"While campaigning for Harry Truman in 1948, [Ronald] Reagan attacked corporate greed, defended the common man, and lambasted the Republican Congress for tax cuts that he charged were skewed toward the wealthy." 1
In Wealth and Democracy, Kevin Phillips discusses the inequality enjoyed by the uberwealthy. "As aggravating as Phillips finds this 'morphing of politics into a marketplace,' he is more concerned that the corporate elite makes most of its money off finance, tax avoidance and shifty speculation, adding little to the true wealth of the nation. 'Market theology and unelected leadership,' he concludes, 'have been displacing politics and elections. Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name." 2
A little history lesson about US Taxation & Tax Rates: 3
1. During Colonial Times, most of the Federal Govt's tax revenue came from tarifs, excise taxes, and custom duties. States taxed using a variety of methods: import/export taxes, property taxes and "head" taxes.
2. In the Post Revolutionary Era, the new govt had few responsibilities & no nationwide tax. States could levy taxes as they pleased. By 1789, the Founding Fathers recognized that no govt could function if it relied solely on other governments for its resources. The Constitution included the power to "…lay and collect taxes, duties, imports, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States." The collection of taxes was the responsibility of the states. Thus, Congress levied excise taxes on liquor, tobacco, sugar, carriages, etc. to pay for the war.
3. From 1817 until the Civil War, Congress imposed no internal revenue, relying instead on high customs duties & the sale of public land.
4. When the Civil War erupted, Congress passed the Revenue Act of 1861. This was a combination excise tax and a tax on personal income (3% of all incomes higher than $800/yr.). A year later, due to high war costs, they added more items to the excise tax & set up a two-tiered tax rate: Incomes up to $10,000 were taxed at 3% and higher incomes at 5%. A $600 standard deduction as well as a few other deductions were also added. For the first time, taxes were deducted at the source--by employers. After the war, most taxes were repealed. From 1868-1913, nearly 90% of all revenue was collected from excise taxes.
5. 1913 & the 16th Amendment. Congress passed an excise tax on business income and 36 states ratified the Amendment to allow the Feds to impose taxes on individuals' income. Rates were progressive, from 1-7%, the highest being for incomes in excess of $500,000. (Note: less than 1% of the population paid income taxes at this time).
6. WWW1 & the 1920's caused a need for more money. The tax rate in 1918 went to 6-77%, the highest for taxpayers earning over $1.5 million (Note: 5% of the population paid income taxes). During the booming 20's, tax rates fell back down, with the highest income earners down to 25%.
7. The Great Depression saw federal revenue drop from $6.6 billion to $2.7 billion, so Congress passed the Tax Act of 1932, dramatically increasing tax rates again. Another tax increase in 1936 saw the lowest tax rate at 4% and the highest at 79%. The Social Security Act in 1935 was financed by a 2% tax (1/2 from a worker's paycheck, the other 1/2 from employers on behalf of their employees).
8. WWW2 saw the need for big defense spending & support of anti-axis programs; the bottom $500 income earners now faced a tax rate of 23% while incomes over $1 million paid 94% tax rates. (Note: 4 million paid taxes in 1939; 43 million did so in 1945).
9. Post WW2: the maximum tax rate in 1954 remained at 87% of taxable income. The economy remained subject to frequent boom and bust cycles, so policy makers continued a pattern of raising & lowering taxes and adjusting aggregate demand thru spending.
10. The Economic Recovery Act of 1981 offered a 25% reduction in individual tax brackets, with the top tax rate at 50%. Businesses also enjoyed a tax depreciation change as well as a 10% investment tax credit. The new theory was that by reducing marginal tax rates, businesses would put more money into new opportunities instead of pocketing the profits. The other change was that of shifting away from income taxation and toward taxing consumption. The Federal Reserve altered monetary policy and the economy fell into a deep recession in 1982 and produced high budget deficits. In 1984, some of the cuts were pared back, esp. on the business side.
11. The Tax Reform Act of 1986 tried to simplify the tax system but resulted in a downturn in the economy and played a significant role in the collapse of the Savings & Loan industry. The top individual tax rate was now 28% and taxes once again shifted back to income taxation. From 1986-1990, high levels of govt spending with their resulting deficits created higher pressures to increase taxes. In 1990, the top tax rate shifted up to 31%; in 1993 it rose to 36% w/a 10% surcharge (thus the real rate was 39.6%).
12. The Taxpayer Relief Act of 1997 provided a modest tax cut by offering a tax cut for certain families with children. It was the first tax change that provided refundable credits. The system also shifted back to consumption taxes. Despite higher tax rates in the 90's, the economy performed strongly.
13. Economic Growth and Tax Relief and Reconciliation Act of 2001 halted the $281 billion budget surplus, with a tax rate drop back to 33%. The tax cut was almost devoid of business tax provisions and continued the move toward a consumption tax. In 2004, 60% of the tax cuts went to the top 20% of income earners and over 25% going to the top 1% of income earners. 4
14. The 2009 Economic Stimulus Bill introduced the biggest tax cut ever: $282 billion over 2 years. These are short term refunds paid to working and middle class families. Remember, in 2007, the average American household paid $22,100 in federal taxes; in 1965, after adjusting for inflation, the average was $10,800.
The current tax code contains over 5.6 million words--seven times as many words as the Bible. 5 Talk has occured for years that the code should be simplified by a flat tax rate, where, for instance, everyone pays 19%--everyone, rich, poor, middle class. A progressive flat tax might be more fair because I believe this simply isn't enough to cover the deficits which the last administration saddled us with. The rich can afford to pay taxes; the poor cannot.
Economist Paul Krugman wrote an article last month about the Reagan years. He points out that the rich got richer, working families saw meager gains, and for the first time during a non-war period, the govt went on a spending spree. The S&L crisis, fueled by deregulation, ended up costing taxpayers over $130 billion--that was when this was a lot of money. New Deal restrictions were eliminated, fueling increased debt by Americans. This explosion of debt made the US economy weak. Who benefits? I guess it must be the financial institutions. If you recall, George & Jeb Bush owned a Colorado S&L back in the 80's which we bailed out; Tim Geitner was president of the NY Federal Reserve, which probably means close ties to Wall Street, which we've bailed out. Go figure.
Sources:
1. http://www.allacademic.com/meta/p_mla_apa_research_citation/0/6/5/8/0/p65800_index.html
2. SF Chronicle book review by Theodore Roszak, http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/06/02/RV207386.DTL.
3. http://www.treasury.gov/education/fact-sheets/taxes/ustax.shtml
4. http://www.washingtonmonthly.com/archives/individual/2009_02/016863.php
5. http://www.hoover.org/research/focusonissues/focus/17442454.html
6. http://www.sodahead.com/blog/85527/reagan-did-it/
Monday, June 22, 2009
Healthcare Reform Brought to it's Knees--By Democrats?!?
In today's NYT, Paul Krugman berates "centrist" Democrats who are fighting healthcare reform, particularly the public option, despite the fact that public option has overwhelming support of the American public. 1
I'll say. What a great deal for companies! They're the only ones who benefit. So, suddenly millions of American workers will no longer have health care, along with the 44+ million who currently don't have any. This is an improvement? What are they smoking?!?! And forget about pre-existing conditions; I could shop 'til I drop and still be unable to find any insurer who would cover me for breast cancer. And if I had had to pay for my previous care, I too would be in foreclosure and homeless....
Examples:
- Sen. Ben Nelson (NB) initially declared public option "dead". Why? Because then private insurers couldn't compete. Duh. Are we protecting American citizens or insurance companies?
- Sen. Kent Conrad (ND) says we can't get a public option because no Republicans will go for it. Guess what? No Republicans went for Social Security, Medicare, or Medicaid. They have a nearly perfect track record of voting against any sort of national healthcare since the 1930's. 2
Could it be that special interest lobbying (by healthcare companies) has been part of the problem? FiveThirtyEight.com 3 has some interesting statistics of which this graph is one:
Senate rankings and PAC money taken:
The Republican response to healthcare? From USA Today:
The GOP plan relies on...replacing the current unlimited exemption from taxes of
employer-provided insurance with a refundable tax credit of $5,700 for a family,
or $2,300 for an individual, that people get regardless of whether their health
coverage comes through an employer. The idea is to introduce market forces
into health care to hold down costs that are soaring unsustainably. Here's how
it would work: The government would essentially pay for the first $5,700 in
coverage for a family through the credit, and the family would pay the rest out
of pocket. With the average family plan costing $12,700 now, that is a major cost. An employer could contribute, but with workers having to pay tax on the benefit, the employer might as well convert it to pay. The upside is that having Americans pay for more of their medical needs with their own money would give people incentive to shop around when looking for insurance or having procedures done, putting
pressure on providers to control costs. The downside is that millions of people who are now covered through their employers could be left on their own. 4
Sources:
1. See NYT/CBS poll at http://www.nytimes.com/2009/06/21/health/policy/21poll.html?fta=y
Thoreau's Legacy
A new interactive book is available (http://www.ucsusa.org/americanstories/) containing real person accounts regarding climate change. The TOC includes Open Spaces, Tales from Urban America, Faith and Convictions, etc. It's a joint project by the UCS (Union of Concerned Scientists) & Penguin Books. The House of Representatives is voting this week on a bill that could start to set us on the right path, so be sure to call your rep today!
Thursday, June 11, 2009
Healthcare Options
Why do Americans think universal healthcare leads to socialism? Is universal health care part of the Communist Manifesto and, if so, is that a bad thing? Is healthcare a Right or a Privilege to the rich? Should healthcare be a profit-run industry or non-profit?
Have Americans been sold a bill of goods? During the last 50 years, Americans have been educated (re-educated?) to abhor socialism, marxism, liberalism--pretty much all "isms". We learned to crouch under our school desks in case of a nuclear attack, to "just say no", to learn the color-coded alert system for terrorism. In the meantime, we lost sight of the real issues surrounding our lives: the environment, energy, good-paying jobs, election finance reform, corporate monopolies, healthcare, education. We allowed companies & municipalities to pollute, did very little to change our use of fossil fuels, and did nothing about the last 5 in the above list. Americans have been "dumbed down." (For an interesting study on declining schooling, go to YourDictionary.com.)
Have Americans been sold a bill of goods? During the last 50 years, Americans have been educated (re-educated?) to abhor socialism, marxism, liberalism--pretty much all "isms". We learned to crouch under our school desks in case of a nuclear attack, to "just say no", to learn the color-coded alert system for terrorism. In the meantime, we lost sight of the real issues surrounding our lives: the environment, energy, good-paying jobs, election finance reform, corporate monopolies, healthcare, education. We allowed companies & municipalities to pollute, did very little to change our use of fossil fuels, and did nothing about the last 5 in the above list. Americans have been "dumbed down." (For an interesting study on declining schooling, go to YourDictionary.com.)
According to Online Journal, "...people who read to begin with, newspapers in particular, are already higher on the intelligence chart, because they’re looking for information, i.e., the truth in print, a proactive not passive medium. As newspapers dumb down the truth, they may gain a transitory readership. In the long run, though, it’s the kiss of death. Many of those kinds of readers will abandon them at some point for something even dumber."
But I digress. I just read The Communist Manifesto and I didn't find any mention of national healthcare. This document talks about the abolition of private property and about free education for all children in public schools. But nothing about healthcare.
Is healthcare a Right or a Privilege? If you read the Constitution, you won't find anything about health care in it. Until you get to the 8th Amendment, where, as part of the "cruel and unusual punishment" clause, the Supreme Court affirmed that POWs were guaranteed a right to health care. Currently, prisoners are the only group specifically granted a right to health care. So, should it be a privilege to only those who can buy it? An interesting point on this was made by Laura Knoy of NHPR:
"Here at home, medical statistics have shown that degraded diet, water, and air quality are responsible for billions of dollars in AVOIDABLE health care costs. That degradation has happened largely without citizen involvement in the decisions that brought it about."
200 years ago, most Americans lived shorter lives, rarely saw a doctor, and, when they did, could often barter for the treatment. Fast-forward to today and you see that, were the Founding Fathers around, they'd be aghast. We have a government run highway system, a government run education system, but we can't keep our family healthy in order to get
to school? Now, universal healthcare doesn't have to be government run. It could be run by a non-profit organization, for example. Why should we pay insurance companies
over 30% admin costs while Medicare does the same on 3%? I believe it's France where
doctors are paid a bonus to keep their patients well. What an idea!
So, instead of thinking of this as a Right vs. a Privilege, how about looking at it from a cost analysis position?
1. The U.S. spends far more per capita on health care than any other nation (and health care costs continue to soar): $2.4 trillion dollars (18 percent of our GDP).
2. More than 18,000 Americans die every year from preventable illnesses
because they do not get to the doctor when they should. This impacts where they
work & their capacity for spending.
3. The average American spends about $7,900 per year on health care.
4. General Motors spends more on health care per automobile than on steel
5. Despite the fact that we spend almost twice as much per person on health care as any other country, our health care outcomes lag behind many other nations.
6. Over the last three decades, the number of administrative personnel has grown by 25 times the numbers of physicians.
7. From 2003 to 2007, the combined profits of the nation's major health insurance companies increased by 170 percent.
8. CEO compensation for the top seven health insurance companies now averages $14.2 million.
9. Our current private health insurance system is the most costly, wasteful, complicated and bureaucratic in the world.
10. In 2008, employer health insurance premiums increased by 5.0 percent – two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,700. The annual premium for single coverage averaged over $4,700.
11. Health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7 percent in Germany, 9.7 percent in Canada and 9.5 percent in France, according to the Organization for Economic Cooperation and Development.
I've heard all sorts of ideas, of which these are the latest:
1. The Single-payer option. According to Physicians for a National Health Program (PNHP),"Single-payer national health insurance is a system in which a single public or quasi-public agency organizes health financing, but delivery of care remains
largely private."
2. The Public Option. A government run health care program. This could mean extending Medicare to the under-65 crowd. A new study by the Commonwealth Fund reports that Medicare recipients are more satisfied with their coverage, have better access, and fewer problems paying their bills than people covered by employer-sponsored plans.
3. Member-run Health Cooperatives. According to Bloomberg news, "It would allow non-profits to negotiate directly with health-care providers for low-cost rates. The plans they offer would be sold, like private plans, through Internet-based exchanges where consumers could buy insurance at lower-cost, group rates....the cooperatives could be chartered by either the federal government or the states, and that they could receive federal seed money."
Sources:
1. YDC, YourDictionary.com on grade level declines since 1858.
2. PNHP on Single-Payer Options.
3. Clark & Amiot, The impact of the Reagan Administration on Federal Education
Policy.
4. Online Journal, http://onlinejournal.com
5. Bernie Sanders at http://www.huffingtonpost.com/rep-bernie-sanders/health-care-is-a-right-no_b_212770.html.
6. http://www.nchc.org/facts/cost.shtml
7. http://www.mckinsey.com/mgi/publications/US_healthcare/Executive_Summary.asp
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