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progree

(10,864 posts)
Mon Sep 24, 2012, 12:28 PM Sep 2012

Ed Schultz pushes sales tax increase (the most regressive tax) and makes sound like a tax on rich

Here's the letter I sent to progressive talk shows host Ed Schultz (via the email link at weGotEd.com). If you have progressive legislators or any influential progressive like a talk show host pushing sales taxes as solutions to funding problems, please call them on it (unless you think the wealthy are paying too much and the non-wealthy too little in taxes.) I was particularly incensed by him making the sales tax sound like a tax on the wealthy by ranting on and on about Romney's and the rich's low tax rates.

------------- The email -----------------------------

Subject: Raise Cook County's sales tax 1/4% and then rag on Romney and the rich not paying their fair share, come on, sales tax is the most regressive of all major taxes

Hi Ed,

I heard you 9/21/12 answering a caller's complaint about Chicago's finances and the cost of the teachers settlement by suggesting that Cook County raise its sales tax. Then you went on and on and on about Mitt Romney and the wealthy not paying their fair share.

Look. I'm sure you know that the sales tax is highly regressive and hits the poor the hardest while affecting the wealthy the least of all the taxes. So please, please, I beg you Ed, please do not sugar coat a sales tax by making it sound like its some sort of tax that makes the wealthy pay their fair share.

Here in Minnesota, I am extremely very sick and I am extremely very tired of even the most progressive legislators pushing sales tax increases while not daring to suggest an income tax increase -- the most progressive of all taxes.

Thank you
Signed...

13 replies = new reply since forum marked as read
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progree

(10,864 posts)
4. Nope, very definitely he said sales tax. Though property taxes are also quite regressive
Mon Sep 24, 2012, 01:17 PM
Sep 2012

Most economists believe that in a competitive rental marketplace, over the long run, renters pay the property taxes (it gets built into the rent). I saw some data from some agency of the state of Minnesota and was shocked at how regressive the property taxes were -- not as bad as the sales tax, but very definitely regressive (property tax rates as percentage of income decrease as income grows).

DURHAM D

(32,595 posts)
7. OTOH - I am so old I remember when schools were 100% funded by property taxes.
Mon Sep 24, 2012, 01:38 PM
Sep 2012

In the beginning that was the reason for property taxes. I remember when public libraries were added. Now property taxes are used for many other things - like junkets for city council members.

progree

(10,864 posts)
8. Critics say that leads to very unequal funding of schools - schools in poor areas poorly funded
Mon Sep 24, 2012, 06:03 PM
Sep 2012

along with the inherent regressive nature of property taxes.

In Minnesota, the "Minnesota Miracle" state, in the early 1970's a large portion of school funding was shifted from property taxes to the state income tax, so as to reduce the school funding disparities between low- and high- income areas. Unfortunately, the GreedBangers have been whittling away at that reform, but still there is a substantial amount of state funding, via the income tax, of schools and other local government functions.

Also there is a state income tax form where one gets a partial rebate of property taxes depending on income, so that is another feature to reduce the regressivity of property taxes.

Property taxes also are charged on a sliding scale according to property values -- highly valued houses pay a higher property tax rate than lower valued houses. (I feel bad about families that need a sizable house in a good school district, while I as a childless single can make do with a cheap townhouse -- or less).

I'm guessing that most other states have some or all of the above features to some extent.

On EDIT: There's not much that reduces the regressivity of sales taxes. In Minnesota and most states, food (other than restaurant food) is exempt from the sales tax. Services are exempt too (for the most part), as is rent (though that has the property tax built into it). I'd guess that the low- and middle-income people who live from paycheck to paycheck (very-little to no savings / investments) spend about half their income on things which are sales-taxed.

======= Extra Credit Reading Assignment ======================

Google: Minnesota Miracle Wendell Anderson

http://www.mnhs.org/library/tips/history_topics/18public.html
Rising public discontent with soaring property taxes created the ferment for needed reform of long-established policies: local governments and school districts were financed solely through autonomously levied property taxes; municipalities were forced to compete for commercial-industrial development to boost their tax base; and disparities in the quality of education between property-tax-rich and property-tax-poor districts were egregious. Reform laws enacted to resolve those issues, taken together, came to be known as the Minnesota Miracle of 1971. The Minnesota Miracle survived, relatively unchanged, for more than 30 years until 2002, when the property tax structure was again revised by legislative action. {{2002 was the year Tim Pawlenty was elected governor, yuk}}

The famous (to us) August 13, 1973 Time cover story proclaiming the Minnesota Miracle
http://www.time.com/time/covers/0,16641,19730813,00.html

Wikipedia - http://www.en.wikipedia.org/wiki/Wendell_Anderson

DURHAM D

(32,595 posts)
9. And it also leads to certain cities/areas keeping their property taxes
Mon Sep 24, 2012, 06:06 PM
Sep 2012

unnecessarily low, including well off cities. They want the funds to dribble up.

progree

(10,864 posts)
11. Wealthier areas don't get funding help from the state, at least in Minnesota. I don't know very many
Mon Sep 24, 2012, 06:16 PM
Sep 2012

areas that have "unnecessarily low" property taxes, but that's a subjective opinion on my part.

progree

(10,864 posts)
12. ALL regressive taxes suck because they are regressive and I'm a progressive, just an opinion
Tue Sep 25, 2012, 09:36 AM
Sep 2012

I'm almost as incensed when a Democratic legislator proposes raising property taxes to fund whatever as when they propose a sales tax increase. At least they should fight for an income tax increase first before giving in to the regressives and class warrior greedbangers in general.

I should have added in post #8 that renters in Minnesota get a break on their income taxes in recognition that they are paying property taxes indirectly through their rent.

Some progressives think the residential property tax is kind of a "wealth tax" being taxed on house wealth. Well, most economists believe that in a competitive rental marketplace, over the long run, renters pay the property taxes (it gets built into the rent), and they have zero "house wealth" or "real estate wealth". One way in which the property tax is very regressive.

Also, for example, a $200,000 home that is underwater (the mortgage balance exceeds $200,000 so that the owner has negative house wealth) is taxed the same as a $200,000 home that is free and clear (so the owner has $200,000 of house wealth). Far from being a house wealth tax. Very regressive.

I mentioned the funding disparities in schools between the high income areas and low income areas. More war on the poor.

I think we have enough inequality, but I guess thats just me being a silly libtard.

The Top 1% and percent and their share of the nation's income: 1928: 23.9%, Late 1970's: 8 to 9%, 2007: 23.5% (includes capital gains) - The Nation 7/19/10

The Newsweek 1/13/12 article by Niall Ferguson has very similar, is probably the source of the above: "According to Berkeley economist Emmanuel Saez, the share or total income going to the top 1% of families has more than doubled since 1979, from below 10% to a peak of nearly 24% in 2007 (it has since fallen, but not by much). The share going to the super-rich -- the top 0.01% -- has risen by a factor of 7."

(David Frum is the former Bush adviser or somesuch that has turned lefty in the last year or two or so. Its odd that Niall Ferguson would write about growing inequality {he wrote the Newsweek cover story hit piece on Obama 3 or so weeks ago}

Average HOUSEHOLD Income (2007 $) -- post-transfer and post-tax incomes.
[div style="display:inline; font-size:1.37em; font-family:monospace; white-space:pre;"] Year 1979 2007 %increase
[div style="display:inline; font-size:1.37em; font-family:monospace; white-space:pre;"] Top 1% (P1) 350,000 1,300,000 271.4%
[div style="display:inline; font-size:1.37em; font-family:monospace; white-space:pre;"] Mid 60% (Q2+Q3+Q4) 44,000 57,000 29.5%
[div style="display:inline; font-size:1.37em; font-family:monospace; white-space:pre;"] Bottom 20% (Q5) 15,500 17,500 12.9%

[font size=2]Lane Kenworthy, using data from the Congressional Budget Office
http://lanekenworthy.net/2010/07/20/the-best-inequality-graph-updated/
http://www.cbo.gov/publications/collections/collections.cfm?collect=13 [/font]


The following is a pithy summary of much of the above for the message board wars:

[font color="blue"]In inflation-adjusted dollars, after taxes and after transfers -- From 1979 to 2007 the top 1% increased their income by 271% while the middle 60% increased by only 30%. Virtually all the productivity gains since 1979 has gone to the top 1%. Their share of the nation's income has increased from about 9% to 24%. [/font]

Raising regressive taxes only makes this horrible situation worse.






Courtesy Flush

(4,558 posts)
2. Low income people spend 100% of their money
Mon Sep 24, 2012, 12:34 PM
Sep 2012

A sales tax would be levied on 100% of what they earn (slight exaggeration, but forgive me).

High income people put a large percentage of their income into savings/investments. If they spend 15% of their money on consumer goods, that's all that gets taxed.

Jeff In Milwaukee

(13,992 posts)
5. Not really much of an exaggeration....
Mon Sep 24, 2012, 01:20 PM
Sep 2012

My paycheck has three destinations:

Spend it.
Invest it.
Donate it.

If you're poor, virtually everything you earn goes to keeping a roof over your head and food on your table. That's why sales taxes are so regressive.

progree

(10,864 posts)
13. Oops, I was thinking of state and local taxes when I wrote big Eddie
Tue Sep 25, 2012, 09:56 AM
Sep 2012

since he was talking about funding a Chicago area teacher's settlement.

Although on Social Security taxes, I think one should consider that Social Security benefits are quite progressive (meaning that the per-dollar-of-income S.S. benefit goes down as lifetime income goes up). So overall (considering both taxes and benefits) it's not as regressive as it looks at first glance.

Also, the employer pays half the S.S. taxes, sort of a corporate tax / business tax. (Although a self-employed person pays both halves and lots of self-employed people are not high income. And I realize not all company owners are wealthy corporados).

Some people rant and rave about the maximum earnings cap, something like $110,000 IIRC, above which no SS taxes are paid. But OTOH for example somebody earning 10 times the maximum earnings cap gets no more benefits than someone earning right at the maximum earnings cap.

Hard to say for sure if SS taxes are more regressive than the sales tax when the SS benefits are considered. But I suspect you are right.

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