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Washington at Work--for the Wealthy
Uncle Sam is concentrating America's wealth, not sharing it.
Scroll through the right-wing blogosphere, or listen in at a tea party rally, and you'll find angry people ranting about an out-of-control federal government that's redistributing the nation's wealth to the undeserving poor.
Those rants do have one point right: The federal government is shoveling hundreds of billions of dollars into programs that redistribute wealth. But these "wealth-building" programs aren't redistributing wealth from the top to the bottom. They're actually shifting more wealth to the top.
"We cannot avoid the sad irony," as one new report has just concluded, "that government policy aimed at building wealth is largely helping the rich get richer."
This new report from the Annie E. Casey Foundation and the Corporation for Enterprise Development--Upside Down: The $400 Billion Federal Asset-Building Budget--dives deep into the programs that aim to help Americans "buy homes, start businesses, put their children through college, and retire comfortably."
Upside Down's authors added up all the money the U.S. government devoted to these programs last year, and then tracked who exactly reaped the benefits. In nearly every instance, the answer came back the same. Federal dollars, as Upside Down details, routinely "subsidize wealth building for the wealthiest among us, rewarding them for (the) size of their homes and investment portfolios."
How could this be? Most federal asset-building programs, the study explains, deliver their benefits through the tax code, an approach that almost guarantees that the wealthy will score, by far, the biggest benefits.
Here's one example: The federal government encourages home-ownership--a central pillar of family wealth building--with tax deductions for mortgage interest and local property taxes as well as discount capital gains tax rates on the sale of property.
These sorts of tax subsidies work spectacularly well--if you have lots of income you can apply these tax breaks against. But if you don't have much money to report on your tax return, these tax breaks do you precious little good.
Low-income households that "don't make enough money to itemize deductions or even to accrue much tax liability," notes Upside Down, "receive next to nothing from these strategies."
And middle-income families don't see much benefit either. The typical household making $50,000 a year, the study relates, received in 2009 only $500 in benefits from the federal government's mortgage and property tax deductions and investment tax breaks. Taxpayers making over $1 million a year, on the other hand, averaged $95,820 last year from these same subsidies.
Over half the benefits from these programs went to the most affluent 5 percent of Americans: families making over $160,000. Just 4 percent went to the nation's bottom 60 percent: families that earned under $50,000 in 2009.
In other words, the near $400 billion the federal government is laying out, largely via tax subsidies, to help families "save, invest, and build assets" is doing remarkably little to help the families that really need the money.
Of course, alternatives do exist. We could, notes Upside Down, easily alter how we "deliver" asset-building assistance. We could, for instance, replace tax deductions with "refundable tax credits," a move that would funnel actual checks to Americans who don't have tax bills big enough to benefit from tax deductions.
And to end the windfalls for the wealthy our current system encourages, we could place "caps on the value of homes and other assets that can be deducted." That would mean no more tax breaks for mansions and palatial beach retreats.
We need to pursue all these alternatives, especially now, with so many millions of Americans facing foreclosure and finding jobs so few and far between. We don't need to start redistributing our nation's wealth. We're already redistributing. We just need to reverse the flow.
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14 Comments so far
Show AllSadly the rich and cunning along with the poor and dumb are in the majority.
Yes, but the poor and dumb out-number the rich. That's why the rich are getting richer: the poor no longer vote and the dumb are too dumb to realize that it's their tax dollars that are being stolen to keep the wealthy in their mansions.
I think one would need to write a book to be able to point out all the legitimate loopholes for the wealthy.
Jill--I thought much the same after reading this. This wealth transfer has been a bi-partisan tag team effort for decades and it's just getting noticed? Amazing but says a lot about human thought processes.
"This wealth transfer has been a bi-partisan tag team effort for decades and it's just getting noticed?"
Not even close even now. Election season is blocking a lot of judgment lately.
Noticed by you and I, but most American voters still wave their Team D or Team R flags and think that something will change.
Money makes all the decisions in this country today. And money is known for making STUPID decisions. It does pretty much every time. The condition of our country today is proof positive of that.
This is the ONLY way that you can explain how, after 30+ years of downhill motion for the vast majority of us, there is NO serious call for the removal of "Reaganomics" as our economic system. Seriously, it's been shown to be a 98% disaster, and yet NOT ONE of our great "leaders" is saying that it has to be repudiated and scorned. It HAS to be removed or we will CONTINUE to go even further downhill.
Really, anyone who sees this article or the ideas behind it to be a surprise has either been in a coma for 30 years, or is just brain dead though vertical. I saw this coming when Reagan first announced his "plan". The historical mistakes in it were glaringly obvious to me, a professional musician with NO economics education other than life, but somehow all those trained economists thought it would be wonderful. I guess I should be getting a job as an economist, because I have been right more often than those IN the field have been. And I suspect that a LOT of the rest of us here are the same. It's a real shame when the readers are smarter than those writing the articles.
Capitalism is about capital. Nothing else matters.
Politics is about capitalism; government is about saving capitalism. Nothing else matters.
The press, which was provided unique power in the First Amendment to keep a watch on government, is about capitalism. Nothing else matters.
Television is about capitalism. Nothing else matters.
‘Insurance-Care’ (whose success is dependent on denial of medical care) is about capitalism. Nothing else matters.
Religion is about capitalism. Nothing else matters.
'Saving' the schools is about capitalism. Nothing else matters.
'Saving' the environment is about capitalism. Nothing else matters.
'Saving' Social Security and Medicare are about capitalism. Nothing else matters.
Khrushchev said in 1956, “We will bury you.” He was right. It just took longer than he expected.
—The following is a quote from Wikipedia:
“Soviet premier Nikita Khrushchev famously used an expression generally translated into English as ‘We will bury you!’ ("Мы вас похороним!", transliterated as My vas pokhoronim!) while addressing Western ambassadors at a reception at the Polish embassy in Moscow on November 18, 1956. In fact, it was somewhat distorted. The actual quote reads: ‘Whether you like it or not, history is on our side. We will dig you in’ (Нравится вам или нет, но история на нашей стороне. Мы вас закопаем).
“On August 24, 1963, Khrushchev himself remarked in his speech in Yugoslavia, "I once said, 'We will bury you,' and I got into trouble with it. Of course we will not bury you with a shovel. Your own working class will bury you," a reference to the Marxist saying, ‘The proletariat is the undertaker of capitalism", based on the concluding statement in Chapter 1 of the Communist Manifesto: "What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable’.”
Lower income families give a larger proportion of their money to charitable causes. That's always been the case but its also always been unfair because even though we get a tax deduction for doing so, we never realize the tax benefit because we don't have enough itemized deductions like the very wealthy. It's a serious flaw in the tax system. This is similar to the unequal judicial system that levies fines at the same rate to all parties regardless of income. The only equal punishment is jail or community service since the wealthy can do things like hire an attorney to argue a speeding ticket (which I've witnessed) while the poor end up doing community service to pay off parking tickets.
its simple really...the poor have no money to donate to political campaigns, so why should the corrupt politicians give a shit about them?
In Fact:
http://www.google.com/hostednews/afp/article/ALeqM5gxVcXgKCFiyhDhT1si2HzQUL_cTA?docId=CNG.3af003c84a71aeca2db44ba857bb01cc.351
US right wing battles 'a nation of slackers'
By Charlotte Hill (AFP) – 19 hours ago
NEW CASTLE, Delaware — Stephen Knotts, a blond, blue-eyed member of the conservative Tea Party movement, is deeply concerned about where he sees the United States heading.
"We are pushing towards European values. Socialism, that's a European value," he warns. "Everybody's kind of zombified over there."
Knotts is one of a crowd gathered at a Delaware shooting club, awaiting an address by Senate candidate and Tea Party superstar Christine O'Donnell.
He is one of many Americans who fear their country is lurching dangerously towards higher taxes and bigger government and cites with fear the experience of France and Germany.
"Sixty percent of what they earn goes for taxes," he tells a reporter, though the actual figure is closer to 40 percent.
Paul Lamanna, a member of the shooting club who describes himself as a first generation Italian immigrant, is similarly concerned about what he sees as a turn towards European policies in the United States.
"They have communism, they have fascism, they have socialism, even today. I'm not interested in any of that. I'm interested in democracy," he says.
In neighboring Newark, Delaware, 31-year-old Kevin Thomas pronounces himself "sick and tired of this big government coming in, taking our money, giving it away basically to people who don't deserve it."
"We're building a nation of slackers," he warns at a campaign event for O'Donnell.
Considered controversial for everything from her positions on sexuality to her claims to have dabbled in witchcraft, O'Donnell has become one of the Tea Party movement's most prominent candidates.
She beat out competition in Delaware's Republican primary from a well-established candidate, and won despite the Republican Party's expressions of deep concern about her electability.
In doing so, she has become a symbol of the Tea Party movement's complex relations with the Republican establishment, which has swung between trying to sideline the organization and seeking to capitalize on its mobilization of conservative activists.
The Tea Party emerged as the Republican Party appeared at its lowest ebb, and drew its inspiration from the revolutionary fervor of America's founding fathers, rather than the staid politics of establishment conservatives.
The group's name is a reference to the 1773 incident in which angry Boston colonists dumped tea into the sea to protest British taxation rules, and an opposition to taxes is one of the movement's strongest principles today.
Members also cite a belief in strict adherence to the letter of the US Constitution, opposition to abortion, support for gun rights and a desire for smaller government.
"This country was not founded on a huge federal government like that (President Barack) Obama is trying to institute," says Thomas.
Lamanna says Tea Party members mobilized because they feel "over a period of time, while they were sleeping, their government was taken away and they want it back... We are waking up."
While the movement reserves its strongest opposition for Democrats and their policies, the Tea Party has not hesitated to directly challenge Republican candidates they deem too liberal or complacent, with O'Donnell a prime example of the "insurgent" politicians supported by Tea Party activists.
"The Tea Party disagrees with the current state of the Republican Party, so they're creating a revolution of sorts," says O'Donnell supporter Alex Mili, a 34-year-old lawyer.
O'Donnell takes care to present herself as outside of mainstream Republican politics, declaring herself a "citizen-politician" and pledging to "return to the constitutional principles on which our country was founded."
While defense of the US Constitution is a key theme for the movement, religious values feature prominently too.
O'Donnell's Newark campaign rally began with a prayer, and a message attached to a wall spoke only to those with the religious background to understand it.
"Pray for Obama: Psalm 109:8," it read, a reference to the line "May his days be few; may another take his office!"
The largely white movement also faces accusations of racism from Democrats, including David Tillman, a 67-year-old African-American attending a campaign event for O'Donnell's opponent Chris Coons.
"Come on, all they did was take off their hoods," he says in reference to the peaked masks worn by Ku Klux Klan members.
Barry Townsend, another Coons supporter, is more generous about the members of the movement.
"They've been hoodwinked by people with extreme views," he says.
This whole article is ridiculous. First, the government does not own the income people receive, either from their work or from their wealth--and the government's not confiscating all of it is not a subsidy to the extent of what they leave-- whereas a welfare or other payment is a subsidy involving a transfer of wealth. Second, according to the IRS (see http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133521,00.html ("Individual Income Tax Returns with Positive Adjusted Gross Income (AGI) Returns Classified by Tax Percentile - Early Release"), the wealthy and high-income workers pay the lion's share of federal income taxes: for 2008, the top 1% by income paid 38.02% of federal income taxes, the top 25% paid 86.34% and the top 50% paid 97.3%. The bottom 50% paid 2.7%. Second, much of the federal budget involves transfer payments from the wealthy to the poor or the lower middle class, through Social Security (remember that the high earners get a much lower share of their taxes paid than the low earners), and various welfare and quasi-welfare payments. Third, other taxes, such as the estate and gift taxes, pile insult on injury (or will, once this year's anomalous tax holiday is over).
Typical Limbaugh propaganda. Enough said.