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Nov-19-2007 20:05printcomments

Tax Cutting Away the Middle Class

Take the word of a man willing to stake a million dollars on it: the U.S. tax system has been turned upside down.

Billionaire investor Warren Buffett
Billionaire investor Warren Buffett with Bill and Melinda Gates. Courtesy:

(SILVERTON, Ore.) - In a recent interview with NBC's Tom Brokaw, billionaire investor Warren Buffett disclosed the results of a voluntary survey of his employees. They reported paying an average of 32.9 percent of their income in federal payroll and income taxes last year, compared to the 17.7 percent paid by Buffett, America's second richest man.

"The taxation system has tilted toward the rich," Buffett concluded. He offered a million dollars to anyone on the Forbes 400 list of wealthiest Americans who could show they paid a higher rate than their receptionist. So far, he's had no takers.

Buffett's experiment is a dramatic example of how three decades of tax cutting has bled the fairness out of our system.

The tax structure built by America's Greatest Generation -- to borrow Brokaw's phrase -- was highly progressive, with marginal tax rates during the Eisenhower years above 90 percent. The strongly progressive system was a key factor in creating America's broad middle class.

But that was then. Today, the top marginal federal income tax rate is 35 percent, the lowest level since the early days of the Great Depression, except for the years 1988 to 1992.

Add the rise in federal payroll taxes that disproportionately burden low- and middle-income taxpayers and the system loses much of its progressiveness. This year, Social Security taxes are paid only on income up to $97,500. Thus, Buffet will pay only a miniscule percentage of his income on Social Security taxes compared to just about everyone else, especially middle- and low-income workers.

Factor in as well the slashing of taxes on capital gains to the current 15 percent level and you get the absurd situation where a multi-billionaire pays a lower tax rate than his secretary. It is a topsy-turvy world indeed when money earned from work is taxed at a higher rate than money earned from non-work, the appreciation of investments.

The $2 trillion in tax cuts pushed through by the current administration, in particular, have been highly skewed toward the well-off. While middle-income earners received an average tax cut of $744, the top 1 percent of income earners on average got over $44,000. More stunning still, the top one-tenth of 1 percent (0.1 percent) of income earners -- the richest of the rich -- banked over $230,000 on average.

The Bush tax cuts were not only massive but also highly regressive. According to the Tax Policy Center, the tax cuts represented only 2.5 percent of income for middle-income taxpayers but amounted to 5.4 percent of income for the top 1 percent of income earners. In other words, those at the top got more than twice as large a tax cut in percentage terms as those in the middle.

The overall tax system is still progressive, but much less so than it used to be. Middle- and low-income Americans today are carrying burdens sloughed off by the rich over the last few decades.

As the tax system has tilted toward the well-off, income inequality has returned to levels not seen since before the Great Depression. Today, the wealthiest 1 percent of Americans receives about 19 percent of all income, compared to about 9 percent in 1980, thereby shrinking everyone else's share of the pie.

Rather than a trickle-down effect, the drive to cut taxes on the wealthy has seemingly created a geyser effect that shoots income upward. As the narrow group up top showers with more and more of the nation's income, the broad middle-class society of the post-war years dries up.

Unless our political leaders take bold steps to reintroduce a more progressive tax system, as Buffett has urged, the middle class will continue its downward spiral. You can bet a million bucks on it.

Juan Carlos Ordóñez is the communications director at the Oregon Center for Public Policy. He can be reached at

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Jefferson November 26, 2007 1:24 pm (Pacific time)

Neal hopefully the "facts" in my last post re: the Florida elections in 2000 and 2004 did not cause you any serious discomfort. I realize that facts are often a source of misery for those who go by opinions and emotionalism, but facts are facts young man. Oh well...P.S. I see they have the same impact on Henry also.

Jefferson November 25, 2007 11:28 am (Pacific time)

Neal: Thanks for showing your whimsical side regarding the 2000 Florida election, but just in case some other reader's don't understand your buffoonery, let's do a proper Post-mortem election analysis to help the improperly informed actually become informed. To best understand the conflicting causal variables over Florida's 2000 presidential election, let's look at some empirical data: In the last #14 presidential elections, Republicans have won Florida #11 times. In 2004 (by the way, Bush was suppose to have lost Florida by a significant majority), let's look at a couple of major democratic voting counties that Gore "cherry-picked for his 2000 recount (Note: You notice most of the voting problems seem to happen in democratic-controlled counties/parishes all over America? Wonder why? e.g. , See Cook County in Chicago! King [keep recounting till you win] County in Washington!): In Palm County (2004) Bush had a gain of 60,000 votes to Kerry's 59,000 over 2000 (Buchanan effect?(chuckle); in Broward County Bush had a gain of 68,000 to Kerry's 65,000, ergo somewhat of a "wash", to use your word. But how did the vote talley finally end up in 2004 Neal? Well Bush won in 2000 by 537 votes but in 2004 he won by "380, 978" votes, or by 710 times more than his 2000 victory margin. That's a very significant number Neal. The theory (think causal variables) that has the most evidence regarding the 2000 election is that ("allegedly") the networks (who wanted Gore to win) knew that Gore was going to lose the electoral college vote unless he won Florida, thus they called the state early for Bush (you know they tried that for Kerry also in 2004 re: certain important state precincts back east!), which in effect suppressed the vote for Bush (see 2004 victory margin!), then here comes Gore's recount bid. But more evidence follows Neal: Outfits like the Washington Post, Newsweek and Times' magazines went back and did a full recount of Gore's cherry-picked counties and the rest of the state and found that Bush still won (research that has been replicated numerous times. You understand the concept of replication, right?). Suffice, Bush's victory in 2004 erased all doubt as to who Florida wanted to win their state. America dodged a bullet in both 2000 and 2004, as it will in 2008. Oh well... I am quite pleased that Gore won the Nobel Peace prize, he was a logical choice in comparison to recent recipients, though I think he should have got it years ago for inventing the internet, or even for his scholary(heh heh) "attempts" at getting through law school or even seminary training-- a brilliant failure or simply a glib [you fill in the blank]? Neal how about a theme song for Algore? Let's take that academy award song from the recent past: "It's hard out there for a pimp." Some people theorize that some awards out there are more based on politics than merit. I'm inclined to lean that way myself. Regarding so-called election "trickery, corruption or other chicanery" I suggest you look at the ofical record of prosecutions over the years and see who has actually been overwhelmingly the guilty party in this area. Hollywood (and the MSM) makes a lot of myths out there that so easily influences the weak-minded that history has been co-opted by the moonbats. Of final note, I am no fan of Bush, but in 2004 he won over 50% of the vote (beating Kerry by over 3 million votes!), so who was the last President to win over 50% of the vote? American voters, when they are provided with the facts will make the right choices (Measure 50 for example), but some simply do not want them to have these facts, and that list is quite lengthy, but exposable. Oh well... Orwell: "Those who control the present control the future, those who control the past control the present." Beware what is happening in the public education system.

Neal Feldman November 21, 2007 5:13 pm (Pacific time)

Jefferson - you are so adorable... like a small child. There may be those who register dem but sometimes vote republican... know a secret? Some who register republican sometimes vote dem. so that is a wash. But do continue to desperately grasp at your straws. It is amusing to watch. Yes the fringe left is not in power... never has been. Same thing with the fringe right (which you seem to try to ignore) so again a wash. As for Florida in 2000 they voted for Gore. It was only the 5 conservative traitors on the USSC who put themselves up as electors to decide a presidential race in an unprecedented manner. FL in 2000 was given to Shrub by his brother the governor and his campaign manager the Sec of State of FL at the time by various corrupt practices, as well as counting thousands of invalid military ballows knowing they would be overwhelmingly GOP leaning, and allowing 3000 votes for Gore to instead go to Buchanan from west palm beach where even Buchanan stated this was the case. Bringing up 2000's cout d'etat does not help your case. And Gore still won the popular vote by over a million votes nationwide (and the Nobel recently, something Shrub is unlikely to do unless they have an award for War Crimes or Government Corruption). As for 2004 again hardly a ringing endorsement for the neocons like yourself since Shrub still came a hair's breadth from being the ONLY wartime president ever to be unseated during war and their campaign was nothing but lies and fearmongering (not to mention the entire Iraq war as a tool to aid in re-election). And the Sheeple woke up to the truth a nit late but they did wake up and in 2006 your neo-cons got shellaced. And polls show the fall of the right will continue in 2008... it is just a matter of how badly. Will it be an 8 yr banishment from power or will it be such a decisive rout that they will be on the outs for decades? Remember 2010 is redistricting time again and I doubt Texas or any other state will get a second bite at the apple again or you will see redistricting occur every time a state legislature changes hands. But it is clear by actions such as Texas' re-redistricting that the only way your folks seem able to win is through trickery, corruption or other chicanery. Showing your side's true colors again. Ah well...

Jefferson November 21, 2007 10:47 am (Pacific time)

Neal: For example, we know how the "blue dog" democrats register, how do they vote? Hint: Look at Florida's vote in 2000 and again in 2004. Ummm! As you also know, the Independents (whatever they really may be?) are the fastest growing political population. The far left will continue to become more and more irrelevant. That's just the way it is... Henry thanks bunches for reminding me to go get some more feed for my livestock. I have become so mesmerized by your prose that it just slipped my mind. The sources you provided are ones that I put right up there with opinions from people like Neil Goldschmidt and others of similar ilk. I dare say Henry, that in the fullness of time you will see that our economy will emerge from what ills may come next year, and become even stronger. The proviso of course for that to happen, will be to keep the left from getting any real power, which it won't, and be glad for that Henry. It's amazing how people quote the New York Times, a rather inaccurate source don't you think? So how's their circulation doing? Over the years I have noticed that when those who get frustrated, all they end up doing is to start throwing out insults. Hope you all have a great Thanksgiving and say a prayer for those who are keeping America safe.

Henry Ruark November 21, 2007 8:09 am (Pacific time)

Benedict et al: Nothing like decent documentation to offset b-b stroking...this one from United Press, where I started. Please note this economic authority forecast last several major trends right on the money (no pun !). (Where did you publish, Benedict ?) Forecast: U.S. dollar could plunge 90 pct. RHINEBECK, N.Y., Nov. 19 (UPI) -- A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said. "We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008." "The bigger they are, the harder they'll fall," he said in an interview with New York's Hudson Valley Business Journal. Celente -- who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May -- told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse. Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said.

Henry Ruark November 21, 2007 7:18 am (Pacific time)

Benedict, former Jeff: This string started with "see with own eyes" from story-above as obvious. Later Neal pointed to rapid trend towards curbing Bush-powers, now underway prior to possible impeachment. Here's more of that obvious event; why did you not "see with own eyes", Benedict ? (New York Times website) November 21, 2007 Editorial Limiting Power’s ‘Natural Tendency’ After a long and frightening period of acquiescence, Congressional Democrats are standing up to President Bush’s assault on civil liberties — demanding an end to spying on Americans without court supervision. Last week, the full House and the Senate Judiciary Committee endorsed major improvements to a deeply flawed measure that the White House pushed through Congress just before the summer recess. The leadership will have to stand firm to enact more needed fixes to that law — and prevent the White House from using the occasion to encroach even further on civil liberties. The bill had a narrow aim, to close a loophole in the 1978 law on electronic spying that was created by new technology. But Mr. Bush added provisions that gave legal cover to his decision to spy on Americans’ international calls and e-mail messages without a warrant after 9/11 — and actually expanded his powers. The only thing good to come of last summer’s rout is that the law was set to expire in February, and a group of Congressional Democrats are fighting to get it right this time. The House passed a measure last week that contains the necessary updates to the 1978 Foreign Intelligence Surveillance Act. It allows the collection of e-mail messages and phone calls between people outside the United States that happen to go through American data hubs. It grants some additional latitude for starting eavesdropping on communications originating or ending in the United States, and then getting court approval afterward. But it restores critical oversight powers to the special foreign intelligence court — to monitor such programs, compel the intelligence agencies to comply with the rules and impose sanctions if they do not. These legitimate restraints on the government’s power are reflected in a Senate bill that was approved by the Judiciary Committee last week. (moretocome re inevitable move to impeach, thus ending 40-yr. falsities forced on federal field by impacts of "corporate campaign contributions."

Henry Ruark November 21, 2007 7:08 am (Pacific time)

Benedict,former Jeff: Even FedRes worried; with careers on stake they can "DO SOMEthing !" they still deny realities, but this shows they, too, fearful in extreme: (New York Times website) November 21, 2007 Fed Expects Slowdown to Deepen By EDMUND L. ANDREWS WASHINGTON, Nov. 20 — The Federal Reserve expects economic growth to slow sharply next year, and policy makers there are worried that even this forecast may prove too optimistic, according to an assessment that the central bank released on Tuesday. In a new effort to be more open, the Fed released a detailed forecast that summarized the predictions of the Fed governors and regional bank presidents. It also reported their disagreements, which almost all centered on how much the broad economy is likely to be damaged by the surge in oil prices and the tight credit markets brought on by the recent severe problems in housing and mortgage lending." ("See also" current FORTUNE re Wall St. real fears since top ten leaders all succumbed to same search for more-greed.) Enjoy YOUR turkey-status while you can...

Anonymous November 21, 2007 5:49 am (Pacific time)

Benedict, formerly Jeff: Have a great T-giving, too, and don't feel sorry for that old defeathered bird...we all gotta go sometime ! At least you can now tell "the bird is dead".

Henry Ruark November 20, 2007 6:19 pm (Pacific time)

Friend Jeff: Never occurred to me, until now, to ask: WHAT is your turkey having for dinner Thursday ?????

Neal Feldman November 20, 2007 6:13 pm (Pacific time)

Jefferson - you are just so darned cute with your naive bleating of the neo-con propaganda. The only ones in the business of 'fooling the voters' are your blessed neo-cons with Shrub and Cheney right up at the top. Your brand of blind neo-con extremists are scared so bad your pants are permanently dripping that 2008 does not lock you out of the halls of power for another 50-100 year stretch. Americans are predpminantly conservative? That must be why democrats hold the edge in voter registration by party and that of those unaffiliated with either of the two major parties most are to the political left. But you go right ahead with your amusing pathetic ravings while you adjust your tinfoil hat. Ah well...

Henry Ruark November 20, 2007 5:57 pm (Pacific time)

Friend Jeff: Have you informed the other world-class economists of your findings ? I'm sure they will be interested. Yr credibility not nearly as evident as yr bellly-button talk - so why not ID-self to Editor (6th time !) and we can check each other out at closer range, with less volume, space and time wasted here ? Bring yr documentation, too; yr bb may be entrancing to you, but means little to me. Re status of rest-of-world, that's irrelevant while we spend billions upon billions in lying-war while millions on millions here hurt hard for what should by rights be building for them with those same dollars --wasted by your gang of cabaling conservatives allowed run of rule by all of your too-afraid colleagues.

Henry Ruark November 20, 2007 2:42 pm (Pacific time)

Neal: You're correct re "targeted taxes" paid by those benefited by government action requiring staff, expertise and other costs. Here you see, again, same attitude demonstrated by plan to get new carburetor via kicker check, suddenly become donation to charity, later, when under examination here.

Jefferson November 20, 2007 1:59 pm (Pacific time)

Unfortunately taxes and user fees that are collected for a specific purpose are often re-channeled, ergo filling pot holes and paving roads are put on the back burner for some nonsensical project. Mr. Ruark we most likely will be in a very minor and short-lived recession before too long, but a depression like the big one that began in 1929 will never happen again, i.e. , our economy is too diversified. Though a perfect storm could happen, e.g. , the far left comes into power and we fail to meet America's energy needs. Won't happen fortunately, the American voter will not be fooled in 2008 by the far left. America is by and large conservative, and that's why we have survived and will continue to survive. Those far far left squeaky voices out there are simply irrelevant...and that certainly includes Hussein and Hillary. Say Mr. Ruark have you ever taken the time to compare and contrast our citizens who are living in poverty and compared that population with other world populations?

Henry Ruark November 20, 2007 1:05 pm (Pacific time)

Neal et al: Yr Comment points up reality that we still face Neanderthal-and-earlier attitudes from many who play same role as robber barons of old, enjoying what chancy inheritance brought to them while many others strive and drive and dig and fight to survive...with same result you mention as inevitable, and now already well on way. Those who truly earn what they now are getting, like Gates and Buffett and a few others, are among leaders in sharing-out to others, showing attitude so clearly malign and damaging among most-such.

Pamela November 20, 2007 12:49 pm (Pacific time)

When you have as many billions as Warren Buffett it certainly isn't going to hurt your standard of living to pay your fair share of taxes. Taxes fund the public services that people use everyday including the uber rich.

Neal Feldman November 20, 2007 12:20 pm (Pacific time)

I thought fees were considered 'targeted taxation'. in other words those benefiting were the ones who paid. What is wrong with that? Just curious. But the fact remains it is those who can most afford taxes that seem to shriek so shrilly about them. When such a large percentage of the population lives below a living wage yet so many ceos etc get $100 billion bonuses and ask themselves how many yachts they will buy that week one has to wonder if humans learned nothing at all from the French Revolution and the arrogance of those like Marie Antoinette. Will there be surprise when similar results ensue? Ah well...

Henry Ruark November 20, 2007 10:31 am (Pacific time)

Friend Jeff: Nice try to obfuscate, avoid speaking to the realities...but it's your gang that has caused this worldwide coming-Deression via its unrealistic demands for Constitutional-damaging powers overwhelming Congressional progressive actions. If I were you, I'd play sub-game very carefully to preserve remnants of any remaining credibilities. Invitation to ID-self to editor for direct contact in detailed documentation still open, but no response so far.

Jefferson November 20, 2007 8:59 am (Pacific time)

FEES: The death of a thousand cuts...

Henry Ruark November 20, 2007 8:28 am (Pacific time)

To all: Continuing neocon propaganda as demonstrated in Comments here reminds me of that famous response from Chico in the Marx Bros. film "Duck Soup": "Who you gonna, or your own eyes ?" Even the most casual of observers must now make that choice, confronted by what is so clearly visible-and-obvious in this current economy.

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