When Work Doesn't Pay For The Middle Class

[Big Train]

An excellent piece on something nobody talks about in the socialism vs. corporatism debate: How the middle class get hosed in the "help everyone" scenario. The dis-incentives outweigh the actual incentives to work and improve.

When Work Doesn't Pay For The Middle Class - Forbes.com

When Work Doesn't Pay For The Middle Class

Eighteen months after being laid off, Judith Lederman, a 50-year-old divorcee who lives in Scarsdale, N.Y., is ready to consider jobs paying half the $120,000 she earned as a publicity manager at Lord & Taylor. That's mostly because she's desperate, but it also makes sense when you consider how this country punishes work effort. While the first $60,000 of her income would be lightly taxed, the next $60,000 would be hit with what is in effect a 79% tax rate. Given a choice between a part-time or easy job paying $60,000 and a demanding, stress-ridden job paying $120,000, Lederman would be wise to take the former. In the tougher job she would be contributing twice as much to the economy. But she wouldn't be doing herself much good. It would make more sense to take it easy and spend more time with her high school senior daughter, Casey.

How did a middle-class single mom wind up with a 79% marginal tax rate? At $120,000 she would pay $16,500 a year more in federal and state taxes, wouldn't qualify for the five-year $12,000-a-year cut in her mortgage payments she's applying for and would be eligible for $19,000 a year less in need-based college financial aid.

For decades there has been debate about how to help the poor without discouraging work, saving or marriage. Yet with almost no notice just such disincentives have crept up the income ladder, observes economist C. Eugene Steuerle, a former Treasury official and expert on the taxation of families. At first blush it would be hard to argue with anything that might help Lederman get back on her feet. Mortgage relief? The voters clamored for it. Scholarships for less-prosperous students? Everyone wants poor kids to get the same chances in life as rich ones. Add up all these good intentions, though, and you get some perverse incentives.

Work isn't the only middle-class virtue that is getting punished. The system penalizes savings, too--not just through taxes, but also through programs that reward debtors, the profligate and college families that show up at the financial aid office with empty pockets. Yet another series of tax and benefit rules penalizes marriage.

"This is a big social experiment. We really don't know what the long-term effect of all these incentives is going to be," Steuerle says.

There are now more than two dozen federal tax breaks, including seven created or expanded by February's $787 billion stimulus, that disappear (often simultaneously) as income rises. As her adjusted gross income climbs from $60,000 to $90,000, a single parent could lose some or all of the $1,000 per child credit, the $2,500 per college student credit, the $400 Making Work Pay credit and the $8,000 first-time home buyer credit, as well as deductions for contributions to an individual retirement account and for interest paid on a student loan. Such gotchas can push up the marginal federal income tax rate--that is, the tax on the next $1 earned--far beyond the top 35% rate imposed on rich folks. For a mom with a $30,000 income, the phaseout of the earned income credit and loss of a federal Pell college grant can produce a 40%-plus marginal rate, without counting Social Security and Medicare taxes.

Built into the earned income credit and some other tax benefits are marriage penalties, whereby couples lose some advantage they'd get separately. A single taxpayer has more of his Social Security benefits taxed when his income (calculated a special way, just for this provision) reaches $34,000; a couple when their combined income hits $44,000. Harry, a widower with $30,000 of income, and Louise, a widow with $30,000, live in sin. They would be saps to get a marriage license.

As tax grab-backs have grown, so, too, have nontax benefits middle-class folks can lose as their incomes rise. These benefit phaseouts act and quack like taxes. "It's economics 101," says MIT professor James Poterba, president of the National Bureau of Economic Research. "Look at what happens to my family resources if I earn another dollar: I pay more in taxes and I lose some benefits. It places a combined burden."

Need-based college financial aid is a blend of government subsidies and the well-established practice by colleges of charging what the traffic will bear. Before they can get aid, parents are expected to devote 47% of aftertax income (above a modest level) and 5.6% of nonretirement-account savings to college costs each year. Some savings held in a student's name get whacked for 20% a year.

At most schools the 47% rate can hit a family with as little as $65,000 in income. A few rich universities cut the poor and even the middle class more slack. A family earning $65,000 whose kid gets into Princeton will have to kick in maybe $2,000, and the contribution rate rises gently from there. Still, by $150,000 in income or so, parents are back to that 47% aid tax.

With their older son in his freshman year at Colgate and their middle son a high school senior eyeing similarly pricey schools, Denver residents Randy S. and Valerie Lewis decided she'd have to go back to work after 17 years as a stay-at-home mom. Valerie, 46, is applying for local teaching jobs paying $35,000. If she lands one, taxes will eat up $15,000 and the need-based aid they'd be eligible for will decline by $10,000, figures college finance consultant Troy Onink, who runs Stratagee.com.

That leaves the Lewises $10,000 ahead if she works. "It makes sense to go back to work, but it's frustrating looking at the number," says Valerie, who would have preferred to stay home a few years longer, since her youngest son is 12. Randy, 45, is a former commercial real estate broker who is in the process of launching a real estate investment fund. He's frustrated that the money he socked away in custodial accounts for his kids wiped out any chance of aid for their eldest son's first year. "We got totally skunked," he says.

The Obama Administration's $75 billion Making Home Affordable loan modification program aims to stave off foreclosures by pushing down the interest rate on mortgages owned or guaranteed by Fannie Mae and Freddie Mac so that monthly housing costs don't exceed 31% of a family's gross. Relief is for five years, and interest savings don't have to be repaid. Applicants have a big incentive to fall a little bit behind on their payments to wangle a refi. (Honor your promises? That's so out of date.) The process can take months, and while it's under way it is imperative for homeowners to keep their income within a certain range. Once the new rate is locked in, they are free to earn more.

"I almost understand why some people stay on welfare," says Karen, a 59-year-old Bellevue, Wash. self-employed house cleaner. As a matter of "personal pride" she's been applying for better paying, hotel head-housekeeper jobs, even though that could endanger her pending bid to have the interest rate on her condo reduced.

The mortgage refi program will presumably end when the foreclosure crisis does. Not, however, the new system for college loan repayments. The program, passed by Congress in 2007 and launched this past July, will probably be around for a long while. Graduates electing this option face up to 25 years of income-based payments that act like an additional 15% marginal tax.

A health care overhaul, if it happens this year, seems likely to include income-based subsidies for the uninsured that go up to three or four times the poverty level--that's $66,000 or $88,000 for a family of four. In Massachusetts, which adopted a universal care scheme in 2006, a 50-year-old childless Boston couple with an income of $43,700 and no employer-provided health insurance can pick from four Commonwealth Care plans costing them $232 to $299 a month. The same couple earning $44,000 would have to turn to Commonwealth Choice, where the cheapest plan, with a high deductible, runs $732 a month.

Massachusetts also provides premium subsidies so laid-off workers can pay for insurance through their former employers' health plans under a federal provision known as Cobra. In addition, February's federal stimulus included temporary Cobra subsidies for couples with an income of up to $290,000 and singles earning up to $145,000.

Three kids, two lawyers, one income: Jennifer and David Atkins with (from left) Jason, 3, Sharon, 5, and Marshall, 1.

David Atkins, a 42-year-old Westwood, Mass. MIT grad, nonpracticing lawyer and father of three, was laid off from his tech manager's job at a young Internet firm last December. In May, when he took a contract job managing a state Web site, he gave up combined state and federal subsidies that paid 93% of his $1,313-a-month Cobra premium. (He also gave up $728 a week in unemployment benefits.) Atkins' new health plan, with a much higher deductible, costs him $950 a month. He took the job because he likes to work and wants to keep his skills sharp. But he concedes that the net economic benefit, at least in the short term, isn't compelling.

As Atkins mastered the arcane details of the Cobra subsidies, he blogged tips for laid-off Massachusetts residents seeking to stay insured. Among them: If you get freelance work, don't lie about it--that's a crime--but schedule your work "strategically" so that you can collect unemployment one or more week each month and remain eligible for the insurance subsidy.

Some phaseouts, particularly on the benefit side, are unavoidable given Americans' divisions over the size of the social welfare state. Subsidy phaseouts wouldn't exist if the U.S. provided everyone with a basic health insurance plan and then raised taxes to pay for it. But there's no political consensus for that, any more than there is for allowing poorer folks to go without health care.

Still, much of what's going on here--particularly in the tax code--is a blatant shell game. Congress gives with one hand and takes with the other. A half-century ago the personal and dependent exemptions were the main way the federal government helped families with children. Since then the exemption's value has eroded and it has been taken away from millions of families stuck in the alternative minimum tax--the shadow tax system originally designed to make sure rich folks with exotic shelters paid at least some tax.

Instead of providing a big universal exemption, Congress has created a grab bag of family-friendly-sounding tax goodies, almost all with income-based clawbacks. Both liberals and conservatives have bought into this--the former because it concentrates relief at the bottom of the income scale and the latter because it helps hold down the advertised top marginal rates, says Steuerle.

How does all this affect taxpayer behavior? Studies show that certain groups--such as the second earner in a couple--do weigh marginal rates in deciding how much to work.

David Atkins' wife, Jennifer, 39, a lawyer, decided to stay home after their first child was born. She compared her aftertax take with the high cost of quality day care and concluded, "I didn't want to work just to pay somebody else to raise my children for me." When they were both working, the couple's income approached $200,000--meaning they earned too much to get the child credits or any deduction for the interest on Jennifer's $65,000 in college and law school loans.

"Don't think the American public is stupid," says Cheryl Morse, a tax practitioner in eastern Massachusetts with both middle- income and affluent clients. "People call me and say, 'What's the most I can earn before I lose the earned income tax credit?' [They] may not understand marginal rates, but they're shocked when they lose the college or child credits. You hear all the time, 'The harder I work, the more they take away from me.'"

Rosanne Altshuler, codirector of the Urban-Brookings Tax Policy Center, worries that all the tax gotchas could "erode confidence in the system, and that could lead to a bigger compliance problem."

In 2007, after the oldest of her three sons started college, Kristin Lavieri of Litchfield, Conn. went back to work full-time. She and her husband lost the college tax credit for their son. "To me, taking away that tax credit is a slap in the face. You pay so much for school," she says. Aside from the plight of parents, there's another point to Lavieri's story: She's a tax accountant at Weinstein & Anastasio in Hamden. "Even with the knowledge that I have, I got stuck," she says. "What's happening to the other folks who don't have the insider knowledge that I do?"

People may not up and quit when they lose a credit or benefit. But over time, says Steuerle, attitudes and expectations change. For years an "earnings test" caused Social Security recipients younger than 70 to lose $1 of benefits for every $2 they earned over a certain amount. In reality this penalty wasn't so bad, since those who had their checks docked for working received higher benefits later on. But retirees viewed it as an unfair tax on work. In 2000 Congress eliminated the test for recipients who have reached their full retirement age (now 66). As word got out, attitudes about working at older ages changed and work by seniors increased--good thing since the boomers will need to work even longer.

Desiree Segura, 23, expects to graduate from Oregon State University next June with a degree in philosophy and $40,000 in federal student loans. A student government senator, she flirted with going to law school but has decided instead to seek a job at the U.S. Students Association or a similar group. "The ussa is mobilizing their constituency to fight for themselves," enthuses Segura. She couldn't afford to make lobbying for college kids a full-time job if she had to make the full $435-a-month payments on her federal debts, so she plans to opt for the income-based repayment. Under that option she will be required to pay only 15% of her gross above 150% of the poverty threshold--meaning, as of 2009, above $16,245. If she earns $2,000 a month, she'll pay $97. The unpaid interest will add to what she owes, but she won't be charged interest on that interest. Any time her income rises, her monthly payment will, too.

Should Segura embark on a more lucrative career? Or take a second job as a waitress, to pay down the debt faster? The economy would be better off if she did. But she would be wise to make liquidating the debt a low priority. If she winds up in a public sector or nonprofit job for at least ten years, any remaining debt is wiped out.

[sadaist]

And just think of all the money people are earning that Obama still wants to get his hands on.

[Satan]

And now for the real story, not the spin from Steve Forbes, tax dodging billionaire.......

Thom Hartmann Comes to the Defense of the Embattled, and Shrinking, Middle Class

Submitted by BuzzFlash on Mon, 09/25/2006 - 5:49am. Interviews

A BUZZFLASH INTERVIEW

"Why should we care about the fate of the middle class? The answer to that question is a very simple one. Without a middle class, you won’t have a democracy. If you look at history, you see that those times when countries have had emerging or established middle classes are the times that those countries have been the most democratic, the most peaceful, and have best fulfilled the promises of life, liberty and the pursuit of happiness. And it’s the best thing literally for all life on earth."

-- Thom Hartmann

"Middle Class" was, until recently, a description that most Americans felt described them. We all felt we were middle class if we had a steady income, a decent home, and a shot at an even better life. But today, as Thom Hartmann helps us understand, the middle class reality is slipping away. As author Paul Loeb has written, Hartmann's new book, Screwed, "explores why, showing how this is no accidental process, but rather the product of conscious political choices, choices we can change with enough courage and commitment. Like all of Thom's great work it helps show us the way forward." BuzzFlash and Thom Hartmann talk here about the myth of a free market economy and government's role as the arbiter of trade and wealth.

* * *

BuzzFlash: Your new book is Screwed, The Undeclared War Against the Middle Class and What We Can Do About It. First of all, what is your rough sketch definition of the middle class?

Thom Hartmann: I would use the definition that Teddy Roosevelt came up with when he defined a living wage as being pretty much the same thing. Somebody who’s earning a living wage is probably in the middle class. Working a normal work week, one person is able to support a family in a way that they can put their children through school, including college, they can pay for all of their medical and health expenses, they can have enough set aside for a safe retirement, they can have enough to take and enjoy a vacation every year, they can live comfortably and meet the needs of their family -- I guess that’s pretty much it. I can’t remember his words, but I think that that’s pretty much it. I play that sound clip of him from 1912 all the time on the radio program.

BuzzFlash: A lot of your writing is concerned about American politics and the Revolutionary and Constitutional heritage of the United States. How does that point in our history relate to the issue of the American middle class?

Thom Hartmann: Well, we’ve had two periods in the United States when there was a substantial middle class. The first was from the time that the country was founded up to about ten-fifteen years before the Civil War. That middle class was established by virtue of cheap land -- cheap resources, basically. The person-to-resource ratio was such that there was a lot of wealth. Granted, many of those resources came from stealing land from Native Americans and enslaving Africans. But nonetheless, setting aside the obvious moral issues of that, that middle class came about as a result of basically cheap land and cheap labor.

The second middle class came about starting in the late 1930s as a result of Franklin Roosevelt intentionally interfering in the marketplace. The passage of the Wagner Act in 1935 and a series of specific interventions in the marketplace said to business essentially: if you want to play the game of business in the United States, you’re going to play by federal rules that are going to establish a middle class, and not just make a profit. What’s significant about these two periods is that, in both cases, the middle class emerged as a consequence of something that violated the normal rules of laissez-faire free market capitalist economy. The first was that cheap land and labor, which was, in a way, similar to the original Renaissance, because after the black death in Europe where there were so few people, labor was in such demand, and the wealth-to-person ratio dramatically increased because of the death of a third of the population of Europe.

Whenever you see a normal functioning economy without intervention, without government regulation and without participation of either workers through unions or the people through government, what you’ll find is the normal outcome of laissez-faire economics -- which is no middle class, or a very, very small mercantile middle class. In Europe for a couple of thousand years, you had a small class of wealthy ruling elites, and a very, very large class of working poor, and then a very small class of people in the middle who were able to carve out a middle for themselves, usually by virtue of expertise. They are the expert jewelers or the expert watchmakers, the stonecutters, and also the small shopkeepers -- the butcher, the baker, the candlestick maker. But not their employees.

The lesson of this is that a middle class is not a normal phenomenon. A middle class has to be created. It will either be created by external circumstances, as in the case of Europe after the black death, or the United States in the colonial times, or it’ll be created by internal circumstances -- the people through their elected representatives saying we’re going to modify the rules of the economy to intentionally create a middle class. That’s what Europe has done largely since the 1940s, although you could argue that that movement started in the 19th Century. And that’s what the United States did, starting with Franklin Roosevelt, and intentionally stopped doing, or began the radical slowdown of, starting with the election of Ronald Reagan in 1981.

BuzzFlash: Many people think of the post-World War II era as the golden era of the middle class. Is that a correct assumption or stereotype?

Thom Hartmann: Yes, it truly was. We saw real wages rise, and rise substantially, from the 1930s right up through the late seventies, early eighties, depending on which numbers you're looking at. We’ve seen the wages of the middle class basically erode since that time, although the wealthiest among us have seen an explosion in their wealth since Reagan began changing the economic direction of the ship of state.

BuzzFlash: The title of your book is certainly provocative -- Screwed -- The Undeclared War Against the Middle Class -- but who’s conducting this war?

Thom Hartmann: There are two groups of people participating in the destruction of the American middle class. The first is those who benefit directly from it economically -- basically the "pure capitalists," or people who derive most or all of their income from their investments, and simply want to maximize return on investment. Some very wealthy families have been working in this direction -- for example, the Walton family, who helped fund the ten-plus-year effort to change the use of the term estate tax to "death tax."

Then the second group is the ideologues, the true believers -- the libertarians and objectivists who read Ayn Rand and truly believe that pure unrestrained laissez-faire capitalism is not only a good economic system, but is also a good political system. They’re perhaps the most dangerous and destructive. Those are the Grover Norquists of the world. And they get it that there’s something in it for them.

BuzzFlash: You have a chapter called “There Is No Free Market.” What do you mean by that?

Thom Hartmann: The only natural free market is a local barter economy. Once we take a step beyond "I’ll mow your lawn if you’ll wash my car," once we start using mediums of exchange, like money -- we are involving government. Government creates the currency of exchange. Government defines that.

Then we have to say, okay, if you’re giving me this, I’m giving you that, we’re making an agreement to do that. If we’re making an agreement to do that, we’re executing a contract. The government defines the rules of the contract. If one of us is taken advantage of in that contract, the government defines how that harm would be adjudicated and what punishment would be rendered. So without the courts, without a treasury system of some sort, without very specific rules for the game of business, and things like protection for intellectual properties -- the copyright laws, patent laws and things like this -- without these things, you can’t have the marketplace.

So the concept of a free market that people simply trade things in an absolute vacuum is a fantasy. Every market is created by government, and the parameters of that market are defined by government. What’s happening right now is that these cons are redefining the structure of the marketplace in a way that is more free and more profitable for big multinational corporations and those with extreme wealth, and less useful and less functional for the middle class and the working poor.

BuzzFlash: We were interviewing Senator Byron Dorgan recently. He's’s written a book about how the American worker is under siege, and certainly many of those workers are the middle class or were the middle class. One of the interesting things he brought up is that in the so-called "free trade" agreement era, corporations were given rights that overran or co-opted sovereignty. The trade agreement -- NAFTA, I believe -- gave a Canadian firm the right to sue the state of California for inhibiting their trade. In essence, what we’re seeing is that corporations now have treaty guarantees that put them above nation-states.

Thom Hartmann: Or at least on a par with them. I remember 1960s and 1970s hearing conservatives like Barry Goldwater, Everett Dirksen -- the classic conservatives -- being very cautious about the United Nations. And the reason why conservatives had been so wary of the United Nations was that in signing some of the treaties, we had to give up some rights that are generally reserved to sovereign nations. Basically we surrendered some of our sovereignty, as did all the other nations in the United Nations, to the United Nations in exchange for a hope for real peace.

Now that’s a pretty noble reason to give up some of your sovereignty, and I can understand the fear of giving up sovereignty. With regard to these so-called free trade agreements -- we are surrendering sovereignty far more substantially than we did to the United Nations. We’re surrendering the sovereignty of our kitchens and our bathrooms and our bedrooms. I would argue that the sovereignty that we have lost that is economic reaches all the way into our individual homes and families, and it is a greater loss of sovereignty than the UN's limits on our ability to wage war indiscriminately. It just baffles me that the conservatives who are so worried about the surrender of sovereignty to the United Nations have nothing to say about the surrender of sovereignty to the World Trade Organization and to the Chapter 11 Commission of NAFTA.

BuzzFlash: Here in Chicago we have an example of a middle class under siege. The City Council of Chicago passed a living wage ordinance that would bring a guaranteed wage of $10 an hour by 2010. It was particularly aimed at the prospect that Wal-Mart stores would open up in Chicago, and more Target stores that paid extremely low wages. Mayor Daley, who we admire greatly, but we think is dead wrong on this issue, has vetoed this because Target and Wal-Mart said, well, we’ll locate on the suburban borders right outside the city -- a threat which they’ve made apparently to other cities like San Francisco and Santa Fe. Mayor Daley’s argument is that they bring low-wage jobs and tax revenue to the city, and so we can’t afford to lose them. What's happened when you have a leading Democrat, and in many ways, a working person’s type of Democrat, like Mayor Daley, vetoing a living wage law that represents the last hope of the middle class?

Thom Hartmann: This is a trend that began in the 1890s when the state of Ohio told John Rockefeller that by combining oil companies together into the Standard Oil Trust, he was violating both the Sherman Act of 1881 and the state laws of Ohio. He was acting in restraint of trade and harming the freedoms of Ohio. So Rockefeller said to the other states, Ohio doesn’t want me. Who wants me? Who’s going to change their laws? So you had competition between the states to see how far they could lower the standards of the laws that they had regulating corporations -- how large corporations could be, how long they could last, the terms under which they’re incorporated, how much oversight they’d have over them.

Delaware ended up with the least regulated corporations, which is why more than half of the companies listed on the New York Stock Exchange right now are Delaware corporations. New York, New Jersey, Connecticut, and several other states were engaged in this competition, described as charter-mongering. We didn’t put a stop to it at that point. They got away with it.

There have been efforts to slow down the corporate intimidation of government. By and large, they’ve been unsuccessful, because when you combine the changes that happened during the charter-monger era with the changes that came about as a result of the Supreme Court's Santa Clara decision in 1886, giving the corporations right to personhood, corporations have become essentially more powerful than, or at least as powerful as, government entities. I think we need to have a serious discussion of this in the United States, and that there should be laws passed that say if a state is going to engage in competition with other states in a downward spiral, then that state loses certain federal money such as highway funds.

For example, you had Boeing a couple of years ago saying, okay, we’re going to leave Washington state. What state’s going to give us the best tax break if we go there? Cities were really being played off, one against the other, in the race to provide a corporation a huge tax break. And we see this all the time. This is just normal now in the United States. Nobody’s giving you or me tax breaks to move into their town, but they are giving breaks to these corporations.

BuzzFlash: Isn’t Mayor Daley kind of throwing in the towel and saying, basically, the middle class is gone. It’s going to bring jobs to poor people. This is the best they’re going to get.

Thom Hartmann: Well, we’re not even talking about the middle class. Ten dollars an hour is not middle class. That’s not a living wage in Chicago. What we’re talking about is a wage that would be low enough that people are still the working poor, but high enough that they don’t qualify for welfare benefits. A lot of municipalities are not so much interested in giving people a buck and a half raise because it’s going to help the people out. They’re interested in giving them a buck and a half raise because now they’re above the threshold where the city has to pay for part of their housing or part of their medical care, or assistance with food.

BuzzFlash: We were surprised to read in a recent Zogby poll that Bush was slipping among the Wal-Mart shoppers. The Wal-Mart voters are a very key group of people for Bush because 75% -- I believe that was the figure -- voted for Bush in the last election. It was kind of shocking. Why is it that we aren’t seeing people with pitchforks, rising up to protest that the middle class is under siege? These are people who need to shop at Wal-Mart because it has such low prices, even though more than half of its goods come from China -- outsourced jobs that is -- and they're a horrible employer.

Thom Hartmann: I don’t think they put two and two together. I mean, this is what Thomas Frank said so eloquently about in What’s the Matter with Kansas? The conservatives have been so good at messaging that they have caused Wal-Mart shoppers and Wal-Mart voters to believe that prosperity can be achieved through the Republican strategies. They talk about how good the economy is, but they’re speaking about the stock market, and people think that they’re talking about them. Part of this is because we have lost a labor press in the United States. And that is, in part, because of the consolidation of our newspapers and our media.

When I was growing up, there were competing newspapers in most cities, and even small towns or medium-sized towns. Usually those newspapers competed on the basis of left-right politics. I remember growing up in Michigan, the Detroit News and the Detroit Free Press reached the entire state. One had a section that was the business section, and the other had a section that was a labor section. The paper that's more Democratically inclined had the labor section. And you knew the filter through which the news was being presented. You could -- and there was labor news. People were actually talking about labor news. There was a lot of labor news going on.

Every day, there’s labor news happening all over this country. None of it is getting reported in the mainstream media any longer. So workers don’t identify with themselves. The only economic cohort with whom they can identify are investors, because that’s the only economic cohort that’s being talked to or talked about in the media. In part, that’s because the media is made up of these large corporations, not their interests. And also it’s because most of the people in national media are -- I mean, ___ Katy Couric is getting, you know, $15 million to do the NBC evening news. Is she going to be concerned about labor news? Somehow I doubt it. She’s not part of that group anymore, if she ever was. So we have commentators who are working for corporations run by multi-millionaire CEOs, owned in large part by billionaire investors, deciding what the news is going to be for the Wal-Mart voters.

BuzzFlash: Let’s finish up by asking about the subtitle of your book, "And What We Can Do About It." What can we do about the undeclared war against the middle class?

Thom Hartmann: I think there are two steps to this. The first is to expose it -- to wake people up from their lethargy. The second is to take control of one or both of the political parties and intentionally do something about it. Since the government defines the rules of the game of business, including the rules of the game of employment. Government can define the rules of business in such a way that a middle class does emerge and is stable. We need to take control of government. Those of us who are concerned about the fate and future of the middle class are right now at the place where the Goldwater conservatives were in ’64 or maybe ’68 or ’72 -- where we’re saying, okay, how do we go about taking over a political party? How do we participate in the process? We need to get the people out there and get them involved.

The other question that you didn’t ask that I think is really an important one is why should we care about the fate of the middle class? The answer to that question is a very simple one. Without a middle class, you won’t have a democracy. If you look at history, you see that those times when countries have had emerging or established middle classes are the times that those countries have been the most democratic, the most peaceful, and have best fulfilled the promises of life, liberty and the pursuit of happiness. And it’s the best thing literally for all life on earth.

BuzzFlash: Why is that?

Thom Hartmann: Because people are not clawing over each other to reach a level of survival, and we’re not dominated by small groups who have very narrow interests. This goes back to some of the early research that was done by Francis Fukuyama, where he found that, by and large, democratic countries don’t go to war with each other. And why? Because nobody’s going to vote to send their own kids off to a war unless they feel that they’ve been attacked. And so they’re not going to start aggressive wars.

I would submit to you that what Bush did in 2003, invading Iraq wouldn’t have been possible twenty years ago or thirty years ago when America was much more democratic, because we had a strong middle class and people were willing to go out into the streets and protest, and speak up because they had the time to do it. They had some free time. And they had the job security to do it. And they could always get another job, they had educational security. Now we have young people who are educationally insecure. They’re graduating from college with $40-50,000 in debt. That’s assuming that they can get into college. They’re basically slaves from day one that they entered college, which is not a healthy middle-class thing. You have employees who are viewed as human resources, and who are terrified that their jobs are going to be outsourced or their pensions are going to be pulled, or their benefits are going to be taken away. As a consequence, they’re not speaking up.

During the Sixties, people were out in the streets protesting, and raising their fists and saying no to government, no to authority figures, who looked at that with horror. They said: oh, my God, this is civilization decaying. Well, in fact, it was exactly the same thing that we’re talking in the 1770s, and the exact same thing that happened in Greece before the revolt of the 400. There was a middle class that was strong enough to say we’re going to engage in social transformation. We’re going to give women equal power, and African Americans true equality that was promised to them long ago. And that’s a good and healthy thing.

But the conservatives viewed that social change, that social transformation, as a terrible thing, and a dangerous thing, It was a threat to institutions of power, and conservatives are fundamentally about the idea that the best thing is stability. It was a threat to the institutions of power, which were institutions of segregation and oppression frankly.

The environmental movement also came out of there being a middle class. One reason the environmental movement is not as strong now is because again the people don’t have the freedom and the leisure that they once had to speak out and get active and participate. Political action was at an all-time high during the height of the American middle class.

Reagan started chopping away at the American middle class. He declared war on organized labor in America, he ratcheted down the economic potency of the American middle class, thus producing a stronger ruling elite and a disempowered working class, which was the goal of the conservatives because they really and truly believe, as Edmund Burke said back in 1790, that society is best served by stability, not by freedom -- that stability is the most important thing.

BuzzFlash: Let me close with one recollection, which certainly is a telling moment that speaks to your book. Bush had one of his many staged townhall meetings. There was a woman on stage with him and he was asking her what her family life was like, and did she work? And yes, she worked three jobs. She needed to work three jobs. And he said, “That’s fantastic. That’s so American,” or something to that effect. Here is a woman working three jobs just to get by, and Bush praises her for being such a good American. It used to be the dream of the middle class that if you worked one solid job, you had the night with your family. You had weekends off. You could afford your kid’s college tuition. You could save for retirement. Bush's new role model is a woman with a family who works three jobs. What does that say to you?

Thom Hartmann: It perfectly crystallizes the entire thing. George W. Bush was born a multi-millionaire and feels the entitlements of being a member of the ruling class economically and politically. He apparently was not raised with the sense of noblesse oblige that, at least, Joe Kennedy was good enough to impart to his children -- that if you’re wealthy, you have some obligation to society. And so you’re just seeing it in a very raw form -- the belief that there are rulers and there are the ruled. There is the overclass and there is the underclass. And there’s really no need for a middle class in Bush’s world, in the conservative world.

BuzzFlash: And the role of the underclass is to work three jobs.

Thom Hartmann: That’s right. Because if you’re working three jobs, you’re not going to be politically active. You’re not going to be a pain in the butt. You’re not going to be uppity. You’re not going to be problematic for the political and economic forces that are running the country. You’re not going to be in anybody’s way because you’re out there working. So let’s just pat them on the head and say, yeah, keep it up. That is the conservative role model.

BuzzFlash: Thanks so much.

Thom Hartmann: Great talking to you.

Interview Conducted by Mark Karlin.


Link

[hideyoursheep]

http://taxes.about.com/b/2008/10/21/...-announced.htm

[Big Train]

And now for the real story, not the spin from Steve Forbes, tax dodging billionaire.......

Thom Hartmann Comes to the Defense of the Embattled, and Shrinking, Middle Class




BuzzFlash: Your new book is Screwed, The Undeclared War Against the Middle Class and What We Can Do About It. First of all, what is your rough sketch definition of the middle class?

Thom Hartmann: I would use the definition that Teddy Roosevelt came up with when he defined a living wage as being pretty much the same thing. Somebody who’s earning a living wage is probably in the middle class. Working a normal work week, one person is able to support a family in a way that they can put their children through school, including college, they can pay for all of their medical and health expenses, they can have enough set aside for a safe retirement, they can have enough to take and enjoy a vacation every year, they can live comfortably and meet the needs of their family -- I guess that’s pretty much it. I can’t remember his words, but I think that that’s pretty much it. I play that sound clip of him from 1912 all the time on the radio program.

Link

Well, back in the original "real story" that is essentially the argument. NOT working after a certain income threshold provides your family with more of what it needs (as you qualify for government gimmes), whereas earning more actually provides more of a burden for you and your family and provides less benefits. Teddy would tell the worker not to work under this current system and get his living wage.

[binnie]

I actually found the first article very interesting. Here's where I stand. I don't think that I should look after people who won't help themselves, but at the same time I don't mind contributing more to society as I earn more money.

The tone of the article annoyed me a little though. The assumption that 'poor' people don't work hard annoyed me. Is it only the middle classes who know the value of hard work? You telling me that construction workers, shop assistants and factory workers don't graft? The notion that 'if you work hard you'll get a good job and earn more money' is a fairy tale they tell you in High School. Works for lots of people, but not all. Not everyone is capable of attaining a 'Middle Class' profession - not everyone can be a lawyer, accountant, doctor or manager.

In any society, there will always be a small portion of 'lazy' people who want to live off others. It's sad but unavoidalbe. But writing in rhetoric that posits a divide between 'middle class' and everyone else is unnecessairly divisive I feel.

[Big Train]

I think that may be reading too much into it. I think what they are saying is that the system is setup to REWARD the ACTIVE CHOICE to not work. That the penalties aren't for not earning enough income, but earning too much. "Getting the job done" in terms of providing for your family is better accomplished by staying below certain productivity/earning threshholds, which may be good for the individual, but horrible for the GDP.

Which would also make high income people saps, as much as it would make poor people lazy.

[Nickdfresh]

oh please. The silly deluded "conservative" cliches here...

Here's the hard truth...

Most firms pay no income taxes - Congress
Study finds that the majority of domestic and foreign corporations in the United States avoid paying federal income taxes.


By David Goldman, CNNMoney.com staff writer
Last Updated: August 12, 2008: 4:38 PM EDT


NEW YORK (CNNMoney.com) -- Nearly two-thirds of U.S. companies and 68% of foreign corporations do not pay federal income taxes, according to a congressional report released Tuesday.

The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes - despite having a combined $2.5 trillion in revenue.

The study showed that 28% of foreign companies and 25% of U.S. corporations with more than $250 million in assets or $50 million in sales paid no federal income taxes in 2005. Those companies totaled a combined $372 billion in sales for the largest foreign companies and $1.1 trillion in revenue for the biggest U.S. companies.

The GAO report, which did not name any specific companies, said that some corporations reported zero income before deducting expenses while others said they had zero net income after deducting expenses. Either way, those companies reported no tax liability, the GAO said.

But many of the companies the report found had paid no tax were likely small businesses that pay other taxes. Generally, many small firms, because they do not have shareholders, are able to shift corporate income to individual income.

"Small businesses that are going to be liable for a lot of income tax are likely to use other tax forms so they only pay individual income taxes," said Eric Toder, a senior fellow at the Tax Policy Center.

The study was requested by Sens. Byron Dorgan, D-N.D, and Carl Levin, D-Mich., in an attempt to determine if corporations are abusing so-called transfer prices.

Transfer prices are charges on transactions between subsidiary companies within a larger corporate group. Companies may try to lessen their U.S. tax hit by improperly transferring income to foreign subsidiaries in countries with lower rates.

The GAO study did not attempt to determine if companies were abusing transfer prices, but it said that potential abuse of transfers could reduce the amount of taxes companies pay in the United States.

"The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hardworking Americans who pay their fair share of taxes," Dorgan said in a statement.

U.S. politicians disagree about how much income tax the government should levy on corporations. Currently the rate is 35%, but most foreign governments have set their rates below the U.S. level.

"The U.S. corporate tax rate stayed the same while foreign countries have drifted down, which increases the incentive for companies to report income in other countries," said Toder. "If the U.S. drops the rate to 30% but closes other tax loopholes, that may ultimately generate more tax revenue for the government."

First Published: August 12, 2008: 3:46 PM EDT

[Big Train]

Speaking of tired cliches, Nick throws out "WHAT ABOUT CORPORATIONS" as a knee jerk response to an article focused on the problems of the negative effects of the middle class tax breaks and incentives.

[FORD]

When Bill Gates, Warren Buffett, and John "Jay" Rockefeller IV all agree that they (three of the richest guys on the planet) don't pay enough fucking taxes, I really don't see how anybody can make a logical counter argument to that.

[Big Train]

When Bill Gates, Warren Buffett, and John "Jay" Rockefeller IV all agree that they (three of the richest guys on the planet) don't pay enough fucking taxes, I really don't see how anybody can make a logical counter argument to that.

How one can make a counter argument to apples with oranges is beyond me.

[Nickdfresh]

Speaking of tired cliches, Nick throws out "WHAT ABOUT CORPORATIONS" as a knee jerk response to an article focused on the problems of the negative effects of the middle class tax breaks and incentives.

Okay. What about the fact that middle class wages have remained virtually stagnant since the late 1970s while corporate profits and CEO salaries have exploded? It seems that work truly doesn't pay...

So. In addition to cutting taxes, shouldn't we also mandate universal raises?

[Big Train]

Yea...what about it? How about those Yankees and the weather?

How about we talk about the actual thread title for starters?

Incentives that discourage work are an issue, do you or do you not agree?

Wages, Big business, taxes, those are all separate issues.

[Nickdfresh]

Yea...what about it? How about those Yankees and the weather?

How about we talk about the actual thread title for starters?

Incentives that discourage work are an issue, do you or do you not agree?

Wages, Big business, taxes, those are all separate issues.

You mean "incentives" like that US workers are statistically working longer hours, taking less vacations, and a two-income household is now a necessity --whereas as recently as 20 years ago a family could live comfortably on a single salary?

Maybe you're thread title sucks and you have a monomania regarding issues?

[Big Train]

No, you are just the king of the side argument.

[Nickdfresh]

Or maybe the actual argument?

What's fucking the middle class over? Corporatists or the nonexistent "socialists" (who are actually New Deal reform capitalists that ironically saved modern capitalism)...

[Big Train]

OK, you can have it your way Nick. I'll respond to YOUR side arguments before you talk about anything in the original post. I'm sure that will make you more responsive.

What is fucking the middle class over? Combination of several factors: Excessive Taxation, retarded incentives (as mentioned above), globalization and a dearth of new industries.

Now, can you please tell me whether or not you feel that these negative incentives that discourage work are an issue. Do you or do you not agree?

[Nickdfresh]

OK, you can have it your way Nick. I'll respond to YOUR side arguments before you talk about anything in the original post. I'm sure that will make you more responsive.

What is fucking the middle class over? Combination of several factors: Excessive Taxation, retarded incentives (as mentioned above), globalization and a dearth of new industries.

Now, can you please tell me whether or not you feel that these negative incentives that discourage work are an issue. Do you or do you not agree?

Aside from the fact that the article is a purely theoretical exercise written by people who are themselves wealthy and in a magazine owned by a man who inherited much of his wealth.

But where do they cite any actual evidence that people "work less" in order to be put in a lower tax bracket? Indeed, how much control do people actually have over their own salaries? Do they turn down higher paying jobs and raises? I'm pretty sure most people are salaried and actually put in a good deal of overtime for free...

And their "math" for the 79% tax rate is just a fucking riot!

[thome]

Well, back in the original "real story" that is essentially the argument. NOT working after a certain income threshold provides your family with more of what it needs (as you qualify for government gimmes), whereas earning more actually provides more of a burden for you and your family and provides less benefits. Teddy would tell the worker not to work under this current system and get his living wage.

Very True!!! don't listen to -The Front- I ain't telling you anything do not know.. BT.

The cut off was 45K, when I first started thinking about income and how much do I want to work compared to my taxable income and income after taxes.



59K is a damn good wage and you can stay under the radar for the different Levels of taxation .

Really good for a two income houshold both earning 59K.



Thanks I bet to Republican forethought.

One thing I realized early is I need to skip from 45K to, I think it was around 375K a year to get back on the benifit trail.

Or I would simply be showing a large gross and my net buying power would be decreasing by percents within the value of my dollar earned and taxed.

So, it is true the taxes are heavy on the middle upper class earners.

Hardley at all on the majority of Americans that earn below 50K or the Millionaire s..mart sumbitchez...

They never say this when they want to scare people into voting for Lowering Taxes.

What do they never say..?? ...That 75 % of americans don't earn within the levels to benifit a lowering of taxes,........ they design it that way.

Fight The Power!

[sadaist]

When Bill Gates, Warren Buffett, and John "Jay" Rockefeller IV all agree that they (three of the richest guys on the planet) don't pay enough fucking taxes, I really don't see how anybody can make a logical counter argument to that.

I thought we were talking about people who are making middle class type money.

[FORD]

I thought we were talking about people who are making middle class type money.

And if the rich paid the taxes they SHOULD be paying, the middle class wouldn't get stuck with the tax burden, right?

[Big Train]

[B]
When Work Doesn't Pay For The Middle Class - Forbes.com


David Atkins, a 42-year-old Westwood, Mass. MIT grad, nonpracticing lawyer and father of three, was laid off from his tech manager's job at a young Internet firm last December. In May, when he took a contract job managing a state Web site, he gave up combined state and federal subsidies that paid 93% of his $1,313-a-month Cobra premium. (He also gave up $728 a week in unemployment benefits.) Atkins' new health plan, with a much higher deductible, costs him $950 a month. He took the job because he likes to work and wants to keep his skills sharp. But he concedes that the net economic benefit, at least in the short term, isn't compelling.

As Atkins mastered the arcane details of the Cobra subsidies, he blogged tips for laid-off Massachusetts residents seeking to stay insured. Among them: If you get freelance work, don't lie about it--that's a crime--but schedule your work "strategically" so that you can collect unemployment one or more week each month and remain eligible for the insurance subsidy.


David Atkins' wife, Jennifer, 39, a lawyer, decided to stay home after their first child was born. She compared her aftertax take with the high cost of quality day care and concluded, "I didn't want to work just to pay somebody else to raise my children for me." When they were both working, the couple's income approached $200,000--meaning they earned too much to get the child credits or any deduction for the interest on Jennifer's $65,000 in college and law school loans.

"Don't think the American public is stupid," says Cheryl Morse, a tax practitioner in eastern Massachusetts with both middle- income and affluent clients. "People call me and say, 'What's the most I can earn before I lose the earned income tax credit?' [They] may not understand marginal rates, but they're shocked when they lose the college or child credits. You hear all the time, 'The harder I work, the more they take away from me.'"

You could start here Nick , IN the article.

I'm glad you find actual math hilarious...

[Terry]

The broader (and more important ) question to be asked is more along the lines of:

Why do so many people claim capitalism (and, by extension, the US) is the greatest system known to civilization, when the essence of it keeps the larger portion of the population endowed just enough to keep from going broke, but usually not quite endowed enough to stop working like some rat on a wheel (and, by extension, making some rich person richer) for the bulk of their lives?

THIS is a far more useful notion to ponder than some cunt who used to make 120 grand, now makes half of that and has to, I dunno, drink Folgers instead of gorging on Starbucks Frappucinos now that she's ONLY making 60k a year. Along with that question, we may well ask why these various CEOs and elected representatives are making the killings they are financially in reference to the state we find our economy in. Are these people really worth what WE are paying them, or did they attain their status and sense of entitlement through old-boy networking most of their lives combined with being a member of the lucky sperm club?

[Blackflag]

The broader (and more important ) question to be asked is more along the lines of:

Why do so many people claim capitalism (and, by extension, the US) is the greatest system known to civilization, when the essence of it keeps the larger portion of the population endowed just enough to keep from going broke, but usually not quite endowed enough to stop working like some rat on a wheel (and, by extension, making some rich person richer) for the bulk of their lives?

Because this system provides the opportunity to break out from that status, and other system don't have that opportunity at all.

Are these people really worth what WE are paying them,

If you're talking about politcians, fine. But if you're talking about the person in the article, what she makes is hers. You're not paying her.

or did they attain their status and sense of entitlement through old-boy networking most of their lives combined with being a member of

"Old boy network" to get some middle management job at Lord & Taylor? Please. Get your head out of the trailer park, and go to college.

the lucky sperm club?

If you mean that you're genetically too stupid to try and get a good job...ok, I'm sorry to hear that. But if you're saying everybody who makes $60 or $120 was born in the lap of luxury... well, please. You can't really be that fucking stupid.

Either that, or you've been listening to Ford's shit too long. Go out in the world. See what else is out there besides 7-11 jobs in Buffalo.

[Terry]

If you're gonna ask questions about class and money, you may as well go for the larger picture and attempt to illuminate what comprises the class structure in this country (as well as WHY it is so) rather than get bogged down in stories of individual slices of the class structure, or focus on a particular degree of class.

That's the way I see it, anyway.

It seems you totally missed the points I made in my first post, since your counterpoints are little more than setting up Straw Men to be knocked down...not so effective when the Straw Men you knocked down were only mentioned by yourself. And no, I'm really not that fucking stupid.

Spend a bit less time quoting other people's articles, do some of your own thinking, re-read what I originally post.

Honestly, what use does anyone have for your interpretations of a Forbes.com article?

Worthless cunt.

[Blackflag]

Strawman? You asked why capitalism is preferable, and I told you why. You can disagree if you like, but that doesn't make it a "strawman."

Similarly, you decided to claim that a lady working at Lord & Taylor must have been born with a silver spoon in her mouth. I said that's fucking ignorant. Again, disagree if you like. But don't call it a "strawman."

If you aren't happy with what you make, go to college. Again, that's the beauty of this system. Now go eat a dick, douchebag.

[Nitro Express]

I want to be like Timothy Gietner. He gets caught for not paying taxes and he doesn't get in trouble. I guess when you are Secretary of the Treasury Dept. you can get away with it since you are over the IRS.

[sadaist]

Why do so many people claim capitalism (and, by extension, the US) is the greatest system known to civilization,

Why do so many socialists refuse to admit that they are socialists? Like it's a bad word. If that's what you support, just say it. They want the country to become more socialist, but not call it that.

[GAR]

And now for the real story, not the spin from Steve Forbes, tax dodging billionaire.......

bluh bluh bluh

FUCK OFF, PAKI~!! Think anyone reads all that shit past your judgemental setup?

[standin]

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[standin]

That video brings the thought:
“If you have a democratic society, you would look at it ...great it is April 15 were all going to contribute implement the plans we jointly decided on for the benefit of all of us ... meaning we would have a functioning democracy.”

If you value the United States of America’s system capitalism/democracy, and wish to expost this system, why the desire to under fund and create direst in the working class, disrupting the goal of maintaining the Plantation or Fiscal Aristocrats?

[jacksmar]

The whole of the articles, interviews, and comments on this thread miss the point entirely. Not one statement on how to fix the problem: Congress.

The fix:

No withholding tax for one year. Then on tax day you are require to come up with whole sum and write a check for the amount Congress is stealing from you.

Tax Day moves to the first Tuesday in November.

Election Day moves to the second Tuesday in November.

Problem solved.

[ZahZoo]

And if the rich paid the taxes they SHOULD be paying, the middle class wouldn't get stuck with the tax burden, right?

Seems perfectly logical... but if Washington got it's greedy hands on all that "rich" money... Do you honestly think they are going scale back middle class rates equally, if even at all?

[FORD]

Tax Day moves to the first Tuesday in November.

Election Day moves to the second Tuesday in November.

Problem solved.

And the retail sector would put a contract out on your ass, because making everybody broke in November would absolutely KILL the Xmas shopping season.