The $5 billion state budget shortfall for 2010-11 can be resolved responsibly and wisely if the legislature enacts a temporary, progressive surtax on income brackets that can afford to contribute more. Gov. Pawlenty’s “no tax” proposal is a non-starter and an example of the irresponsible tax and budgetary policies of the Republican Party that Minnesotans rejected in electing President Obama.
Responsible taxation and budgeting means funding the costs of operating state and local government functions in bad times and good times. Yet, GOP legislators, the Governor and anti-government ideologues claim that like the private sector, government must also cut jobs and services during a recession.
However, government functions and employment are not comparable to private sector service or manufacturing firms. The demands for private companies’ goods and services fall during a recession and fewer employees are required to manage the workload. On the other hand, the demand for government services, like courts, health care, snow plowing or fire fighting remain constant or may even rise during a downturn.
Raising revenue via an income surtax would be efficient and cost little to implement, save a little computer time. And, when the recession is over and revenues rebound the surtax would end. Some ballpark calculations modeled on 2004 tax and income data show that a modest surtax plan would cover about 50 percent of the deficit.
A formula to achieve this, one of many possible, would be to levy a five percent surtax on the handful of individuals (7,339 in 2004) making over $700,000 whose combined income was $13.8 billion, or 10 percent of all income. [NOTE: It takes the income of 288,000 people making $50,000 to total $13.8 billion.] The surtax would drop in each of the next four brackets so that individuals in the last group, those making roughly $80,000 to $95,000 (in 2008), would incur a surtax of only one-half percent. This formula is designed to illustrate feasibility and could be more progressive and based on finer increments of income.
In 2004 these five groups, about 16 percent of the 2.8 million people employed, all together earned one-half of reported income. The remaining 2.4 million working Minnesotans split the rest. Who has the ability to pay more could not be clearer.
Although some might advocate sticking wealthier taxpayers with the entire bill, I think even middle income individuals (but not the working poor) can also forgo some discretionary spending, even if it is just $50 a year, so that nearly all Minnesotans are called to make a contribution. Public employees would also be subject to the surtax relative to their income.
The Governor, GOP legislators and some Democrats argue that to raise taxes on wealthier individuals will reduce spending and investment and cause further job losses. This is a red herring and false. Common sense math tells us that that if a surtax is used to keep people employed around the state like our teachers, city and county employees or through direct government spending contracting local businesses, almost all these dollars will be spent in Minnesota. It is more likely, on the other hand, that wealthier individuals will invest or spend the same dollars outside the state or put them in savings.
These conclusions are verified in research conducted by Nobel Prize winning economist Joseph Stiglitz and former Brookings Institute Fellow, Peter Orszag, who is now on President Obama’s economic team. Their 2001 study, published by the Center on Budget and Policy Priorities, concludes that given the choices states have in a recession “the least damaging approach in the short run involves tax increases concentrated on higher-income families” in order to maintain public employment levels, transfer payments and direct spending. The worst choice for the Minnesota economy, according to this logic, would be Governor Pawlenty’s.
Some Democratic legislators have suggested expanding the sales tax to include clothing to raise revenue. Such a solution, like Pawlenty’s proposal to raise fees (a GOP word for taxes) would reduce the discretionary income, thus the purchasing power, of the two million middle and lower income Minnesotans who are the engine of our local economies. Let’s hope the Democratic leadership can rise above the political calculations surrounding their hopes to win the 2010 governor’s race and speak frankly with Minnesotans about the various remedies and the consequences of our choices.
No one likes paying higher taxes, but legislators might be surprised at Minnesotans’ common sense attitudes toward the fiscal choices ahead. An indication of what we might call a post-GOP attitude toward taxes and government is that many wealthier Minnesotans supported Barack Obama. And as a candidate, he said in no uncertain terms, that he was going to raise their taxes significantly—not just temporarily.
Read more!
2/16/2009
An irreversible progressive majority
I believe American politics swings between right-wing dominance and the big business-leaning middle not because of intergenerational or cyclical political processes, but because the work necessary to forge an irreversible progressive, labor-friendly, peace-minded majority has never been completed. To achieve such a majority requires a change in peoples’ consciousness about a myriad of social, historical and economic worldviews and values. No small task, but we are moving in the right direction. The demographic and political changes that helped Barack Obama become President of the United States and the hopeful political engagement his campaign inspired, has created the conditions for progressive change agents and organizations to systemically diminish the influence of right wing thought, values and historical narrative such that a conservative agenda can never again amass a constituency large enough to gain power.
To accomplish this task will require developing a grassroots popular educational curriculum (or several). In particular this means creating a curriculum about how the economic system of capitalism works, so citizens can support reforms that will protect them from the most egregious behavior and failings of the system. Any system based on greed (maximizing profits) and competition, must be regulated. We have learned this the hard way.
Even well informed people find the workings of capitalism a mystery. It is difficult when so many lack insights into the system they live and work in to advance and win support for far-reaching reforms of capitalism. The remedy is education and dialogue. I do not advocate an anti-capitalist educational program; simply a program that teaches how the system works. Evaluating the system’s moral or economic behavior and consequences should left to participants.
I believe that the next goal for democratic change in America should be to reform the socio-economic system so that we move toward that of European social democracies. Achieving this would provide a broader economic security net that would be financed by a more equitable re-distribution and a better use of the wealth we create. To achieve this will require a new social contract between labor and business, either negotiated or imposed by a significant democratic majority via electoral, civic and institutional actions. [NOTE: In 2007, of a $14 trillion GDP, profits were $1.6 trillion or 13.8 percent. The only reason we do not have fully employment and a good economy right now is systemic, reckless mismanagement of huge profits like this.]
This move toward social-democratic solutions is in its infancy. The developing consensus for universal health care represents the first possibility and most importantly presents an opportunity to inject similar types of solutions for other social and economic problems. Individual solutions, the go-it-alone, work harder and longer approach needs to be replaced by the “we are in it together” outlook that trade unions have long advocated with one word: solidarity. (See the 2006 book by Jared Bernstein, “All Together Now: Common Sense for a Fair Economy.” This is a must read for union leaders and activists as Bernstein is Vice President Joe Biden’s chief economic policy advisor and Executive Director the Administration’s Middle Class Task Force. The phrase “we are in it together” is from Bernstein’s book).
Simply put: A consciousness of social solidarity is required in order to win a more equitable distribution of wealth and the economic reforms that are need to underpin economic security. Embracing such a value would be a first for an American culture that is built on striving for success, competition and individual enrichment and power. A persistent cultural undercurrent in America has for several decades challenged these assumptions by asking the proverbial quality of life question: Do we live to work or do we work to live?
I believe this is one of the central economic and cultural dilemmas of our time that crosses class, occupational, religious and political boundaries. It is a question of meaning. A progressive educational agenda should place this inquiry within the context of how the system works and in relationship with the socio-economic reforms that promise to yield a less stressful, more secure and a better quality of life.
The choices people make to either embrace go-it-alone or in-it-together policies are choices that need to be patiently and respectfully debated. To this end, a progressive educational agenda’s method should be built on dialogue, not persuasion. It should inform, not indoctrinate. It should seek to open debate, not close it.
This calls for accurately presenting opposing perspectives and solutions. The progressive educator’s goal is for people to make informed choices that they have thought through in comparison with other possibilities. Educators should encourage critical, skeptical thinking, regardless of the choices people may make.
Communication via the Internet has already changed the world for the better. It allows for democratic participation, organizing and debate that is rivaled in effectiveness only by face-to-face dialogue. The combination of an easily accessible creative educational curriculum online and grassroots activity are the yin and yang of a more just, democratic and peaceful America.
Read more!
To accomplish this task will require developing a grassroots popular educational curriculum (or several). In particular this means creating a curriculum about how the economic system of capitalism works, so citizens can support reforms that will protect them from the most egregious behavior and failings of the system. Any system based on greed (maximizing profits) and competition, must be regulated. We have learned this the hard way.
Even well informed people find the workings of capitalism a mystery. It is difficult when so many lack insights into the system they live and work in to advance and win support for far-reaching reforms of capitalism. The remedy is education and dialogue. I do not advocate an anti-capitalist educational program; simply a program that teaches how the system works. Evaluating the system’s moral or economic behavior and consequences should left to participants.
I believe that the next goal for democratic change in America should be to reform the socio-economic system so that we move toward that of European social democracies. Achieving this would provide a broader economic security net that would be financed by a more equitable re-distribution and a better use of the wealth we create. To achieve this will require a new social contract between labor and business, either negotiated or imposed by a significant democratic majority via electoral, civic and institutional actions. [NOTE: In 2007, of a $14 trillion GDP, profits were $1.6 trillion or 13.8 percent. The only reason we do not have fully employment and a good economy right now is systemic, reckless mismanagement of huge profits like this.]
This move toward social-democratic solutions is in its infancy. The developing consensus for universal health care represents the first possibility and most importantly presents an opportunity to inject similar types of solutions for other social and economic problems. Individual solutions, the go-it-alone, work harder and longer approach needs to be replaced by the “we are in it together” outlook that trade unions have long advocated with one word: solidarity. (See the 2006 book by Jared Bernstein, “All Together Now: Common Sense for a Fair Economy.” This is a must read for union leaders and activists as Bernstein is Vice President Joe Biden’s chief economic policy advisor and Executive Director the Administration’s Middle Class Task Force. The phrase “we are in it together” is from Bernstein’s book).
Simply put: A consciousness of social solidarity is required in order to win a more equitable distribution of wealth and the economic reforms that are need to underpin economic security. Embracing such a value would be a first for an American culture that is built on striving for success, competition and individual enrichment and power. A persistent cultural undercurrent in America has for several decades challenged these assumptions by asking the proverbial quality of life question: Do we live to work or do we work to live?
I believe this is one of the central economic and cultural dilemmas of our time that crosses class, occupational, religious and political boundaries. It is a question of meaning. A progressive educational agenda should place this inquiry within the context of how the system works and in relationship with the socio-economic reforms that promise to yield a less stressful, more secure and a better quality of life.
The choices people make to either embrace go-it-alone or in-it-together policies are choices that need to be patiently and respectfully debated. To this end, a progressive educational agenda’s method should be built on dialogue, not persuasion. It should inform, not indoctrinate. It should seek to open debate, not close it.
This calls for accurately presenting opposing perspectives and solutions. The progressive educator’s goal is for people to make informed choices that they have thought through in comparison with other possibilities. Educators should encourage critical, skeptical thinking, regardless of the choices people may make.
Communication via the Internet has already changed the world for the better. It allows for democratic participation, organizing and debate that is rivaled in effectiveness only by face-to-face dialogue. The combination of an easily accessible creative educational curriculum online and grassroots activity are the yin and yang of a more just, democratic and peaceful America.
Read more!
2/04/2009
"Ordinary" Americans could do better
The present financial crisis is a case study that lends support to John Maynard Keynes’ idea that a significant portion of capital should be publicly owned and/or directed. Witnessing the daily revelations of corruption, incompetence and irresponsible behavior of those who own and manage capital, it is reasonable to conclude that ordinary citizens would make better decisions. Congress should take Keynes advice and create public capital pools funded by a surtax on the wealthy to make loans to businesses for projects in the green economy sector, affordable housing and transportation. Oversight boards comprised of experts, ordinary citizens, labor unions and industry leaders should plan and direct this activity in an open, transparent, democratic manner inviting public comment and scrutiny. It is foolish to print money and give taxpayer-backed loans to those who caused the crisis and then trust them to make investment decisions for renewing the economy.
Read more!
Subscribe to:
Posts (Atom)