Welfare for the rich—let us count the ways.

Federal:

• Top income tax rate is 35%, the lowest since 1932. In the Nixon years it was 70%.

• The inheritance tax is being phased out by 2010, affecting those with estates over $1,000,000.

• The income tax on dividends cut from up to 34% to a flat 15%.

• Long-term capital gains—28% in 1997, 20% in 2003, now 15%.

• The Pease provision eliminated—this limited the amount high-income taxpayers could claim in itemized deductions.

• Personal exemption phase out provision eliminated—used to be, if your income was high enough, the amount you could take in personal exemptions was decreased. These last two items benefit those with taxable incomes above $218,950 (couple) and $145,9650 (single). “By the time the Bush tax cuts have taken full effect, people with really high incomes will face their lowest average tax rate since the Hoover administration.”

• (Data from Paul Krugman, New York Times, 9/24/03.)
  

In California: The top income tax rate is 9.3%. In 1991 it was 11%

Corporate Welfare:

The top Federal income tax rate is 35%. The law is riddled with loopholes and reductions for special programs like investment and job creation. Of 275 Fortune 500 companies that reported profits in 2001, 2002 and 2003, 82 paid NO income tax in at least one of those years. The effective tax rate in 2001 was 21.4%, in 2003 17.2% for the overall group due to tax breaks.

In California in 2001, more than half of all profitable corporations paid $800 or less in taxes, including dozens of corporations that reported over one billion in profits. In 2004, 14 of the largest Bay Area corporations paid no taxes. This tax welfare doesn’t mention the numerous, generous subsidies handed out.

“The top one percent of income earners take home more than the bottom 100 million, and the top one percent of wealth holders own just under half of all investment capital. We should restore top marginal tax rates to the Nixon-era level of 70%, revive taxes on estates worth more than 3.5 million, and institute the wealth taxes that are common in Europe. We should also return to Eisenhower-era corporate tax policies (when corporations accounted for roughly 25% of federal revenues, compared with today’s roughly 10%).” Alperovitz and Williamson, The Nation, 1/23/06.

Some Suggested Remedial Steps

• Repeal the 2001 and 2003 tax cuts.

• Institute a war excess profits tax, including energy excess profits.

• Restore top income tax rates to 70% nationally and 11% in California.

• Close corporate loopholes and giveaways.

• Remove the cap on social security taxes.

• Institute a SF property transfer tax.

• Increase the PG&E franchise tax.

(back to April 2006 Newsletter front page)