TAXES: Taking from the poor, 'cause the rich choose our Congress

This is my continuation on David Cay Johnston's work ...today using "Perfectly Legal" as my primary source. This is David's first of the two, and is a best seller.

A note on my choice of title prior to continuing ...the use of the word "poor" in the phrase "taking from the poor" is not entirely accurate ...yet. In truth, it's the middle class that is getting taken from the most ...and, surprise, surprise, the middle class is shrinking ...with the vast majority being pushed into the lower class, thus making my usage of the word "poor" far more poignantly accurate than I dare imagine.

As I've mentioned before, I'm not anti-rich or anti-capitalism at all ...I think the drive to succeed and achieve financial security for one's self and one's family really do drive people in this country ...but the playing field is being tilted against all but the super rich.

An alarming statistic is that in 2003 dollars, the average income across all classes was $36,573 in 1970 and $40,330 in 1999. [Johnston, 27] That's a 10% jump. Not bad, not bad ...people toiled 30 years to increase their income by 10% ...lest we forget that this is the average of ALL incomes, including the wealthiest 10% of Americans ...let's look at how they faired individually:

Income Group	Average 1970	Average 2000	% Gain
90th-95th percentile	$80,148	$103,860	+29.6%
95th-99th percentile	$115,472	$178,067	+54.2%
99th-99.5th percentile	$202,792	$384,192	+89.5%
99.5th-99.9th percentile	$317,582	$777,450	+144.8%
99.9th-99.99th percentile	$722,480	$3,049,226	+322.0%
99.99th-100th percentile	$3,641,285	$23,969,767	+558.3%
[Johnston, 34]

...I see a trend there, don't you? Remember my 10% income increase for 30 years above ...well, that included the above. So, clearly, for your average Joe, it was alot less. Fortunately, I have that info separated into the top 1% and the rest of us:

Income Group	Average 1970 (inflation adjusted)	Average 2000	$s added
Bottom 99%	$32,763	$35,473	+$2,710
Top 1%	$3,641,285	$23,969,767	+$20,328,482
[Johnston, 37]

!!! To put it into perspective, if we could somehow say we (the bottom 99%) got ahead by about a mile in those 30 years, then the top 1% got ahead by 7,500 miles ...that's just shy of the diameter of the Earth at the equator (7,926.28 miles)!!!

So, things just might be tilted in their favor ...but here is the part that will make you sick ...they pay LESS in taxes than we do!!! (as a percentage of their income)

The IRS (in 1999) audited 1.36% of the people making < $25,000 (up 33%) and only 1.15% of those making > $100,000 (down 90%). [Johnston, 130] They justify this by trying to find people defrauding the Earned Income Tax Credit ...but read Chapter 9 (Preying on the Working Poor) of "Perfectly Legal" and you'll see how messed up the details of that credit are ...the type of details that can get a woman who made just $7,000 one year get audited and thrown thru the court system over pennies. These people can be denied the credit for up to a decade over something as simple as living in the same household as another person (since neither could afford to live on their own). ...all the while, someone who makes $91,000 or the child of a foreign billionaire can LEGALLY apply for the FULL credit. ...thanks Congress (as the law makers, they're the ones who put the devil in the details of that credit, of course).

Check out the Alternative Minimum Tax. Initially intended to not allow people who make tons of money to pay less than they should by using all sorts of deductions, has instead turned into a greater tax burden on the middle class. ...the super rich and the corporations (as you'll read more about shortly) don't end up showing profits as far as the IRS can tell, so it ends up not applying to them. Worse yet, is that the way that Congress drafted the law, even though exemptions, deductions, and income tax brackets automatically get adjusted for inflation, the AMT does not ...so every time the dollar inflates, another round of middle class people get sucked into paying more taxes. (Read Chapter 7 "The Stealth Tax")

Or how about the laws that make it PERFECTLY LEGAL to do what is called a corporate inversion, where a company rents a mailbox in Barbados and pays them 2.5% (instead of 35%) income tax, then creates that mailbox as the "parent company" ...then with magic like charging the subsidiary company rent, usage rights to logos and names, this that and the other, the company makes no profit in the US at all. Further, the taxes they do pay in Barbados, are deductible in the US (again we have Congress to thank for that with the Foreign Tax Credit). This is detailed in the 17th chapter of Perfectly Legal entitled "Profits Trump Patriotism".

Don't get me started on how Royal Dutch Shell sold a day's worth of volume on the open market in and then bought it back for $1.92 less a split second later ...46 TIMES in one day. This was an incredibly complicated scheme to basically show a loss in the US, pay less tax to the Dutch government, and basically profit off of taxes ...another willing participant in the game was Compaq ...who also got similar perks from the transaction (they were the company that bought and sold back at the loss) ...this worked by having the coordinating third party short the shares somehow ...it's complicated and can be read in full in Chapter 16 of Perfectly Legal. It turns out they got away with it, but Congress did actually step up and make that particular type of deal illegal going forward.

A concept you may or may not be familiar with is the "tax gap" ...it's the difference between what should be paid in taxes and what does get paid. "Some tax experts have said that $300 billion is a cautious estimate for 2003" [Johnston, 296]. Since income tax was expected to bring in just a little over $1 trillion that year, it's a GAP of nearly 30% of what should be paid ...

...this discrepancy (as is detailed in Perfectly Legal) comes almost entirely from the super rich and the corporations who have the luxury of using all of these crazy schemes that congress has made PERFECTLY LEGAL.

Now let's talk about a candidate who knows and understands all this: Sheldon Schafer. He's a member of the squeezed middle class. He's made his tax records open to the public so they can see he has been paying his share. ...and further he could be in Congress representing us in the future on these things ...I know for a fact he has read and understands "Perfectly Legal" as I have seen his copy (which is highlighted to all get out).

Further, if you still aren't convinced about Schafer, drill your would-be candidate (if you can get them to talk to you) about taxes ...I've read up on the other candidates, and you'll be surprised to find they may not be aware of this disappearing middle class and all the laws that make it legal ...even encourage it ...and perk up your ears when you hear one of them looking to CUT corporate taxes ...without massively reducing government service, it's a zero sum game, so if the corporate taxes get cut, then we'll pick up the slack.

...so again, look to a candidate that wants to represent the majority. He is one of us ...you can get a hold of him ...he knows your concerns, and is looking out for the people ...not the special interests that contribute to the major party candidates and not the people who aren't paying their taxes so that we can pay more.