Category Archives: Wall Street

The Tool of Taxation

Old hammer during reconstruction of the buildi...

Old hammer during reconstruction of the building in Pleszew. (Photo credit: Wikipedia)

In graduate school a professor of mine often referred to the “toolbox of government.”  The characterization must have resonated with me because I still use it in my own classes almost fifteen years later.  Of course he was referring to the variety of actions that governments at all levels have at their disposal to implement and otherwise enforce public policy.  For our purposes we can narrow the contents of the “toolbox” down to the bare minimum:

  • The power of government to deprive a person of liberty (think incarceration and in the most extreme form, the death penalty)—the hammer.
  • The power of government to deprive a person of property (think real property and money)—the hammer.

Confused?  Don’t be.  Chief Justice John Marshall (1801-1835) is credited with expressing the position that the power to tax is the power to destroy.  In this regard the power to tax is the power to punish those who violate the law, ignore regulations, or otherwise challenge the general welfare—the hammer.  The power to tax citizens and residents, businesses, corporations, is generally available to most governments—from Congress to your local water district.  Check your text books, one of the first concurrent or shared powers listed is the power to tax.  Moreover, taxes are ubiquitous—fees: taxes; assessments: taxes; dues: taxes; levies: taxes; taxes: taxes.  The power to tax is the power of government to deprive.

In the months following the Supreme Court’s decision on the Affordable Care Act (Obama-care) , much will be made of the taxation aspect of the now upheld health care reform package—especially the individual mandate, which requires people capable of paying for health insurance to do so or risk a penalty (tax).  What do you think, is it the most intrusive tax ever devised by government (in this case by democrats)?  Is it a new tax?  Is it a tax increase (even though it only applies to people who don’t buy their own health insurance—and wouldn’t we otherwise call these people free-riders or equate them to people who don’t buy car insurance and drive up all of our rates)?  With all the hammers we get hit with every day, is this the one we’re really going to object to?  Ouch!  I know how to fix it; where’s my hammer?!

–DENNIS FALCON

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Food Stamps, Government Subsidies, and Elections

Why have food stamps become a political football in the 2012 election?  The first high profile punt came from Republican candidate and former Speaker of the House, Newt Gingrich, when he referred to President Obama as the “food stamp President.”  The dynamic and diverse new media world of tweeting and blogging could be partly responsible; along with the never ending search for the ultimate sound-bite.  But explanations that focus on the nature of the media today forget to acknowledge that political parties and their candidates have made use of such socially and politically-charged symbolism for decades—if not since the early days of the Republic.

In a larger context, food stamps are just one form of federal and state public assistance to families with incomes that are too low to adequately provide for their needs.  In one form or another, food stamps have been a staple of the social welfare safety net that has protected the poor since the New Deal.  But as a form of government subsidy, food stamps are a symbol of the relationship that exists between government and people.  In that sense, food stamps and tax incentives that benefit home owners (i.e., the deduction of interest paid on home mortgages) are equal—both represent public policies intended to benefit very real constituencies in the political process.  More importantly, the actual impacts of such policy choices are never as one-sided as some might suggest.  A dollar spent by way of food stamps in part keeps farms, dairies, grocery stores, truckers, importers, and even members of Congress at work (just as tax breaks to home owners keep mortgage brokers, banks, tellers, and ATM companies at work).

Public policies generally don’t just benefit one person, group, or class.  And they probably don’t just capture a narrow range of intentions on the part of the policy-makers that pass them.  What do you think?  Are food stamps the issue as some would suggest?  If so, then shouldn’t all government subsidies become symbols during elections?  Can you imagine a way of talking about such programs that does not lend itself to vilifying particular communities in the name of political expediency?

–DENNIS FALCON

Occupying Free Speech

The “occupy” movement of 2011 will go down as a lesson on the limits of the First Amendment and free speech rights for groups and individuals that have little more than something to say.  The real free speech battle on the horizon is the looming explosion in campaign spending that will dwarf all previous records set in that regard.  On the heels of the Citizens United decision by the Supreme Court, corporations—newly bestowed with the rights of personhood—and by extension, unions will stage movements that only the too big to fail can dream of.  Where the “occupy” movement took over public spaces, corporate and union money will occupy both public and private space with little regard for the “time, place, and manner” restrictions that have limited activists around the country.

Generally speaking, government can restrict free speech by using any number of time, place, and manner justifications.  After all, people can’t do what they want whenever they want; or wherever they want; or however they want—that would be in invitation to anarchy.  Free speech is like coloring; you have to stay within the lines.  Forget the fact that the lines are only there in the free speech sense when there is an enforcement mechanism of some sort.  Across the country it has been law enforcement agencies of one kind or another that have stepped in on the behalf of largely non-complaining others to bring the occupiers back into the fold.  In a recent blog, Professor David Hollinger of Berkeley suggests that actions like “occupy Berkeley” are misguided representations of free speech and are distracting probably well –intentioned people from focusing on the larger issues with which the occupy movement should be concerned.  He’s partly right.  The evils of capitalism and Wall Street are hardly issues we can lay at the door step of local and state public institutions (like UC Berkeley).  Unfortunately, it is local and state governments that are enforcing restrictions on free speech and assembly, with the likely consequence of having a chilling effect on some of our most cherished freedoms.  History Professor, remember Shay’s Rebellion?  The rebels seized government institutions that were involved in enforcing evictions and repossessions.  Every campus police officer, every local sheriff or cop that arrests a protestor, is indirectly siding with the powers that be.  Flower petals in rifle barrels.  Peace.

–DENNIS FALCON

Warren Buffet’s 2010 Tax Returns

President Barack Obama and Warren Buffett in t...

President Barack Obama and Warren Buffett in the Oval Office, July 14, 2010.

In theory, the federal income tax rate is based on the progressive taxation system.  A progressive tax is a type of tax system in which the tax rate increases based on level of income. In essence, the wealthy pay a larger tax percentage compared to those with lower incomes. However, as Warrant Buffett’s 2010 tax returns revealed, the federal income tax rate in practice actually decreases on those making significantly large incomes. Buffett earned $63 million last year, yet paid around $7 million in federal income tax and a mere $15,300 in payroll taxes. All said Warren Buffett, who is worth around 50 billion dollars, paid 17.4% in total federal taxes (income and payroll taxes) while the average American worker paid around 33%.

Warren Buffett has been championing increased taxes on wealthy Americans for years. Back in 2007, Buffett offered a million dollars on NBC Nightly News with Tom Brokaw to any member of the Forbes 400 that could prove they paid a greater tax burden than their employees.

“I’ll bet a million dollars against any member of the Forbes 400 who challenges me that the average tax rate for the Forbes 400 will be less than the average of their receptionists.”

Not one member of Forbes 400 has taken Mr. Buffett’s million dollar challenge. Greta Van Susteren of FoxNews posted on her blog several ways Warren Buffett could better spend his time by voluntarily paying more taxes.

Meanwhile, the nation is in the middle of a tax debate concerning the exact fairness of the federal tax code. From Herman Cain’s 9-9-9 plan to Occupy Wall Street, the American people are divided on whether or not the American wealthy is paying too much or too little in taxes. However, the majority of the current debate is based on economic theory and political ideology. Should the debate be placed on hold until more members of the top 1% release their tax returns?

-TERRANCE MULLINS

Colbert Report: The Word – The Business End

Mitt Romney knows how to treat America’s sick economy with his business experience. (05:38)

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Workers of America Unite; You Have Nothing To Lose But Your Chains!

Communism is an economic and socio-political theory proposed by Karl Marx that aims for a classless society structured on the end of wage labor and private property. Communist theory states that the main producers of wealth in society are the working class who are also perpetually exploited and marginalized by the unproductive capitalist owners of production. According to Marx, the only way to solve the problems caused by capitalism is for the working class to unite and overthrow the capitalist system itself via violent revolution.

For Marx, the end of capitalism is inevitable as the class conflict between those who have and those who have not caused by capitalism will ultimately lead to its destruction. However, class conflict in the United States is practically nonexistent as the American working-class has been tricked into accepting blame for the nation’s economic woes. The middle-class is too busy blaming middle-class pension plans and labor unions to remember the upper-class  actually caused the great recession. As it stands now, public teachers and firefighters are to blame not private bankers or hedge managers. Not surprisingly, no one from the public sector has been prosecuted for the illegal activities that ultimately caused the economic recession.

CNN’s Lisa Desjardins posted a blog examining what the current deficit debate is really about and the consequences each plan would certainly have for middle-class Americans. However, how democratic is the United States when justice, safety, education, health-care, and representation are determined by ones economic class? The American people have stood idly by for decades as:

  • Corporate lobbyists maintain more influence in Congress than the American people
  • The U.S. Congress facilitates the outsourcing of American middle-class jobs
  • Corporations receive bailouts and/or subsidies devoid of strings
  • Tax cuts for the extremely wealthy are paid for by cutting services for the poor and elderly
  • Colossal military spending goes unimpeded while the average American soldier is underpaid

How can the average worker achieve the “American dream” within the current capitalist system? Should the American working-class  consider communism as a viable option?

–TERRANCE MULLINS

Looking for Work? Expect a Lower Salary

Working on Wall Street always meant great pay, fabulous perks and year-end bonuses that would make you feel as if you’d won the lottery. But that was before the Great Recession. Now, unemployed traders and bankers are finding out that high-paying jobs are nearly impossible to come by, as layoffs and slow economic growth continue in the finance sector. (10/11/10 ABC News, Tara Murhpy) … Read Article

1. What factor accounts for the lower salary in the financial sector according to Heidi Shierholz?

2. According to Shierholz, unemployment rate is expected to remain high for the next several years. How long before the economy recovers to the pre-recession unemployment rate? How many jobs will it take to maintain a steady unemployment rate relative to the population growth?