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Posts Tagged ‘capital gains tax’



Taxes, Class Warfare and eMeg’s Vast Fortune

Wednesday, October 20th, 2010

Faced with Jerry Brown’s intensifying attacks on her call to end California’s tax on capital gains, Meg Whitman has responded with one of the hoariest political lines in the Republican campaign play book: the Democratic nominee, she says, is engaging in “class warfare.”

Whitman argues that her capital gains proposal, which would eliminate state taxation on sales of stocks, bonds, real estate and other assets, would jump start California’s economy, by keeping the profits from such transactions in the hands of investors, who would channel the money into starting and sustaining businesses, thereby creating jobs.

Brown argues, however, that the tax cut not only would blow a $5 billion hole in a state budget already wracked with huge deficits, but also would prove beneficial only to the very wealthy, including Whitman herself.

In the days since their final debate, when Brown repeatedly charged the big winners with the tax cut would be Whitman and “her billionaire friends,” the “class warfare” meme has been sounded and echoed in quick succession by Whitman spokesmen, by the state party and by the candidate herself, at a Monday appearance in Southern California.

The fact that I would run for governor to enrich myself is ridiculous – all you have to do is to look at how much money I have spent versus how much money I would save. He is so off-base on this. It’s a political stunt. It’s class warfare.

Well and good, but inquiring minds want to know: Why does “class warfare” always only go in one direction?

For Whitman and her allies, taxing profits of investors and the wealthy, in essence, is a wrong-headed, socialist, economic redistributionist notion that strikes at the most fundamental values of American capitalism.

Yet they never portray their own, constant, fierce and unbridled attacks on unions as “class warfare,” no doubt because they are the most selfless of citizens — “I refuse to let California fail” — whose beef with labor represents nothing more than high-minded, good government reform, which they embrace solely for the most civic-minded of motives.

Whitman mocks Brown as “crazy” for even suggesting that economic self- interest might help explain the great personal favor she’s done all of us by deigning to run for governor; after all, Meg notes, she and Griff might only net $15 million a year as a result of her proposed tax cut – a mere bagatelle.

What person in their right mind would spend $140 million to run for governor to save $15 million? I mean it just shows Jerry Brown does not understand math.

How about some Calbuzz math:

According to an in-depth study by our Department of Investment Risk Management Modeling and Abacus Repair, $15 million a year on a one-time investment of $140 million works out to a 10.7% annual rate of return, most likely more than Our Meg could make anywhere outside of those early-peek IPOs she got the inside track on over at Goldman Sachs.

Qui bono capital gains: Despite eMeg’s distaste for “class warfare,” a look at the numbers clearly shows that it is precisely her economic class – the wealthiest 1% of taxpayers – who would reap the outsize benefits of her tax cut proposal. As Michael Hiltzik, the Pulitzer Prize-winning economics columnist for the by-God L.A. Times, has noted:

The real problem with this proposal is that it looks like a pure handout, and a costly one, to the wealthy, a group that includes the billionaire Whitman herself. In 2008, according to figures from the Franchise Tax Board, more than 82% of the $56 billion in capital gains earned by California residents were reported by the top 1% of income earners (those touching about $500,000 or more).

And this, from Hiltzik’s colleague, the redoubtable George Skelton:

Who pays the (capital gains) tax?

–People with adjusted gross incomes exceeding $500,000 pay 82% of the total capital gains tax. For them 38% of their earnings comes from investment profits.

–These $500,000-plus earners amount to only 1% of taxpayers – or about 150,000 returns – but provide 48% of the total personal income tax.

–-People with more than $200,000 in adjusted gross incomes – 4.4% of filers – provide 93% of the capital gains tax.

Whitman says that eliminating the tax would “spur innovation, which we have to own in California.” But, I note, many people realize investment profits merely by buying and selling stock. That hardly induces innovation.

Still, eMeg stands aghast at the shocking suggestion of “class warfare,” though she never hesitates for a second to demonize as “labor bosses” public school teachers who knock down 60 grand, or thinks twice about bashing some poor shlub living on a $25,000 pension after 30 years of mopping floors at the DMV office for “sucking up taxpayer funds.”

How rich is eMeg? Fortune magazine, which just released its annual compilation of the 400 richest individuals in America, pegs Whitman as the 332nd wealthiest person in the nation, with a net worth of $1.2 billion.

Among the 400, there are 84 people who live in California – about 21% of the total – and Whitman sits near the bottom of that list, which makes the wannabe governor only the 74th richest citizen of the oh-so-Golden State.

These 400 people, who represent 0.0000012% of the country’s population,  control about 2.5 percent of its wealth – about $1.5 trillion; thus the Fortune 400 control only slightly less wealth than the $1.6 trillion held by the bottom half of the U.S. population, no doubt most of them avaricious public employees with outrageous salaries and benefits.

Of course, it must be noted that Meg’s cohort of 400 is just the crème de la crème of the upper 1% of taxpayers who have made out like bandits prospered disproportionately over the past decade. Washpost columnist Steven Pearlstein writes:

By 2007, the top 1 percent of households took home 23 percent of the national income after a 15-year run in which they captured more than half – yes, you read that right, more than half – of the country’s economic growth. As Tim Noah noted recently in a wonderful series of articles in Slate, that’s the kind of income distribution you’d associate with a banana republic or a sub-Saharan kleptocracy, not the world’s oldest democracy and wealthiest market economy.

Put another way, as the Center on Budget and Policy Priorities did in boiling down the same economic trends in a 2009 report:

Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.

During those years, the Piketty-Saez data also show, the inflation-adjusted income of the top 1 percent of households grew more than ten times faster than the income of the bottom 90 percent of households…

The last time such a large share of the income gain during an expansion went to the top 1 percent of households – and such a small share went to the bottom 90 percent of households – was in the 1920s.

1928 – now that was a helluva’ year.

Why it matters: All this talk of class warfare – the horror, the horror! — would be little more than fodder for Marxist whining sessions or kvetching by petty and jealous-minded souls who lack the innovative imagination, spirit and perseverance needed to make themselves fabulously wealthy in the entrepreneurial manner of, say, Calbuzz, a privately-held partnership, plenty of free parking.

Turns out, however, there are some practical reasons that this wealth concentration business is a real bummer, even for those of us who long ago left behind their obsession with dialectical materialism. Pearlstein again:

There are moral and political reasons for caring about this dramatic skewing of income, which in the real world leads to a similar skewing of opportunity, social standing and political power. But there is also an important economic reason. Too much inequality, just like too little, appears to reduce global competitiveness and long-term growth, at least in developed countries like ours…

The biggest problem with runaway inequality…is that it undermines the unity of purpose necessary for any firm, or any nation to thrive. People don’t work hard, take risks and make sacrifices if they think the rewards will all flow to others. Conservative Republicans use this argument all the time in trying to justify lower tax rates for wealth earners and investors, but they choose to ignore it when it comes to the income of everyone else.

It’s no coincidence that polarization of income distribution in the United States coincides with a polarization of the political process. Just as income inequality has eroded any sense that we are all in this together, it has also eroded the political consensus necessary for effective government…

Political candidates may not be talking about income inequality during this election, but it is the unspoken issue that underlies all the others.

And thank you for that.

Clinton Rallies Dems; Krusty Bashes eMeg on Taxes

Sunday, October 17th, 2010

Jerry Brown took some of his toughest shots of the campaign at Republican Meg Whitman at a rollicking rally Sunday night in San Jose, where former president Bill Clinton warmly embraced his one-time Democratic rival, lavishly praising him as a leader who “has always been on the side of positive change.”

The old-fashioned political rally drew about 3,000 people to the Event Center at San Jose State University, the second large, raucous event Clinton headlined in the state, as he energetically turned his popularity in California to motivating Democrats, especially younger ones, to cast ballots in an election year where most of the enthusiasm is on the Republican side.

Brown’s theme – apparently his closing meme – was “know-how, values and vision” – each of which he used to contrast himself to Whitman, the former CEO of eBay who has no prior direct political experience.

Clinton, on stage with Brown and Democratic lieutenant governor nominee Gavin Newsom, urged the audience to use all their social networking tools to contact their friends and if they’re not planning to vote, to ask them “What planet do you live on?”

Said the former president: “Your future’s on the line – but you’ve got to show up.”

Just two weeks before the Nov. 2 election, state Democratic leaders hope Clinton’s visit to the state can ignite the party’s base. It is a measure of the Democrat’s perilous political position in 2010 that the former president is spending time in California, normally a reliable blue state, during a midterm election where boosting turnout will be crucial to the party in holding down GOP gains in Washington and across the country.

The Whitman campaign sought to dismiss Clinton’s participation as a minor annoyance. “If it weren’t for his party affiliation, Bill Clinton wouldn’t have anything to do with Jerry Brown,” said  Whitman spokeshuman Andrea Jones Rivera.

Recent polls have shown Brown narrowly leading Whitman, while incumbent Democratic Sen. Barbara Boxer remains locked in a tight race with GOP challenger Carly Fiorina in the other top statewide race.

Brown and Clinton have a long history of political conflict, but there was no evidence of it on Sunday, as the two warmly hugged and exchanged compliments.

Brown introduced Clinton as a great guy and a great president who persevered “in the face of the most outrageous Republican opposition,” and credited him with leaving the nation with a surplus and with creating 22 million jobs during his two terms.

“Now I know this president’s amazing,” he said “He took a lot of crap from a lot of people, okay? Yeah, I gave him a little myself “

Striking a populist tone, Brown also praised Clinton for giving “the people at the bottom” a chance at the American Dream. “It’s how society takes care of the least powerful,” that truly matters, he said, paraphrasing Franklin Delano Roosevelt.

It was a theme that he elaborated upon in his own comments, as he assailed Whitman as a tool of the rich, and he doubled down on his recent attacks on the GOP nominee for her proposal to eliminate the capital gains tax in the state.

“Here’s the Whitman economic plan,” Brown said. “The most important part of her plan is to take the 1% of the people in California who pay 80% of the capital gains tax and give them a complete pass . . . So here’s the plan, take the money from you and give it to her and her friends and her contributors . . . She wants to give them a complete pass.”

Warming to his theme and tapping his inner William Jennings Bryan, Brown mocked Whitman’s statement that she doesn’t know how much her proposal would save her personally.

“Let me give Ms Whitman a little bit of advice. Go look at your tax return. There’s a little line on her tax return – which she won’t release by the way, to the public – and on that line it says how much your taxable gain is. So you know what it is…she knows the number!

“I know my number by the way. I paid $1400 in capital gains tax this year. Doesn’t she know? I don’t know. Maybe somebody stole her tax return, like they stole her mail or something,” Brown said to laughter, referring to Whitman’s allegation that her housekeeper stole her mail containing information about her mismatched Social Security number.

One of Brown’s biggest applause lines came when he referenced Whitman’s argument that most of the state’s fiscal problems can be traced to the power and greed of public employees unions, and her promise to lay off 40,000 state workers if she is elected.

“I’m not ashamed that people join unions and bargain collectively, because you know what? If you’re a janitor or you’re a farm worker or you’re a housekeeper, God help you if you don’t have somebody looking out for you that’s more powerful than you are. And that’s what it’s all about,” he said.

He also bashed Whitman as someone who wants to enter political life at the top of the ladder and is in it for her own personal ambitions.

“This is somebody who never voted, never got involved in her local school board, never did anything . . . and she wants to start at the top.” He compared her to a job applicant who goes to an interview and says, “Here’s my resume – it’s blank.”

Referring to Whitman’s injection of $140 million of her own funds into the race, he said: “We’ve found out a billion is not enough if that’s all you got.”

PS — Here’s our favorite Clinton riff (which we think we have verbatim):

I was raised in a home where nobody I knew had a college degree. I had people one generation older than me, who I knew had higher IQs than I did, who never had the opportunities I did. We were raised to believe if you were fortunate, you were supposed to give back to your community, give to the future of your community and that was the right thing. All I think about these days both here and when I work in Haiti and Africa and Latin America and East Asia and all these places … I just think about the fact that intelligence and ability and dreams are evenly distributed across this state, across this nation and across this world but the resources, they’re not evenly distributed. And whenever you let them get out of whack, you pay a terrible price. So what I think about all the time is, I want all of you to have the chance I did. That’s why Jerry Brown sounded so angry when he was talking.

We were raised in a totally different tradition. We were raised in the first generation of Americans that took a middle class lifestyle for granted. All we had to do was show up, be good students, obey the law, do what we were supposed to do and we had a chance to live our dreams. I have watched for 30 years the assault on the American Dream and I am sick and tired of it and I want you to stop that from being your future. (cue WILD APPLAUSE AND CHEERING)

Thanks to DWT for photos, limo service and transcription.