Saturday, June 29, 2013

Saturday Morning Links

Assorted content for your weekend reading.

- Andrew Jackson rightly questions Greg Mankiw's faith-based assertion that increasing wealth accumulation is based solely on merit and contribution to society rather than hoarding and rent-seeking. And Martin Lobel highlights a few of the distortionary policies that have served to exacerbate inequality in the U.S.:
Everyone admits that our current tax system is broken and many "reform" proposals are being considered. But, our current tax code is too fragile to support most of the current "reform" proposals that powerful interests want to layer on it. Instead, we need to strengthen and simplify the tax code to provide a broad tax base before carving out another loophole, like territorial taxation, to "reform" the tax code. We need to reform the tax code so that it doesn't continue to increase the disparity in wealth between the very rich and the rest of us. We also need to remember that the more complicated the proposal, the more likely it is that some lobbyist is proposing another unjustifiable tax expenditure (aka tax subsidy, tax loophole) to benefit his wealthy client. In fact, any business that doesn't seek a tax subsidy is a fool because the rate of return is far higher than it could get in the market. According to a recent study, multinational companies had a 22,000 percent return on tax expenditures they lobbied for, although small in comparison to the 77,500 percent return earned so far on the $116 million the prescription drug industry spent lobbying for legislation to prevent Medicare from bargaining on drug prices.
In the United States, wealth is highly concentrated in a relatively few hands. As of 2010, the top 1 percent of households (the upper class) owned 35.4 percent of all privately held wealth, and the next 19 percent (the managerial, professional, and small business stratum) had 53.5 percent which means that just 20 percent of the people owned a remarkable 89 percent, leaving only 11 percent of the wealth for the bottom 80 percent (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1 percent of households had an even greater share at 42.1 percent. In terms of types of financial wealth, the top one percent of households have 35 percent of all privately held stock, 64.4 percent of financial securities, and 62.4 percent of business equity. The top 10 percent have 81 percent to 94 percent of stocks, bonds, trust funds and business equity, and almost 80 percent of non-home real estate.

 Or to put it in a different perspective, from 2009 to 2011, "Top 1 percent income gains grew by 11.2 percent while bottom 99 percent incomes shrunk by 0.4 percent. Hence the top 1 percent captured 121 percent of the income gains in the first two years of the recovery."

Yet, individual income and payroll taxes on the middle and lower classes have increased over the last 60 years while estate and corporate income taxes have declined substantially as a percentage of receipts. The only logical conclusion is that government tax policies have been instrumental in the shift of income from the middle and lower classes to the rich. This conclusion has been supported by almost all of the non-industry supported research, including the Congressional Budget Office which recently reported that over 50 percent of the 10 largest tax breaks went to the richest 20 percent of Americans and 17 percent went to just the top 1 percent, while the middle quintile only got 13 percent and the bottom quintile only got 8 percent.

Besides taxing the almost $2 trillion of stateless income offshore, there are other alternatives to make our tax and economic system more efficient. Although the Republicans talk about cutting tax expenditures and did cut some in the 1986 Tax Reform Act, they ought to get serious and cut all the corporate tax expenditures which now cost the taxpayers just about the same amount as the corporations pay in taxes. We could also eliminate the cost and distortions of tax accounting and just tax the profits that these corporations report to their shareholders.
- And Brendan Fischer writes about a much-needed pushback against privatization in the U.S.
- even as Canadian governments earmark massive amounts of public money for the sole use of private contractors.

- Meanwhile, James Bloodworth takes another look at Ireland to see whether the poster child for corporatist economics is seeing any public benefit as a result. Spoiler alert: not by a long shot.

- Glen Pearson rightly questions why 200,000 people are homeless in Canada in the midst of what's supposed to be unprecedented wealth and prosperity. But the answer can likely be found in a government more interested in putting the screws to marginalized individuals than improving their standard of living.

- But of course, we should be glad to see examples of inspiring leadership where they arise. And so Lana Payne's column on Naheed Nenshi's response to Calgary's flood is well worth a read.

- Finally, Lorne writes about the plight of disposable labour in Canada - with temporary foreign workers treated particularly harshly for lack of any ability to push back against abuse.

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