisers? And why isn’t Emmanuel Saez the expert they turn to when they present perspectives? In the media’s own terms Emmanuel Saez would be a great person to interview on TV: fresh perspective, concise, young, tall, dark, and handsome; he even has a French accent. More importantly, not in media terms but in the terms of the 99% and our future generations, he has the facts that show the Occupy and Tax The Rich movements are heading in the right direction.

What can we do? Spread the word. California showed  it’s ready to listen. We voted to increase taxes on the richest a tiny bit via Prop 30. True, it was a watered-down version of the real Millionaires Tax that voters preferred over Jerry Brown’s initial tax proposition. The good news is that the Tax The Rich movement – which includes Occupy, student movements, and California Federation of Teachers – forced Governor Brown to increase the tax rates in the compromise that became Prop 30.

Saez said, “The public will favor more progressive taxation only if it is convinced that top income gains are detrimental to the 99%.” What can we do? Spread the word and keep up the pressure.

BLOG BIBLIOGRAPHY

http://en.wikipedia.org/wiki/Emmanuel_Saez

http://emlab.berkeley.edu/~saez/

The following are PDFs:

Striking it Richer: The Evolution of Top Incomes in the United States” (March 2, 2012)

“Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities” with Thomas Piketty and Stefanie Stantcheva, NBER Working Paper No. 17616, November 2011, revised October 2012

GRAPH: Black line is top 1% income, red line is top tax rates. If it’s hard to read, see page 40 of “Optimal Taxation” article above (page 42 of the PDF).

Picture 1

Response to “Reduce spending and don’t tax the rich!”

I have talked with many people who have concerns about state spending and taxing the rich. This blog is a response to them, and a reply to a comment Vibora Volando posted to my Open Letter to Governor Jerry Brown (click here to see the initial blog and comments).

VIBORA VOLANDO: When will you sympathizers get it through your heads. We have a spending problem, not a revenue problem. Democratic legislators have taken us down the road to perdition because they don’t know how to balance a checkbook, or insist on a $100bln railroad to nowhere, when there isn’t a dollar on hand we haven’t borrowed. It is sickening. We have been promised too much “heroin” in the form of government welfare and finally someone is at least bringing it to the press. California’s education system is fiscally unsustainable due to waste, giveaways, bloated salaries and pensions. Yet the lazy solution is to raise more money to throw at the problem rather than find real long term solutions. And this thing about the rich paying their fair share. LOL. Take away the rich and Cali goes down the tubes. Then those nice new “temporary” taxes will be re-calibrated to slip down to ever lower income brackets until things blow up. It is laughable that people are all energized about taking more money from the wealthy when they contribute virtually nothing in comparison. Extortion cloaked in the faux fur of democracy.

MY RESPONSE:

First, I agree that a high-speed rail system is not what we need right now. That’s like frosting on the cake, when we don’t have the cake, and not even the main dish. We need good transportation systems like regional public transit that is frequent and affordable; that’s what encourages people to use it. We also need roads with potholes filled and parking available; that helps neighborhood businesses.

I also agree that we should not be borrowing, and throwing money away in interest. The state pays out about 5% interest while it has billions of dollars sitting in Wall Street banks earning less than 1% interest. That does not make sense. North Dakota is the only state without a budget deficit since the global meltdown, and it is also the only state with a State Bank. See http://publicbankinginstitute.org/  I think you’ll like the idea.

As to the disparity of wealth, it’s a question of scale. It has gone too far. What was called rich used to be seven times richer than the rest of us; now it’s 300 times or 1000 times. California’s 94 billionaires could solve the budget gap without affecting their or their children’s quality of life. To build up wealth of one billion dollars, you would have to earn $1,000,000 a year for 1,000 years. Or if you only worked 50 years full-time, you would have to earn $10,000 an hour and tighten your belt – only spend $800,000 a year during those fifty years. That’s a billion dollars. Who needs it? Who is worth $10,000 an hour at age 21 if someone else is worth $8?

All this, all the money they’ve accumulated, would not be a problem if it didn’t bring with it the closing down of schools, libraries, parks and so many things that have now given our next generation fewer educational and economic opportunities than the prior generation. And their elders are suffering too.

For decades we have been reducing taxes on the rich, and if it actually did create jobs and help the whole state, we would not have the unemployment rates we have.

This is real: we are now in the situation where the lower income families pay a higher percentage of their income in state and local taxes than the richest 1%. It has to do with taxes other than income tax; taxes like sales tax, property taxes, and fees fall harder on lower incomes.  My guess is that you and your family and friends, like the vast majority of Californians, are on the wrong side of that balance of tax fairness; my guess is that you pay at a higher rate than the richest of the rich.

The super-rich used to be taxed more and could still get wealthy. They actually get a lot of financial benefit from the government. Corporations for example, in addition to having departments that ensure they pay as little tax as possible (their spending side), have departments dedicated to getting government contracts and subsidies, not to mention the Wall Street bailouts (their revenue side). And as to helping the state, scandals like those of Enron and the savings and loans cost our state billions. And then, in an amazing example of weapons of mass distraction, immigration gets blamed for economic problems.

If the super-rich move away from this wonderful state, then I’m sorry for them because California is truly special.

We won’t stop fighting to balance the budget and reduce the disparity of wealth. We want to increase the chances for the rest of us to have good jobs and good lives.

Video “Open Letter to Governor Jerry Brown”

This video has great graphics half-way through (thank you Art), at about minute 2:00. Here is the text of the video. Please tell me what you think, and feel free to forward.

Open Letter to Governor Jerry Brown

I heard your voice on the radio saying that if more cuts are needed, they will come from education because “that’s where the money is!” The reference was to the oft-quoted answer to the question, “Why do you rob banks?”

That little joke, right there, points to the heart of our budget disasters and to the thinking that keeps the disasters in place.

Where is the money? In cuts to public education? In cuts to welfare and childcare? No. The money is in the hands of the super rich. Not in public schools where California’s spending is near the bottom of all the states.

Every single time that you speak about the budget you have a chance to improve the system, or not. You and your Democratic Party colleagues hold huge majorities in both houses of the legislature and 100% of the statewide offices from Governor to State Controller to Insurance Commissioner. Every time you speak and do not condemn the two-thirds majority required to raise taxes, you are selling out the 99% and pandering to the 1%.

I cannot wait until representatives in Sacramento – the current batch or new ones we will elect – catch up with the rest of us. Led by the young people of Occupy, the social movements have shifted from the plea of “Stop The Cuts” to demanding the solution, “Tax The Rich.”

Statistics are readily available to explain to people who love old Prop 13 and its two-thirds vote requirement that their love is misplaced and unrequited.

Explain that California has 94 billionaires with a total wealth of $311 billion. Only 10% of that wealth would close the budget gap. Although it would be a hardship for 6 people since they would no longer be billionaires, and would only have $900 million, they would probably get it back within a year. California would not have to cut welfare, childcare, and schools.

Explain how our tax structure is upside down. As updated every year by the California Budget Project, when you look at family income and all state and local taxes, not just income tax, the poorest 20% pay a higher tax rate than the richest 1%. Families who average $12,600 pay 11.1% and those who average $2.3 million pay 7.8%. That’s where the money is. Wealth like that used to be taxed at higher rates, and in those times people could still get richer.

Explain that a bipartisan budget agreement in favor of the 99% is a fantasy and will never be reached when slightly more than 1/3 of California legislators have signed a pledge that they will never vote to raise taxes. The 2/3 requirement gives that 1/3 minority veto power over taxing the rich. The only bipartisan budget agreement operating right now is the silence about the rotten parts of old Proposition 13.

You were Governor in 1978 when Proposition 13, with all of its damaging unintended consequences (unintended by the voters), was voted into law. It is only fitting that you should undo its damage now.

Sincerely,

Laura Wells

P.S. Along with keeping only the good of good old Prop 13 and getting rid of the 2/3 rule for revenue, here’s another favorite solution to our budget woes.

Implement a State Bank for California, a publicly-owned bank that would not only protect us from the destructive games of Wall Street, but it would allow us to invest in California. Imagine a bank run by professional managers with no incentives for risk taking — no super-sized salaries, no fabulous bonuses, no recurring commissions for a short-term focus on boosting profit for quarterly statements. The state-owned bank would partner with local community banks and credit unions, and make good loans to students, homeowners, and local businesses. There are 17 states that are exploring publicly-owned banks. The California legislature passed a bill last fall to establish a task force to study a state bank. Unfortunately, Governor Jerry Brown did not sign it.

 

Millionaires Tax wins in polls vs. Jerry Brown’s

The Millionaires Tax was winning in polls as compared to Jerry Brown’s more regressive tax measure, and so he pushed the California Federation of Teachers for a still regressive “compromise” measure.

People know millionaires have gotten all the prosperity, why should Brown deal all of us the austerity? There’s a rally to Continue the Millionaires Tax at the State Building,1515 Clay in downtown Oakland at 4:00 pm today – the first day of spring!

In the interest of pushing for a tax measure than can win in November, last night I emailed the following to CFT contacts.

Begin forwarded message:

From: Laura Wells <info@laurawells.org>
Date: March 19, 2012 10:47:03 PM PDT
Subject: Support a compromise tax initiative that can win

Respecting your time, I’m keeping this under 200 words, and emailing it to all CFT officers and contacts.

How can unions achieve a tax initiative that can win in November, and avert even more draconian cuts to education, social services and labor? Based on attending many meetings this past week, the answer could well be this: eliminate the sales tax increase completely.

Given that the newest initiative petition hit the streets within days of the compromise reached last Wednesday, then there is still time for a new compromise, if Governor Jerry Brown wants to put his power, together with union power, behind an initiative that can win.

In summary:

  • No sales tax increase! This is crucial.
  • Permanent – not temporary income tax rate increases – no ending date.
  • Make total revenue larger than both the Millionaires Tax and the first “compromise” – and have the revenue come from the very highest incomes.
  • Change only the tax specifics, and leave the rest of the initiative. In other words, apply revenue to close the budget gap.

What do you think? Can do?

Sincerely,
Laura Wells
Blogger on the California Budget
2010 Green Party candidate for Governor

LAURA WELLS
blog:  LauraWellsSolutions.com
twitter: Wells4Gov
http://www.LauraWells.org
510.225.4005

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