Josh Harkinson

Josh Harkinson


Born in Texas and based in San Francisco, Josh covers tech, labor, drug policy, and the environment. PGP public key.

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4 Ways That Democrats Want to Cut Taxes on The Rich

| Fri Jul. 27, 2012 5:00 AM EDT

The big debate in Washington right now centers around whether or not to "tax the rich." This week, Senate Democrats passed a plan to cut income taxes on the middle class while increasing them on families that make more than $250,000 a year. Next week, House Republicans will push through a bill to extend (the erstwhile "temporary") Bush-era tax cuts for the middle class and the rich. But scratch beneath the surface of these dueling tax plans, and it quickly becomes clear that the GOP isn't the only party in Congress that wants to help the rich get richer. As Ezra Klein notes at Wonkblog, the cumulative effect of Democratic tax proposals will most likely be a $17,000 tax cut for the top 1 percent of earners (compared to a $75,000 tax cut under the GOP plan). Here are four ways that the Democratic tax plan would benefit the wealthy:

Extending most of the Bush income tax cut

By extending the Bush tax cuts for people who make less than $250,000 a year, Democrats are still giving a tax break to a lot of people who are wealthy by any reasonable definition. As New Republic's Timothy Noah points out, anybody who makes more than $110,000 resides in the top decile (i.e. top 10 percent) of US incomes and probably shouldn't be called middle class. Moreover, Democrats are only proposing to increase the marginal tax rate on $250,000-dollar incomes, which means that if you make a million dollars, you still get a tax cut on the first quarter million. In the chart to the right, the Center for Budget and Policy Priorities calculates that the biggest winners from the Democratic tax plan are people who make between $200,000 and $500,000 a year.

Extending a major cut in the estate tax

Faced with opposition from conservative members of their own party, Senate Democrats dropped a proposal to restore the estate tax to 2009 levels, when it applied to estates worth more than $3.5 million and maxed out at a rate of 45 percent. (Under current law, the estate tax exempts property worth less than $5.12 million and tops out at 35 percent). The price tag for this gift to the wealthy? A cool $21 billion—almost enough to cancel out the additional $28 billion to be raised by boosting income taxes on high earners.

Patching the alternative minimum tax

The alternative minimum tax, or AMT, is designed to make sure that people who benefit from certain tax loopholes pay at least a minimum amount of tax. The AMT is not popular with rich people, which might be one reason why in recent years Congress has always passed legislation temporarily increasing AMT exemptions. Matthew Campione of Forbes estimates that this year's exemptions will be worth a whopping $100 billion. Citizens for Tax Justice has illustrated who benefited from last year's AMT exemptions (see chart).

Extending a tax cut on stock dividends and capital gains

The main reason that Mitt Romney paid an effective tax rate of just 13.9 percent in 2010 was that most of his income was taxed at the capital gains rate, which Republicans under George W. Bush had slashed from 20 percent 15 percent. He also benefited from a Bush-era reduction in the tax rate on corporate stock dividends to 15 percent from a much higher top rate of 39.6 percent. President Obama wants to partially reverse those changes, applying the higher pre-Bush rates to all capital gains and corporate dividends income that falls into the top two tax brackets. But Senate Democrats wussed out, passing a bill with much smaller increases in those tax rates. Citizens For Tax Justice illustrates how the Senate's changes benefit the wealthy:

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The Republican Plan to Tax the Poor

| Tue Jul. 24, 2012 2:37 PM EDT

How will Republicans pay for their proposal to extend Bush-era tax cuts for the wealthiest two percent of Americans? In part, by raising taxes on low- and moderate-income working families.

According to the watchdog group Citizens for Tax Justice, the GOP's tax plan would allow the expiration of tax breaks worth a total of $11.1 billion for 13 million working families. (Democrats want to keep those tax breaks in place.) That's enough money to make up for 40 percent of the value of the GOP's proposed tax cuts for the rich.

Here's a rundown of the GOP's proposed tax increases, and what they'll cost working families:

Child Tax Credit: A tax deduction for families with children
GOP proposal: End a portion of the credit for families making between $3,000 and $13,300
Savings to federal government: $7.6 billion annually
Tax increase for average family: $854 annually

Earned Income Tax Credit: A tax credit for people who work but have low wages
GOP proposal: Reduce EITC for some married couples (i.e., bring back the "marriage penalty") and for families with three or more children
Savings to federal government: $3.4 billion annually
Tax increase for average family: $530 annually

According to CTJ, virtually all of these tax increases would apply to families making less than $50,000—people for whom a few hundred dollars can make a huge difference. Unfortunately for them, the media is focused instead on how Obama's tax increases on incomes above $250,000 will make life intolerable for rich people.

Corning Pays Zero Federal Taxes, But Tells Congress It Wants A Tax Cut

| Mon Jul. 23, 2012 6:38 PM EDT

Corning International, the company best known for its heat-resistant glass cookware, paid zero federal income taxes on nearly $1 billion in income last year, but apparently that was still too much. Testifying at a House Ways and Means Committee hearing on corporate tax policy on Friday, Corning vice-president Susan Ford asked Congress for "a substantial reduction" in Corning's corporate tax rate.

To be fair, Corning would pay Uncle Sam much more than nothing it didn't resort to arcane accounting maneuvers. Ford told members of Congress that Corning paid a 36 percent income tax last year, but what she didn't tell them is that Corning once again deferred its tax payments. According to the watchdog group Citizens for Tax Justice, Corning has paid zero taxes in the past four years. Between 2008 and 2010, a period in which Corning made $1.9 billion in U.S. profits, Corning actually received a $4 million tax refund.

The hearing on corporate tax policy comes at a time when the White House has proposed lowering corporate tax rates while closing tax loopholes, leveling the playing field for business. The changes are supposed to be revenue neutral, though Corning and other companies seem to want more. "American manufacturers are at a distinct disadvantage to competitors headquartered in other countries," Ford told members of Congress. "Specifically, foreign manufacturers uniformly face a lower corporate tax rate than U.S. manufacturers."

Except when they don't. In 2011, Corning paid an average foreign tax rate of 17 percent—far more than what it paid in the United States.

Study: Super-Rich Hiding $21 Trillion In Offshore Tax Havens

| Mon Jul. 23, 2012 1:57 PM EDT

Mitt Romney isn't alone. The world's wealthiest citizens have socked away a mind-blowing amount of money in offshore tax havens: Likely around $21 trillion, but as much as $32 trillion. That's according to a new report from the Tax Justice Network, a British think tank. To put that in perspective, the combined gross domestic products of the United States and Japan are around $21 trillion.

This gargantuan stash of money belongs to fewer than 10 million people, and $9.8 trillion of it belongs to just 100,000 people, the Tax Justice Network estimates. Here are the countries that are losing the most money to offshore tax havens:*

While offshore tax havens have an image of being operated by shady banks in tropical backwaters, the report found that the majority of the $21 trillion was actually managed by well-known private banks. The three largest tax haven players are UBS, Credit Suisse, and Goldman Sachs. For more on the Tax Justice Network's findings, you can read their full report (PDF).

Correction: The original version of this article stated that the countries in the chart were the top offshore destinations for tax dodgers. In reality, they are the top sources of money sent to offshore accounts in places like the Cayman Islands.

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