Update: MSNBC's Ed Schultz: Who Is Getting the Tax Breaks - The Affluent and Big Business?
Update: There he goes again! MSNBC's Ed Schultz is at again on economic issues.
This time, he's having a fit because he ended up on the losing side after personally cheerleading for the recall of Wisconsin Governor Scott Walker, who has worked to rein in the high cost of public sector union contracts to help get that state's deficit under control. Now, Schultz is incensed by polling data on how union members voted. He can't understand how 27 percent of union members and 38 percent of union households in the state could vote for Walker (see video below).
Memo to Ed: Union members aren't robotic clones who all vote in unison. Some of them took the time to understand the economic issues and vote for what was in the best long-term interests of the state.
None of this is a surprise to me after reporting on and documenting Schultz's complete lack of economic understanding last year on numerous issues especially on personal income taxes (see article below).
While doing some channel flipping one recent evening, I stopped on the "Ed Show" on MSNBC. Schultz, a liberal, was talking about income taxes and made some provocative comments. The host stated:
"Americans are paying less taxes than at any time since the `50s, but President Obama is still under attack for being a tax-and-spend liberal and for redistributing the wealth in America...He is not a tax-and-spend liberal. Income tax payments are at a 60- year low and conservatives won`t give President Obama an ounce of credit, any credit at all...
Now, to be fair, many of those numbers really are low due to the economy and the recovery and the record job losses that we`ve seen in this country, but President Obama has also made a habit out of cutting taxes..."
I was surprised to hear that federal income tax payments were at a 60-year low and frankly questioned the accuracy of the statement so I got in touch with the Ed Show folks and they cited as their source an AP article entitled, "Federal taxes hit historic low due to economy, new breaks: The head of the Senate Budget Committee says the nation's tax code is hemorrhaging revenue." Here's what that article stated:
"Actually, as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way...
The poor economy is largely to blame, with corporate profits down and unemployment up. But so is a tax code that grows each year with new deductions, credits and exemptions. The result is that families making as much as $50,000 can avoid paying federal income taxes, if they have at least two dependent children. Low-income families can actually make a profit from the income tax, and the wealthy can significantly cut their payments.
"The current state of the tax code is simply indefensible," says Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee. "It is hemorrhaging revenue."
In the next few years, many can expect to pay more in taxes. Some increases were enacted as part of President Barack Obama's health care overhaul. And many states have raised taxes because - unlike the federal government - they have to balance their budgets each year. State tax receipts are projected to increase in all but seven states this year, according to the National Council of State Legislatures..."
So, it's not that personal income tax payments are at a 60-year low...it's that personal income taxes paid as a percentage of the nations' GDP are at a 60-year low. I'm not sure that's a useful way to examine the level of tax payments but let's put that issue aside for now. I was fascinated that the AP article that the Ed Show cited as their source went on to make points - namely that a raft of tax deductions and credits were killing income tax collections and that the President was raising taxes (health care bill) - which contradicted the points being made on the Ed Show.
Politics and Class Warfare
On his show, Schultz attacked Republicans going back the past three decades for supposedly redistributing wealth for the benefit of the wealthy:
"Republican presidents, they are the real villains when it comes to wealth redistribution in this country. During the Bush years -- listen to this -- the top 5 percent got 52 percent of the tax breaks in this country. The bottom 20 percent, how did they do? Well, they only got 8 percent of the benefits.
Bush couldn`t hold a candle to the highway robber of the poor back in the 1980s. Back in the years when Ronald Reagan was president, income of the top 0.1 of 1 percent grew over 105 percent. The bottom 90 percent only had a 1.2 percent increase.
Now, you tell me what the mission has been since the Reagan years. That means the super rich income grew 100 percent faster than the rest of America. And you want to know what the hell is happening to the middle class? There are the numbers.
Trickle down economics was an absolute, complete failure and it still is today. The Bush tax cuts left us with the worst economic crisis since the Great Depression and President Obama is trying to clean up this mess that was 30 years in the making."
These are silly and erroneous statements. In speaking with Schultz by phone, he seems like a nice enough fellow but he's clearly no economic or tax expert yet he's bloviating on these topics to the masses. First of all, there's movement of folks across different income classes over time. The population of workers today is a far different group of folks than what it was 20 or 30 years ago. Second, income almost always grows quicker at the highest earner levels for the simple reason that it has that upside and because of the increasingly global market opportunities. As the graph below clearly shows, per person disposable personal income (adjusted for inflation) has grown at a steady rate (except for a leveling out the last few years) the past 30 years just as it did the 20 years before that.
Who's Shouldering the Tax Burden?
On MSNBC's Ed Show, host Ed Schultz put forth his theory on the U.S. labor market and who gets the tax breaks:
"You see, when we all finish our schooling or get into the work force, there is this big funnel and all of these employees and workers go into this funnel. And it only gets better for a few Americans as we go on in our careers. And that funnel just gets a little bit smaller and a little bit smaller and a little bit smaller and the people that get down here, they can afford it.
But you see, the folks up here, they still have the same expenses as the folks here and the taxation is totally different. So, this funnel changes as years go on. And whereas some people excel in their careers they get lucky, they`re at the right place at the right time -- others are going this way because of out sourcing, because of taxation, because it's not fair. All the breaks go to the top 2 percent."
The widespread belief, popularized by political sound bites, that big companies and wealthy folks get the best tax breaks, almost single handedly caused the U.S. to have a well above-average rate of unemployment coming out of the past decade. While there are loopholes and credits that favor select niche industries, the U.S. corporate income tax rate is nearly the highest in the world so companies have little incentive to keep their profit and job growth domestically.
For individuals and families, lots of tax breaks are directed to the non-wealthy and phase out at higher income levels. The federal income tax burden of the top one percent of taxpayers now exceeds that of the bottom 95 percent. One-third of all filed federal income tax returns now have no tax liability or actually get money back from the government without having paid any federal income tax during the year.
The erroneous view that tax breaks are solely for the rich contributes to some lower-and moderate-income earners not bothering to learn about the tax rules and strategies that could benefit them (complicated and ever changing tax rules don't help either). Don't make that mistake. Meanwhile, the college financial aid system heavily penalizes higher income earners and the best savers. So if you earn a healthy income or have some assets be sure to get smarter about how that system works.
Looking ahead, I still like the Wyden-Gregg bill as the best solution to our tax and economic problems.
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