Tuesday, April 11, 2006

American Tax Code: Backwards Socialism

Backwards socialism is how Pulitzer Prize-winning tax reporter David Cay Johnston describes our tax code in his book, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--And Cheat Everybody Else. According to a recent interview with the author in Mother Jones, Johnston's book "clearly shows that if Americans want a genuinely progressive tax system, one in which people pay what they can afford for the benefit of society, the current setup simply cannot continue."
Mother Jones: You write in your book that we have what amounts to a flat tax in this country - that the rich pay the same percentage of their income in taxes as the poor do. People would be very surprised to hear that. How do you figure?

David Cay Johnston: Politicians like to talk about the income tax when they talk about overtaxing the rich, but the income tax is just one part of the total tax system. There are sales taxes, Medicare taxes, social security taxes, unemployment taxes, gasoline taxes, excise taxes, and when you add up all of those taxes [many of which are quite regressive], and then you look at how they affect the rich and the poor, you essentially end up with a system in which the best off 20 percent of Americans pay one percentage point more of their income than the worst off 20 percent of Americans.
Johnston goes on to describe the myriad ways in which the rich avoid paying taxes through loopholes, shelters and deferrals, and then explains why Congress seems to lack the courage to fight for fairer tax laws.
There are a lot of politicians who want to do this. But they run into this falsehood that has been inculcated into a lot of Americans that a progressive income tax is some kind of lefty scandal. Progressive tax of any kind is the most conservative principle in western civilization. Indeed, it is the very principle upon which democracy began in Athens 2500 years ago: Those that get the greatest economic benefit from living in a civilization should bear the greatest burden of maintaining that civilization. Now that's not to defend the current system we have. It is a complete and indefensible mess, and so there are people who want to fix it. But you can't fix it if everyone sees these things through a lens that's based on a lie.
Taxes are simply the price of civilization according to Johnston.
There is no America without taxes. The question isn't, "Do we want to have taxes?" The question is, "How heavy is the burden, and who bears that burden?"
And corporate America isn't bearing as much of the burden as one might think. "Sixty-one percent of large corporations paid no federal income taxes for the five-year period from 1996 to 2000," according to Johnston. He also maintains that our high taxes are just a result of our success as a nation, and that "wealthy countries have high taxes because wealth requires lots of common goods, from clean water to public education to a justice system."

Johnston believes we need to do more than simply change tax laws, we also need an attitude adjustment:
The important issues are the principles they figured out in [ancient] Athens - that the greater the economic gain that you derive from living in a society, the greater the burden of the taxes you should bear. Because if not for that society you could not become wealthy. We live in a society that is all I, I, I, I. That's the culture of the CEO. I did this, I did that. I should get one-third of all the stock options in this company I lead with 37,000 workers because I got them to work so hard.

But the fact is you didn't do it, 37,000 people did it and you steered the ship. We need to realize in our tax system is that we are a society. This libertarian idea that says, "I'm responsible for everything that happens to me" - no, you aren't. Taxpayers educated you, taxpayers paid for the clean water that kept you from dying when you were a child, society created the peace that allowed your business to thrive. The tax system is how we distribute the burdens of maintaining that society. [Emphasis mine.]

What has happened is very, very wealthy people have looked at the system and decided that they can co-opt it. They figured out that ordinary Americans are so busy working to support themselves or paying attention to Paris Hilton and Jennifer Lopez and baseball that nobody will dig in to see how they made the system work for them. And I don't fault them for that, there is nothing wrong with people advocating for what they want from their government. The problem is when nobody pushes back.
Well said!


Libby said...

Finally getting around to making the rounds. I see I've missed a lot here. It really gets me when these billionaires talk about "their money" like it was deposited into their bank accounts by God.

Great catch on this and every other post on the page. I can hardly decide what to link to.

Kathy said...

Thanks for the link on the Boven/DeVos story you posted at the DetNews.

You're right about the attitude some rich people have. Do they think God favors them more than anyone else and that's why they're rich and we're not. Won't they be surprised if they make it to heaven and all the poor people they looked down on here on earth have nicer "mansions" than them - for eternity!

And the first shall be last.

expatbrian said...

I recently posted on this. The US personal income tax system is not only corrupt but out of control and certainly beyond the ability of most Americans to understand. The extremely confusing calculations and cross referencing of figures is by design. I received a 40 page book from the IRS to do my simple taxes (and I didn't even work in the US all year). In Singapore, I received a single page. I fill in my income, they do the rest.
Workers who earn less than 20,000 pay nothing, then it graduates up to 22% for the high incomers. Thats it. No other BS involved.

MichaelBains said...

Hi Kathy

Great post on Johnston's interview. It makes me want to get that ish of MoJo.

I clicked over because your recent comment on the Kvatch's blog, vis-a-vie the the space program. I wondered what you are like because I thought the comment was misinformed about the kind of benefits an aggressvie exploration program brings back to societies.

I see on here that you ARE a knowledgable person with an interestin' blog; one which I found I'd already bookmarked whilst going to bookmark it! (Great Walmart story. There's a prime example of the Best and the Worst of America, rolled into one expanding corporate waistline!)

Exploration is Society's duty to the quality of all its citizens' lives, both present and future. It also just happens to be extremely profitable when rationally managed; kinda like most other things, eh. {-'

I hope ya ain't irked by my take on your take on the worthiness of NASA when contrasted w/ poverty and education issues. I only commented cuz you feel like "my kind of people" (whatever THAT means!.)

I think we agree that there's no doubt that Defense, Pork and Fraud are the 3 legislative issues most needing correction. Crooks and Liars... Are way too many of 'em workin' up on that HIll.

Kathy said...

ExPat, thanks for reminding me about your post. I suffer from CRS way too much lately, but I'll try to put a link up to your post today.

Michael, thanks for stopping by and leaving your flattering comment. I'm not irked by your opinion on NASA. I agree that the program has value (and probably can make money when managed correctly), but our economy is not taking care of immediate needs here at home. Space exploration is great, but so is healthcare for the uninsured, protecting our borders, etc. I don't want the program cut, but until our economy improves we need to cut back on some of these exploratory expeditions and do a little more exploration on how we can help people here on earth!

Ron Nasty said...

I've always been proud to pay my taxes, and don't understand how someone could call themselves a "patriot" and not like paying them, if you know what I mean.