Tuesday, August 17, 2010

Who Should We Tax More: Dead Billionaires or the Unemployed?

67%, a full two-thirds of American corporations, pay no income taxes at all last year.  At the same time, a record 20 million-plus Americans collected unemployment benefits, a year that ended with the jobless rate at 10%, with underemployment coming closer to 20 percent.  Fast forward to the end of the third quarter of 2010 and the unemployed have transformed into the long-term unemployed.

So, the choice is simple, tax the unemployed. They're  growing at a faster rate than any other group and it appears they're here to stay as well. Lets tax the hell out of them. 

Wait. Are unemployment benefits taxable in the fist place?

The answer, of course, is a resounding "yes".  This is despite the fact that unemployment compensation is usually less (and sometimes a lot less) than the unemployed's former paycheck.  Hmmm...I guess that means every cent is necessary in the struggle to make ends meet.  However, rest assured, The American Recovery and Reinvestment Act states the first $2,400 of unemployment benefits is tax-free. After that, the remaining benefits is considered taxable income.

Now, who is this genius who decided to tax the unemployed? Well, I'll give you a hint. The year was 1985. Yep, that's right. President Ronald Reagan.
“Under the guise of tax reform, we agreed to raise $2.3 billion from people who don’t have jobs.” -- Rep. Brian Donnelly (D-MA) on the Reagan tax measure to raise revenue.
What would the power elite do without the callous "spirit" of the GOP, who as President Obama said, “hold workers laid off in this recession hostage to Washington politics” and spend billions of dollars on tax breaks for the super wealthy who are doing better than ever.

Meanwhile, back at the ranch, just this year alone, four billionaires died, (George Steinbrenner (net worth: $1.5 billion), Janet Morse Cargill of the family that founded Cargill Inc. (net worth: $1.6 billion), Texas pipeline magnate Dan Duncan ($9.8 billion), and California real estate mogul Walter Shorenstein ($1.1 billion)).  Thanks to Bush's tax cut bill, 2010 is the year without an estate tax. Too bad, the treasury loses approximately $6.5 billion in tax revenue.

This wonderful Bush tax bill, enacted in 2001, ensured that as the value of estates exempt from the tax gradually went up over the past eight years, the tax rate on estates was reduced. During 2010, according to the 2001 law, the estate tax disappears entirely, only to be restored in 2011 at a rate of 55% on estates of $1 million or more, which is where things stood before the 2001 change.  And the purpose of this was??

Anyway, if we let the Bush tax cuts expire, and we return to pre-Bush income tax levels for the richest Americans (among other tax changes), it will result in an increase of more than $217 billion in tax revenues for 2010 and 2011. The expirations will then contribute another $1.25 trillion from 2012 through 2015, and an additional $2.2 trillion from 2016 to 2020.

And here's another thing:  Economists agree that giving unemployed people money to spend stimulates the economy much more than does preserving tax cuts for the rich.  The CBO report, Policies for Increasing Economic Growth and Employment in 2010 and 2011, scores "increasing aid to the unemployed" as the highest-scoring policy proposal to stimulate economy.

The CBO estimated that increasing aid to the unemployed would have the greatest effects on GDP per dollar of budgetary cost and the second highest cumulative effect on employment of the policy options considered.

On the other hand, as our unemployment rate soars and average Americans pay the price, the elites, who are generating more profits than ever, are hoarding their cash and refusing to invest their earnings.
Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. [...]

“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”

Well, that was simple. The dead billionaires win. Tax the hell out of them and all of their alive and wealthy friends.

Contact your representatives and senators and get them to repeal Reagan's foolish unemployment tax.

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