The breakdown on debt limit negotiations between Republicans and Democrats last week was over draconian cuts in the social wage (social security, medicare, education, etc.) and tax hikes. Both Republicans and Joe Biden, heading the Democrats team, reportedly agreed on $1 trillion in cuts in social wages, according to the US business press. Where the negotiations broke down was over how much to raise taxes in addition to the trillion dollar cuts in spending.
Republicans, led by House representative, Cantor, refused any compromise on taxes, revealing once again that their real objective is to protect and expand the Bush tax cuts not matter what the cost of deficits or debt. The latter, deficits and debt reduction, are apparently just a cover issue to force reductions in social wages—i.e. social security, Medicare, and the like—as a means to continue the tax cuts for corporations and wealthy investors for another decade.
The Biden-Democrats’ proposals for tax hikes appear focused on tax loopholes more than on restoring top tax rates or reversing the Bush tax cuts that will cost $270 billion a year for the next decade and doom any possibility of deficit or debt reduction and require further cuts in social security and medicare-medicaid down the road.
This writer was recently asked to provide a keynote speech to the important new grouping within the US labor movement called the ‘Emergency Labor Network’. About 130 local union officers, organizers, central labor council and state federation of labor activists gathered last week in Ohio to propose an alternative budget and program for action to both the Republican and Democratic versions. He was asked to suggest an alternative tax program that would make the wealthy and corporations pay, and in the process not only resolve the deficit but expand social wage benefits such as social security, medicare, medicaid, and jobs.
The program offered and discussed at the Emergency Labor Network conference was dubbed ‘The R.A.T.S. Tax Program’, an acronym which stands for ‘Reverse the American Tax Shift’ of the past thirty years that has occurred on three levels: a shift in the personal income tax—from the ‘top 10%’ wealthy households and investors enjoying capital gains, dividends, carrying interest, and rental income—to the 100 million ‘bottom 90%’ households whose income is almost exclusive ‘earned’ from wages, salaries and pensions. Since 1980, a tax shift in favor of capital incomes benefiting the top 10% households—together with a 50% decline in tax incomes from the corporate income tax (from about 20% to 10% of federal tax revenues), and a doubling of payments into the payroll tax (from roughly 20% to 40% of federal tax revenues)—has resulted in a total annual shift in income by 2011 approaching $1 trillion a year. In other words, a ‘Great American Tax Shift’.
The RATS TAX Program is the response to this shift. And as the attendees at the conference put it in terms of a slogan: “I don’t give a RATS Tax About the Rich”! The
10 point RATS TAX program adopted by the conference is as follows:
THE RATS TAX PROGRAM
- Repeal the Bush Tax Cuts on all capital incomes (capital gains, dividends, interest, inheritance) and related corporate tax cuts for accelerated depreciation and credits.
- Restore the capital gains and dividends tax rates, from their current 15% to their levels of 70% in 1980.
- Restore the top income bracket personal income tax rate to the 70% in 1980.
- End tax loopholes for corporations and millionaires
- Lift the annual income cap on the social security payroll tax for all earned income (wages and salaries) above its current $106,800 ceiling. Extend the 12.4% payroll tax to all capital incomes over $100,000 per year. (Note: per the Social Security Trustees, this would provide 150% of what is needed to resolve all funding issues for social security retirement and disability benefits)
- Increase the Medicare payroll tax by 0.25%, from its current 1.45%, for both employee and employers over the next ten years. Add a second 0.25% for each in 2022. (Note: per the Social Security Trustees, this would resolve all funding problems for Medicare).
- End multinational corporations’ offshore tax fraud. Make multinational corporations bring back their $1 trillion current cash hoard in their offshore subsidiaries and pay their 35% tax. If they refuse, place a 50% tariff on all their imported goods to the U.S.
- Repatriate wealthy investors’ $4 trillion illegally sheltered hoard now in 27 offshore tax havens identified by the IRS and pay their legally required taxes. If they refuse to repatriate within 90 days, impose 10% penalties for consecutive 90 days. If the 27 country tax havens refuse to cooperate in the repatriation, freeze their assets in the US until they comply.
- Stop the States’ corporate tax cut competition and tax revenue ‘race to the bottom’. Introduce a Federal ‘State Corporate Relocation Equalization’ tax to even out state tostate corporate tax differentials. Use the federal revenue from the equalization for State job training.
- Tax the banksters (commercial and non-commercial banks). Levy a three part financial transactions tax as follows: 1.A tax of 10 cents on all common stock trades. 2. A tax of $1 per $1,000 value for all corporate bond sales. 3. A tax of 5 cents per dollar value on all forms of derivatives trading and swaps by counter-parties.
Jack Rasmus is author of Epic Recession: Prelude to Global Depression, Pluto Press and Palgrave-Macmillan, May 2010; and the forthcoming Obama’s Economy: Recovery for the Few, same pubishers. His blog is jackrasmus.com and website: www.kyklosproductions.com.
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