Tax Dodgers Play Hardball

The WSJ Opinion is predictable – Alan J Reynolds says that taxing the rich won’t work at helping to  reduce the huge $14trillion US Deficit. Alan cites the fact that even when tax rates for the rich go up, tax revenue do not increase measurably [and Businessweek supplies the answer to that little puzzle – see below]. But what Alan also fails to note or explain are two fundamental phenomena:
1 – Income disparity is increasing

Note that the 95th percentile [or the top 5% of earners] have seen their income more than triple while everybody else has to be content with just under a doubling of incomes[or less]. In fact  incomes  in the 2000 to 2010 decade have been flat for 80% of all Americans]. But what is missing from this chart is the top 400 earners whose incomes  soared by 46% but whose taxrates dropped in the same period.
2 – Tax rate for the all Income Clases Have Dropped

Even worse, BusinessWeek has shown that the tax dodges available to the top 5% of earners have proliferated within the last decade such that  Alan’s prediction there will be no increases in tax revenues may well apply to the top 5% of earners unless  tax reforms are also  made as well as raising the  top income tax rates. Neither does Alan discuss the fundamental flaw in the Republican arguments for deficit reduction by using  spending cuts exclusively – tax reform and any tax increases, no matter how targetted are GOP forbidden.

Instead he offers “grow the economy” and “all boats will rise”. But then Alan  completely ignores two facts. Thanks to the Financial Community’s continued foreclosure malfeasance, housing is still in a mess – and so the biggest nest egg of wealth for 80% of Americans is jeopardy as housing prices remained depressed. As well,  the Business class in America has exported and outsourced work overseas to such an extent that job growth is barely trickling upward while greater swaths of middle income/college degree jobs are now being outsourced in such areas as legal work,  clinical researchengineering and other traditional white collar/middle class jobs. So with the US Economy dependent on 70-80% of its growth based on domestic consumption, but with those incomes either stagnant  or declining,  Alan Reynolds is engaging in wishful thinking at best and deliberate reportorial malarkey on par with his News Corp Fox News partners.

But even more incredible is  the following omission by Alan. There is the simple  fact that the top 1% of  earners come predominately  from the financial community [nearly 50%] and over the past 4 years the financial community has and continues to benefit mightily  from the public bailout at $3.1 trillion and counting  with ultra-low interest rates from the Fed driving their fundamental cost of business to historical lows. David Stockman, Ronald Reagan’s Budget Director, describes the situation:

In what is no longer secret testimony to the FCIC (Financial Crisis Inquiry Commission), Federal Reserve Chairman Bernanke claimed that the Wall Street meltdown “was the worst financial crisis in global history” and that “out of maybe 13…..of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two”.

In effect, Stockman is saying that the jobs of  Jamie Dimon , Lloyd Blankfein, and all  but one of the topUS  bankers and all their employees were gonzo if not for the Federal Bailout.   Stockman continues with a harshly critical analysis of the continuing Fed preferential treatment for these same  banks and the broader financial community. You would think that Alan would at least acknowledge that the Financial Community really owes  on its taxes. And given the GOP lead attacks on  teachers and public unions as Social Welfare Queens, Alan should set the record straight and tell readers  where the really enormous “public fat cats” reside.

So one can only conclude that it must be that time of year again -Income taxes are due, Baseball has started, and Tax Dodgers are in full swing. And the worst of the Public-Money Sapping Fat Cats get full support from their paper, the Wall Street Journal, with another incomplete swing at the full facts of the tax case in the US. In short, Dow Jones strikes out again – and in the style of itsFox News “call it Opinion” rookie.

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