COMMENTARY: As the deficit-debt debates intensify it is becoming increasing clear that Teapublicans want only draconian cuts in spending, social security-medicare-medicaid and public education in particular. Democrats want cuts but also modest tax increases. Both have agreed already that the cuts will be several times the tax hikes, if any. Democrats are content to pare the edges of the massive tax cuts for corporations and wealthy that have been put in place over the last 30 years, and the past decade in particular, creating a historic ‘Great American Tax Shift’. Working and middle class households, the 90%, are asked to contribute the most to a ‘shared sacrifice’ for an economic crisis, deficits and debt they did not create–in order that the wealthiest 10% can keep the lion’s share of the tax cuts of the past three decades. At the recent Emergency Labor Network Conference held June 24-26 in Ohio, Jack Rasmus proposed the following ‘R.A.T.S. Tax’ Program to make those who created the crisis pay for it.
“The R.A.T.S. Tax Program To Make the Rich and Corporations Pay” By Jack Rasmus, Copyright 2011
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
1. Repeal the Bush Tax Cuts on all capital incomes (capital gains, dividends, interest, inheritance) and related corporate tax cuts for accelerated depreciation and credits.
2. Restore the capital gains and dividends tax rates, from their current 15% to their levels of 70% in 1980.
3. Restore the top income bracket personal income tax rate to the 70% in 1980.
4. End tax loopholes for corporations and millionaires
5. 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)
6. 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).
7. 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.
8. 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.
9. 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-to-state corporate tax differentials. Use the federal revenue from the equalization for State job training.
10. 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
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
Are you serious about 2 and 3?
mz
mikiesmoky@aol.com
I went to the Tax Foundation for a table on income distribution. In 1980 the top ten percent of taxpayers’ AGI was 32% of all income, in 2007 it was 48%. That was pre-tax income. Both restoring the tax rates of that period and increasing income for middle and low earning workers is necessary. Restoring 15% of our present income to the lower 90% would involve a shift of $1.319 trillion, or about $12,500 to every one of the 105 million households in the lower 90%. You calculate a $1 trillion shift in taxes, I calculate a $1.3 shift in pre-tax income. Disposable income must have been somewhere near the sum of those two changes. This is where I found the Tax Foundation numbers, http://www.taxfoundation.org/news/show/250.html#Data I wonder if you agree? If wages had matched productivity then the typical income would be 60% or more higher. On a GDP/capita basis the nation grew by around 64% from 1983 to 2007, I think.
It’s amazing I can remember all that stuff. Thanks, I hope you’ll respond. My blog is http://benL8.blogspot.com where (half way down the current essay) I have posted this argument.
Ben Leet’s comments are a comparable approximation to my prior analyses. The difference is he calculates ‘from the top down’, whereas in my 2005 book, ‘The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush’ (available via paypal on my website, http://www.kyklosproductions.com, I calculate the ‘trillion dollar income shift’ from the bottom up, via the shift in wages, compensation, benefits, pensions, healthcare costs, etc., to verify the Saez and Picketty IRS data that shows an annual (not merely 30 year cumulative 1980-2010) shift in about $1 trillion from the 105 million bottom 90% households to the top 10% (and mostly %5 and 1%). The ‘War at Home Book’, is about the economic class war that has been growing for 3 decades. Three summary articles were written in 2007 for ‘Z’ magazine, entitled “The Trillion Dollar Income Shift”, which are also all posted on my website under the ‘articles’ tab, if anyone wants a brief summary of the book. (It’s heartening to see that mainstream economists like Robert Reich and others have recently ‘discovered’ the massive income shift going on now for decades (which UC Berkeley economist, Emmanual Saez, did (and continues to do) such great empirical work revealing). But the important question of the day is not that this shift exists and grows, or even that it is a major factor in creating the ‘consumption fragility’ and ‘financial fragility’ (central concepts in my 2010 ‘Epic Recession: Prelude to Global Depression’ book. The key question today is ‘what are we going to do about it’? (For this, see my forthcoming post reporting on last week’s ‘Emergency Labor Network’ conference in Kent, Ohio, and forthcoming actions by the labor movement.
The San Leandro Public Library also has a copy of The War At Home, so I’ll look at those chapters. But I still have an unanswered question. I look at the IRS 1040 form, first you calculate AGI then you deduct withheld taxes for tax owed or refund. The Tax Foundation reports the shift in AGI or 16%, while you report a shift in tax rates. The Social Security bite was larger after the Greenspan Commission, the top marginal income tax brackets shrunk.The Disposable Income shift would reflect both declining income percentage (the Tax Foundation figures) and the tax burden shift to the lower 90%, yielding an amount greater than $1 trillion a year, more like $2 trillion, or about a 25% to 30% shift in disposable income comparing 1980 to 2007. What do you think? Is there a source of historical disposable income segregated according to income level?
I do agree with all the ideas you have presented for your post. They’re really convincing and can definitely function. Nonetheless, the posts are as well brief for newbies. Could you please extend them a little from subsequent time? Thank you for your post.