Wednesday, August 12, 2020

It's The Taxes Stupid - The Retiree Advocate

It's The Taxes Stupid - The Retiree Advocate 
Aug. 12, 2020

Tax cuts for the wealthy expands the wealth gap and deficits enormously while doing little to boost the economy. 

(I'm a member of Retiree Advocate/UFT, a group of retirees with a history of opposing the Unity Caucus in the UFT)

Tax cuts for the wealthy expands the wealth gap and deficits enormously while doing little to boost the economy.

Given the recent events stemming from Covid 19 income inequality has been in the news often. If we look at some metrics this sheds light on how the U.S. is doing compared to other countries. The Gini Coefficient is a measure of statistical dispersion to represent income inequality or wealth inequality. The U.S. ranks 46  highest level of inequality  out of 150 countries. Another metric used by the World Bank is the Human Development Index ( HDI ) which ranks countries according to an overall assessment of per capita wealth , educational attainment, and life expectancy. Norway enjoys the highest human development while the U.S. comes in at number 13. Between 1980 and 2019 the share of the nation's total household income going to the richest 1 percent more than doubled while the earnings of the bottom 90 percent barely rose adjusted for inflation. CEO pay increased 940 percent but the typical worker's pay increased 12 percent. In the 1960 's the typical CEO of a large American company earned about 20 times as the typical worker , by 2019 the CEO earned 300 times as much. Let's take a look at the food industry.

Mcdonald's workers in Denmark have a Union and make $21 dollars per hour ( 45,000  per year ) and they enjoy 5 weeks vacation. Their average work week is 37 hours. In contrast the average fast food worker in the U.S. earns $8. 85 per hour. A major reason for this inequity is the decline of Union Membership in the U.S. Only 6.4 percent of American private sector workers are unionized compared to 26.5 percent in Canada , 37 percent in Italy, 67 percent in Sweden, and 25 percent in the United Kingdom. In 2009, even with a Democratic President and Democrats in control of both houses of Congress Unions could not muster enough support to enact Legislation that would have unionized workplaces as soon as a majority of employees signed pro union cards. President Obama didn't fight for this.

The trump tax cuts of 2017 have only worsened the situation. Many promises were made but didn't happen. One of these were: the tax cut would pay for itself. This not only didn't happen but created a trillion dollar federal deficit not even accounting for the Covid 19 stimulus spending. This comes as no surprise to anyone who has heard the same Republican tax cut argument for decades and now recognize them for the fabrications they are.  Republicans also claimed that wages will skyrocket. The claims were that average incomes would rise at least $ 3, 000 and perhaps as much as $ 9, 000 after the tax change had been fully absorbed into the economy. Obviously this didn't happen and the working poor tax cuts are below 1 percent until 2027. By 2027 the reduction in income tax rates will disappear.

But guess what? Corporate profits soared after the tax cut. The economy didn't boom, investment didn't increase, employment didn't go up, household earnings didn't surge, and the middle class tax cuts started out small and then disappeared completely. Corporate profits jumped 8 percent after the tax cuts were passed, and they have stayed at that level ever since. In June 2019, Walmart, America's largest employer, announced it would layoff 570 employees despite taking home more than $2 billion courtesy of the Trump tax cut. In 2018 the company closed dozens of its Sam's club stores, leaving thousands of Americans out of work.  Walmart plowed more than $20 billion into buying back shares of its own stock which boosted the pay of Walmart executives and enriched wealthy investors but did nothing for the economy.  In 2018, Amazon, America's richest company, paid zero dollars in US Federal Income Tax on more than $11 billion in profits before taxes.  It also received $129 million tax rebate from the federal government.  In the political arena, we hear President Trump talking about Socialism.  We have Socialism alright, but it's Socialism for the rich and harsh Capitalism for the rest of the population.  Neither political party has been committed to challenging the increasing concentration of wealth and power in America.  Both have come to depend on that wealth, and therefore defer to that power.  Even Trump said in 2016, "I give money to everybody, even the Clintons because that's how the system works". 

In summary, corporations won't voluntarily sacrifice shareholder returns unless laws require them to do so.  In the next decade, the fight shouldn't be democrats versus republicans, but that of Democracy vs. Oligarchy.

Retiree Advocate/UFT is a caucus in the UFT. Our goal is to make the Retired Teachers’ Chapter (RTC) more effective, democratic and responsive by critically evaluating leadership’s policies & programs and proposing alternatives to protect retirees & support working members.
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