Wednesday, April 23, 2014

OK for us to pay tax, why not OK for them too?


     Back in the Gilded Age of the 1890s, the philosophy used to justify the concentration of enormous wealth among a handful of folks was: They had earned it through hard work and moral superiority. God meant for them to be rich. Poor people, on the other hand, also deserved their lot, by being inferior, lazy and prone to vice.
     Plus, there was always the Horatio Alger path, open to all. With pluck and luck, the most humble newsboy could do a good deed, catch the eye of some titan of industry, get a job at the factory, marry the boss’ daughter. Happened all the time, in fiction.
     The social Darwinism mindset hit a rock during the Progressive Era, that asked why people born on the lower rungs of society had to live such miserable existences? Would the American dream really grind to a halt if the law forbade 12-year-old girls from working in thread factories?
     Now we’re in a New Gilded Age and social Darwinism is back. The rich do very well. We all agree on the rightness of that, just in case we ever become rich. The only question is: “How well?”
     A Republican article of faith is that the rich must be allowed to earn, earn, earn with as little interference as possible, and by doing so we all somehow benefit — I guess by being hired to clean their pools. They insist that even if they are asked to do a little bit more, they’ll just huff off to some tax haven in St. Kitts. And we tend to buy that.
     Yet if you look at past eras, taxes were much higher. During the Eisenhower years, the personal income tax rate topped out at 90 percent. Yet CEOs still showed up at the corner office. Look at other countries; they tax far more than us. Combine state and federal taxes and the U.S. hits 47.6 percent. In Denmark, it’s 60 percent. And now their middle class is earning more than ours.
     Among the many people responding to a recent column of mine were former Board of Trade President Tom Donovan, who explained why he passed a law, in 1981, to prevent financial transactions in Chicago from being taxed. To alter that, he said, "You'd have to go to Springfield and change the law." That's exactly what Rep. Mary Flowers, D-Chicago, intends to do.
     House Bill 5929 creates the Financial Transaction Tax Act, which "beginning September 1, 2014, imposes a tax on the privilege of engaging in a financial transaction on any of the following exchanges or boards of trade: the Chicago Stock Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade and the Chicago Board Options Exchange."
     "We are merely asking that people pay their fair share of taxes," Flowers told me. "Some of these people do not. As the result of them not paying their taxes after making billions and billions of dollars, the very state we're in is crumbling apart."
     The tax is $1 for commodities contracts - say soy futures—and $2 for stocks and such, with retirement funds exempted.
     The tax is also a will-o'-the-wisp that has been pursued for years at the city, state and national levels. In 2008, the tax was suggested as a natural price to pay for the $700 billion Wall Street bailout. Nobody on Wall Street questioned the propriety of government aiding the financial sector; why, then, does putting the shoe on the other foot spell the end of capitalism as we know it?
     But maybe its probable failure, like that of Occupy Chicago, can have a benefit, can leave a lingering question: Is society the way it is now the only way a fair system could be structured? Flowers said most citizens are used to paying tax on the things they buy.
     "We do it every day," she said. "Every day, we pay taxes. If it's OK for us to pay taxes, it's OK for these traders to pay taxes."
     For instance: I bought my beef and broccoli lunch Tuesday. The bill included the 10.75 percent Chicago restaurant tax. I did not move to Liberia. If I can do that, I bet a trader can pay two bucks to buy 100 shares of TechDrek. I just can't believe financiers are really going to pull their kids out of the Latin School and move at the prospect of earning a little less.
     Here's what I find most interesting. Michael Lewis' new book, "Flash Boys: A Wall Street Revolt," looks at the shadowy world of high-frequency traders—those who, with the market's collusion, carved a niche in the few milliseconds between the time a stock order is placed and when it is filled. Adding a few pennies per sale created what could be a $29 billion, largely invisible industry.
     That near-scam gets only a cluck of approval from financial sorts—noblesse oblige, I suppose. Yet direct those same pennies toward the state to keep it from collapsing and you're anti-American. I just don't get it.
    


7 comments:

  1. We should also get rid of tax deductions for food, liquor & entertainment.
    Two/thirds of the people at the Super Bowl don't pay for their tickets, their companies pay for them & then deduct the cost of the tickets & the private jet to go there, along with the luxury hotel suite.

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  2. Advocate of the anti-ChristApril 23, 2014 at 4:14 AM

    Eat the rich. They are a valuable source of protein. But end all taxes on everyone and give away money, just print it.

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  3. A wag once suggested that "the only problem with capitalism was capitalists". We have an entire generation of them raised to think that their wealth is a sign of their virtue and wisdom. Add to that the "virtue of selfishness" in which they feel no obligation to anyone other than themselves and you've got a situation where they see nothing wrong in messing with everyone else to their own benefit. It sure doesn't help that Obama has turned out to be a good friend of the market and crony capitalism. Even Reagan and the first Bush went after the jokers who tanked things in the S&L fiasco and sent many of them to well deserved stays in jail but Obama and his justice department seem curiously reluctant to do the same today with the financial cheats. And, I don't see that changing if Clinton gets into the White House.

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  4. Everyone blindly cites the 90% Eisenhower tax rate, but Kennedy reduced it and the economy grew. Clearly taxes can be too high or too low - what's baffling is why so few liberals complained when President Obama agreed to make 75% of the George W. Bush tax cuts on the wealthy permanent rather than insist on going back to the wildly successful Clinton tax rates.

    But there's something very off-putting about someone who lives near the Cook County/Lake County border willing to bet that parents of kids at private schools like Latin won't do what he did himself did: move to the suburbs and have their kids get a free education so good it sends them to Ivy League level colleges. Naw, no rich people live in Lake Forest. Neil, a 1%er makes over $340,000 household income per year - is that it SO inconceivable to you that a few extra thousand in taxes - i.e., the kids' college fund - might drive some of those residents to do what you did? Businesses do relocate, neighboring cities and states do poach, so let's not be so flip about this.

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    1. I don't know where you got the idea that Neil lives in Lake Forest.

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    2. I didn't say he lived in Lake Forest - he's said repeatedly he lives in Northbrook - I'm using Lake Forest as an example of a suburb where rich young Chicagoans who send their kids to Latin (per his article) might move.

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  5. Neil..u still dont get it..because of electronic trading all of exchanges cited could move to indiana TOMORROW

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