SPECIAL NOTE: Greetings to those of you signed up for this blog. I have been delayed since September providing new entries to this blog due to work completing my most recent book, OBAMA’s ECONOMY: RECOVERY FOR THE FEW, Pluto Press and Palgrave-Macmillan, due out February-March 2012, as well as an item excerpted from the intro and concluding chapters of the book–a 35 pp. pamphlet entitled: ‘AN ALTERNATIVE PROGRAM FOR ECONOMIC RECOVERY’, which was produced for several labor unions. I will share with you selections from both of these in coming weeks. The first selection is a segment of the book and pamphlet concluding chapter involving 13 Specific Proposals for how to ‘tax the wealthiest 1%’ and their corporations. The recent movement to ‘Occupy Wall St'(OWS)emerging around the U.S. and world has raised the appropriate slogan, the 99% (us) vs. the 1% (them). But the slogan now needs specific content. The attached blog entry, ’13 Ways to Tax the Rich’ offers some initial suggestions in that regard.
COMMENTARY: The following proposals to Tax the Rich are excerpted from the recent pamphlet by Jack Rasmus, ‘An Alternative Program for Economic Recovery’, recently produced (October 2011) for various Teamsters Unions in the bay area and New York. The longer pamphlet also includes proposals to restructure the banking and retirement systems in the U.S., create 17 million jobs, save 11 million homeowners, and stabilize state and local government finances. For more information re. the pamphlet, contact the author, Jack Rasmus at: firstname.lastname@example.org or call 925-209-3933. The pamphlet may also be ordered from the website, http://www.kyklosproductions.com.
’13 WAYS TO TAX THE RICH’ by Jack Rasmus, copyright 2011
Tax Program #4.1: PROFESSIONAL INVESTORS’ OFFSHORE TAX HAVEN REPATRIATION TAX.
About $4 trillion today is held in offshore tax havens by US investors, individuals and institutions, in island nations like Cayman islands, Vanuatu, Seyschelles, Isle of Man, Cyprus, etc., and in more traditional havens like Switzerland, Lichtenstein, and so forth. The IRS has identified 27 of these, which it calls special jurisdictions. If just $2 trillion of that $4 trillion was required to be redeposited in US banks, those investors would have to pay the 35% top tax bracket personal income tax on the $2 trillion in the first year, raising about $700 billion. Future earnings on the remainder would also be taxed in the second to fifth years, yielding another $200 billion a year. Refusal to repatriate could result in a 10% penalty after 90 days, followed by similar penalties. Countries that refused to cooperate should have their US based assets frozen and then taxed until compliance.
Tax Program #4.2: MULTINATIONAL CORPORATIONS OFFSHORE PROFITS RECOVERY TAX.
Multinational corporations today are hoarding between $1 and $1.4 trillion in their offshore subsidiaries, refusing to pay the required 35% corporate tax rate. If they were required to repatriate that lower amount of $1 trillion, it would raise in the first year a sum of $350 billion and another $140 billion a year in each of the next four years. Refusal to repatriate could result in a 50% tariff on the re-importing of their offshore products to the U.S. until they repatriated.
Tax Program #4.3: ONE YEAR 15% SURTAX ON $2 TRILLION CORPORATE CASH HOARD
Companies refusing to invest one third of their current cash hoard within 6 months in the U.S., and create jobs as a consequence of such investment, would be taxed at a 15% surtax rate for the remaining six months of the first fiscal year. That raises an additional $300 billion in tax revenue the first year. Repeated in subsequent years for corporations still not hiring, at a rate of 15% + 5% on the remaining balance.
Tax Program #4.4: FINANCIAL TRANSACTIONS TAX ON STOCKS, BONDS, AND DERIVATIVES TRADES
Another $150-$200 billion a year, at minimum, is raised by implementing a financial transactions tax as follows: $1.00 per every common stock trade for stock value traded $10,000 or less. Add $100.00 for stock trades valued $10,000 to $100,000. 1% on all trades worth more than $100,000. $1.00 per each $1000 value for all forms of corporate bond sales, both investment and junk grade bonds. Similar charge for commercial paper transactions. And $1 per $100 notional value for all interest rate, currency and other derivatives trades, levied on each of the counter-parties. 1% tax of notional value for all credit default swaps derivatives trades.
Tax Program #4.5: CAPITAL GAINS, DIVIDENDS, AND ESTATE TAX RESTORATION
This proposal raises taxes on capital gains and dividends from current 15% to the 35% rate that is currently levied on all top bracket personal incomes. It would also tax carrying interest at the same rate and require all hedge fund managers to pay 35% instead of their current 15%. Estate Tax rates and thresholds are restored to 1980 levels. These measures raise at minimum $125 billion in the first year, and potentially more, as well as an additional $125 billion per year for the next four years.
Tax Program #4.6: IMMEDIATE EXPIRATION OF BUSH TAX CUTS
Bush tax cuts passed in 2001-04 cost over the last decade approximately $2.9 trillion. Their extensions alone in 2010-11 cost the U.S. budget about $270 billion a year. For the next decade the cost would be an additional $2.7 trillion. Tax program #4.5 above is included in the total Bush tax cuts. Not addressed in 4.5, however, are the additional Bush tax cuts involving top bracket rates for individual and corporation income taxes as well as numerous additional deductions, exemptions, and credits worth collectively more than another hundred billion a year. Restoring the top marginal rates to 2000 levels of 39.6% raises additional tens of billions of dollars a year in revenue with which to balance the budget or other uses.
Tax Program #4.7: RESTORE TOP BRACKET PERSONAL AND CORPORATE TAX RATES TO 1980 LEVELS
Top marginal individual and corporate tax rates are proposed by this program to restore to 1980 levels, which were 50% each for both individual and corporate tax rates.
Tax Program #4.8. BUSINESS-TO-BUSINESS 2% VALUE ADDED TAX (VAT)
This proposal was in part addressed in Jobs Program #1.6 above, as a means to fund an increase in social security early retirement benefits in order to make available new job opportunities for young workers. #1.6 identified and earmarked 1% of the 2% VAT for B2B sales on intermediate goods. The other 1% of the VAT is allocated to States as a major measure for restoring their revenues and fiscal stability as well. Once again, the justification for this #4.8 tax proposal is, if consumer households can pay an up to 10% sales tax on final goods and services, then Business should pay at least a 2% tax on their inter-sales to each other.
Tax Program #4.9: STATE-TO-STATE BUSINESS RELOCATION TAX
This program was also previously described elsewhere in this pamphlet as a means to re-stabilize State revenues and budgets.
Tax Program #4.10: INCREASE THE 12.4% PAYROLL TAX ON WAGES & SALARIES(Earned Incomes)to $250,000 OVER NEXT 5 YEARS
Currently less than 85% of all wage earners pay up to the current top annual limit of $106,800 because wage income at the top wage levels above $106,800 has risen faster than the social security base increase. If this was adjusted to prior levels where 100% of wage income was captured by the 12.4% payroll tax, the increase would more than cover any potential shortfalls in social security benefits until 2085. However, this proposal recommends paying the social security payroll tax on all forms of income, wages and salaries (i.e. earned income), and all other forms of income up to $250,000 a year. A large social security surplus would result as a consequence, and could be applied toward raising monthly social security benefit payments by as much as 20%, as described in the next Tax Program #4.11.
Tax Program #4.11: INSTITUTE A 6.2% PAYROLL-EQUIVALENT TAX ON ALL CAPITAL INCOMES (capital gains, dividends, interest, etc.)
An even larger social security surplus would result if a 6.7% tax were levied on all incomes, whatever the form and with no ceiling limit. This would transform social security from a payroll tax, or quasi payroll tax (#4.10) to a true social insurance tax. The tax revenue raise would amount to additional hundreds of billions of dollars a year to permit a 20% raise in monthly social security benefit payments for the 48 million current and future retirees. That 20% income boost would enable a major improvement in household consumption fragility.
Tax Program #4.12: INCREASE MEDICARE PAYROLL TAX BY 0.25%.
An initial 0.25% in the payroll tax for the next ten years provides all necessary funding to stabilize the Medicare system for ten years. That’s a combined 0.5% for employee and employer. Starting the eleventh year, 2022, another 0.25% each tax increase is necessary. Thereafter, the 77 million baby-boomers begin to decline as a cost factor, the costs of Medicare level off, and then decline. So a total tax increase of 0.5% over 20 years for both worker and employer totally covers the Medicare cost shortfalls. Those who consider this mere 1.7% tax for the next ten years unacceptable, should consider that the typical employer insured health care plan costs the equivalent of 30-35% of a workers take home pay today.
Tax Program #4.13: LEVY EXCESS PROFITS TAX ON THE ‘BIG 4’ PARASITE INDUSTRIES
There are four industries that are sucking the economic life blood from the U.S. economy, at the expense not only of their workers, the bottom 80% households, but also at the expense of millions of smaller businesses. These industries suck super-profits out of the economy, away from wages and other businesses income. They are the most powerful in terms of both economic and political influence. They are the banks, the oil companies, the health insurance companies, and the big pharmaceutical companies. They charge excess prices, rising at double digits now for decades, and thus reap super-profits at the expense of everyone else. An excess profits tax equivalent to a minimum 10% of the gross profits or net income of the companies in these industries should be levied on the biggest companies in these industries. Those excess profits should be returned to consumers and small businesses as offsets for health care costs and gas and electric utility costs and mortgage interest in the form of credits on annual federal tax returns.
Contact info for PAMPHLET: ‘Alternative Program for Economic Recovery’ email@example.com