Another benefit of lump sums -- from employers' perspective--is that they shift longevity risk to retirees. Employers have been acutely aware that life spans are increasing, which explains why companies with a large percentage of women and white-collar professionals have been eager to provide lump sums.* If the pension is based on a life expectancy of seventy-eight, then an engineer who lives to age ninety will have drawn a pension for roughly twelve years longer than the amount the lump sum will have been based on.
Footnotes as bottom of page:
I encourage everyone to watch ALL of these snippets on YouTube. It is eye opening and should be mandatory viewing in my opinion.
To get you started, here is a piece from Coventry & Burling (NOT OUR FRIENDS) discussing hybrid Cash Balance Plans. http://www.youtube.com/watch?v=nlkEYACKEFc&feature=relmfu
Just watch on the left of your screen to select more snippets posted by the PRC. Thanks Karen!!!! Kathi.
Xcel Energy is the sole provider of gas and electricity in the Denver Metro region, Minneapolis, MN, Amarillo, TX and a few other cities. The health of the business is excellent. New buildings are going up in Denver and Minneapolis. Xcel Energy outsourced its IT, application support, infrastructure and database jobs to IBM in 1995. The workers on the IBM Xcel Energy account, like all acquisitions, didn't join IBM voluntarily, but because they are proud of their work gave it a chance.
Unfortunately this seems to be a one way street for the workers.
Xcel Energy wants to cut their maintenance costs drastically and IBM agreed. Of course they way they are going to do this is by firing the workers here and offshoring the work to India. It is rumored that 100 out of 145 jobs will be cut from 3 sites. Many of these workers have been with Xcel for 15 to 25 years. The workers are being kept in the dark and are told not to talk with each other about the job losses and offshoring.
Customers are concerned that the loss of these workers and the offshoring of the jobs will result in a decline of expertise. IBM Xcel Energy account workers know it is just about the money and greed.
At this moment the workers are not getting any promises from Xcel Energy. IBM is promising to find new positions for these workers but long time IBM employees know these "promises" need to be in writing, not verbal. IBM is also reviewing their severance eligibility.
IBM Xcel Energy account workers have told the Alliance that it is morally reprehensible to give away good paying, high skill jobs to India. Workers say the termination of US jobs ripples through communities, negatively impacting the economy. These workers have also told us that many of them could lose everything if they are not able to secure employment.
For those that have been following the Alliance campaign at IBM you know we have seen this before.
But for how long do we repeat it?
IBM needs to do the right thing and keep these workers employed.
We also encourage supporters to contact your congressional representative and tell them what IBM and Xcel are doing.
Let us do all we can to protect and keep jobs here in the US.
Stop Offshoring Now!
More news and information at www.allianceibm.org
Are they completely gutting ADM or have they started in on the Delivery teams? Beryl.
If all this offshoring were such a good thing, why is the world economy doing so poorly compared to many prior decades? Costs are not just measured in salary, they are measured in revenues, and IBM is losing to competition. Oracle is eating our lunch precisely because of the bean-counting mentality of IBM management. Exadata - never saw it coming. Now we're playing catchup.
Oracle bought Sun, it also bought PeopleSoft, it's got itself staked out in so many different niches. Precisely because it didn't run to the cheapest labor. Didn't hurt to have a CEO, Larry Ellison who is a techie instead of an MBA...or a history major. What big account will IBM lose next while it bean-counts its way to disaster.
It may surprise you to learn that Wall Street has wasted precious little time publicly defending itself after the 2008 market meltdown and taxpayer bailout. Everyone knows the nauseating truth that Wall Street pulled a fast one on the American public and there is no point, i.e., no money to be made by Wall Street, trying to soothe critics, such as the Occupy Wall Street crowd. Instead, Wall Street is busier than ever making even bigger grabs at the few pockets of American wealth still left – pensions, endowments, foundations and high net worth individuals.
Wall Street no longer has any interest in Main Street—the vampires have drained the blood from America’s middle class and are moving on.
The “garbage du jour” is high-cost, high-risk, illiquid and opaque alternative investments, such as structured notes, hedge funds, hedge fund of funds, and private equity funds. These investments are designed to lock-in investor monies for, say, a decade, charge exponentially greater fees than traditional investments, provide substantial wiggle-room regarding interim investment performance/portfolio valuation, and delay accountability for years—until it’s too late. ...
We are in a far more unforgiving financial environment than in decades and pensions are heaping on risk. What’s the likely outcome? The odds are, these desperate gambles will fail and many of America’s few remaining pensions, now on life-support, will finally die.
Cons:
Advice to Senior Management:
Comment by Current IBMer (US): Unfortunately this is a very accurate, and thorough, review. It is unfortunately that it has degraded to this point. (And one worries how much further it can go, before the whole thing implodes). The quest for shareholder value is on an unsustainable path. Unfortunately the high level execs will punch out well before they finish running the company into the ground.
The crux of the problem is that as traditional pensions have disappeared from the private sector, replacement plans have proved woefully inadequate. Fewer than half of the nation’s private sector workers have 401(k) plans, and more than a third of households have no retirement coverage during their work lives, according to the Center for Retirement Research at Boston College. ...
Working longer can help to rebuild savings, and, more important, allow one to delay taking Social Security, which improves the ultimate payout. As a practical matter, however, keeping a job is no sure thing. Workers ages 55 to 64 have been less likely than younger ones to lose their jobs in recent years; their jobless rate has averaged 6.1 percent in the past year, compared with 7.3 percent for workers ages 25 to 54. But when older workers become unemployed, they are much more likely to be out of work for long periods and less likely to find new jobs, while those who do become re-employed usually take a big pay cut. ...
More saving is clearly needed, along with ways to protect retirement savings from devastating downturns. The question is how. In addition to strengthening and preserving Social Security, the nation needs new forms of retirement coverage, along the lines of the “Automatic Individual Retirement Accounts” that President Obama has proposed in recent budgets, which would require companies that did not offer retirement plans to automatically divert 3 percent of an employee’s pay into an I.R.A., unless the employee opted out. A similar plan was recently proposed by Senator Tom Harkin, Democrat of Iowa.
But why not? Everyone's doing it, and everyone can't be mistaken, right? The common perception is that outsourcing saves money based on labor arbitrage. There may be other factors, but mainly companies do it in order to get more software, probably faster, for less money.
However, the economics of outsourcing are far less straightforward than the labor rates comparison suggests. There really is no such thing as "labor arbitrage" in software development. Unlike copper or wheat, all developers are not created equal, so you are not exactly trading commodities. Furthermore, outsourcing is definitely not without risk, as discussed below. So the concept of arbitrage doesn't apply, and with it goes the whole proposition. ...
And no, documentation won't completely remedy this: you can't really document everything about a system up front, and any written text is always subject to multiple interpretations. Plus, the market changes so quickly that, by the time your documentation is complete, it's typically obsolete and new requirements are driving a different system. Software development deals with tacit knowledge and emergent understanding. Again, hard enough in-house and even more challenging with an outsourcing supplier (think cultural differences, accents, communication barriers, etc.).
You'll learn, for instance, that software architects make more than managers -- a mean of $183,000 a year plus equity compared with $163,000 plus stock -- and that cash compensation across all tech companies is $112,000. Another curious finding: Despite the huge demand for engineers in Silicon Valley, jobs in the northeast pay more, presumably because companies are competing with Wall Street firms for talent.
That may not, however, be the case with the Republican presidential nominee’s other health-care proposals. A growing body of research suggests that his plans to repeal the Affordable Care Act and cut Medicaid funding would have a direct impact on the health care that seniors receive.
Repealing the health law would mean higher Medicare premiums, the Kaiser Family Foundation found in a recent analysis. Wellness visits and prescription drugs also would cost more. Although under the current law, reductions in doctor payments could create an access issue. ...
Health and Human Services estimates that Medicare beneficiaries paid $94 less out-of-pocket for hospital and doctor coverage this year than they would have without the health-care law. That number will rise to $572 in 2021 as the Medicare cuts grow larger. ...
Repealing the health law also would have an impact on Medicare’s “doughnut hole,” the gap between Medicare’s regular and catastrophic drug coverage, in which seniors are responsible for footing the bill. The average senior who falls into this space spends $604 on prescription drugs.
The health-care law changes that: It gradually eliminates the doughnut hole over the course of a decade. This saved seniors who fell in the doughnut hole an average of $643, according to Health and Human Services analysis.
While the reviews spared consumers $1 billion in rate hikes, the Department of Health and Human Services announced Tuesday, insurance commissioners and advocates say they would have saved consumers much more if government authorities in all 50 states could prevent insurers from going ahead with unjustified increases.
“At the end of the day, the companies can tell us to pound sand,” says Dave Jones, the insurance commissioner in California, one of 13 states where the rate reviews are not binding. “It’s very frustrating. Frankly, our hands are tied behind our back.” ...
When commissioner Jones found Aetna’s small-employer rate hikes unreasonable in April, the health insurance company ignored the ruling, raising those plans’ annual premiums by an average of 8%, and increasing some as much as 21%. “I have no authority to actually enforce a reasonable rate here,” Jones says. “At the end of the day, the health insurers and HMOs have the ability to set the rates wherever they see fit.”
But myths about the ACA abound. Some of the most persistent:
Today 40 percent of primary-care physicians nationwide are hospital employees, more than double the number employed by hospitals in 2000, according to Southwind, a Nashville, Tenn.-based consulting group that analyzes health-care trends. In 2000, only one in 20 specialists was a hospital employee; today nearly one in four is. Buying physician practices is a boon to hospitals because it helps them secure more patients and profits. Once employed, physicians admit their patients to the hospital they work for and also funnel patients there for tests and procedures. ...
"Doctors watch hospitals get higher payment rates, and they want in on that," said Dr. Robert Berenson, an analyst at the Urban Institute's Health Policy Center, a Washington think tank. "They find it attractive to work on high salary with productivity incentives, and get out from under the headaches of managing a practice." ...
"It doesn't matter what political party you belong to," said Dawn Lipthrott, a Winter Park family therapist and patient advocate. "If we're going to talk seriously about health-care reform, lowering health-care costs and Medicare viability, this is what we should be talking about. "Unbeknownst to everybody, these consolidations are doubling the cost of health care." ...
When hospitals employ doctors, they can layer in a "facility fee," which adds cost to a patient's visit without adding value, experts say. It's a practice few consumers are aware of. "Patients don't even know, quite honestly, and they aren't going to notice," said Cynthia Peterson, vice president of the Broward County Medical Association. ...
In its March report to Congress, Medcap, a government agency that analyzes Medicare policy, found that the cost for a basic doctor visit nearly doubled once a practice was purchased. Last year, a 15-minute visit to a doctor in private practice cost $69, including the $14 patient co-pay, the report said. That same visit to a hospital-employed physician cost $124. The patient portion rose to $25. At that rate, Medicare spending for doctors visits alone would increase by $2 billion a year, the Medcap report said.
In 2008, the hospital billed Medicare for the two most expensive levels of care for eight of every 10 patients it treated and released from its emergency room — almost twice the national average, according to a Center for Public Integrity analysis. Among those claims, 64 percent of the total were for the most expensive level of care.
But the charges may have more to do with billing practices than sicker patients. A Baylor representative conceded hospital billing for emergency room care “did not align with industry trends,” but said that the hospital since 2009 has reined in its charges.
The Texas hospital’s billing pattern is far from unique. Between 2001 and 2008, hospitals across the country dramatically increased their Medicare billing for emergency room care, adding more than $1 billion to the cost of the program to taxpayers, a Center investigation has found. The fees are based on a system of billing codes — so-called evaluation and management codes — that makes higher payments for treatments that require more time and resources.
Use of the top two most expensive codes for emergency room care nationwide nearly doubled, from 25 percent to 45 percent of all claims, during the time period examined. In many cases, these claims were not for treating patients with life-threatening injuries. Instead, the claims the Center analyzed included only patients who were sent home from the emergency room without being admitted to the hospital. Often, they were treated for seemingly minor injuries and complaints.
While taxpayers footed most of the bill, the charges also hit elderly patients in the pocketbook, increasing the amount of their 20-percent co-payments for emergency room care.
Drugmakers participating in Medicare agreed to give the government a 50% discount on premium drugs and 14% on generic drugs as part of the law, and the government passed those savings on to seniors. In 2012, the coverage gap - or "doughnut hole" - is $2,930. The law eliminates that gap by 2020. So far, no research has shown that the drugmakers have passed costs from those discounts on to other consumers, as some opponents of the law had feared.
Compared to last year, more patients have saved more money this year, Blum said. Through August 2012, beneficiaries have saved an average of $641.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth,” concluded a report by the Congressional Research Service released Friday. “Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.” ...
The study delves into the last 65 years of U.S. tax policy pertaining to high earning Americans — including top marginal rates on income and capital gains taxes — and how it impacts their decision-making. The conclusion: cutting effective taxes on the rich doesn’t boost economic growth, but it does correlate with rising income inequality.
Republicans who favor tax cuts as a way to boost the economy, and who believe the issue should be a political winner for the GOP, are wondering why Mr. Romney hasn't gained traction with his tax-cut plan. Some say he simply isn't promoting it well or arguing forcefully that it would bring economic benefits. ...
Some conservatives suggest the Romney campaign hasn't done enough to convince voters that his plan would boost economic growth. "I think there's an educational effort that needs to be made with the public," said Douglas Holtz-Eakin, a former economic adviser to GOP Sen. John McCain's 2008 campaign. "I don't think sufficient effort has been made on that front" by the Romney campaign.
There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what.
That forty-seven per cent does a lot of work, especially since the root idea—that that number of Americans don’t pay federal income taxes—is deployed so often as a distortion. The majority of them pay other federal taxes, like payroll taxes, which are highly regressive, or pay state taxes, or are retirees—many of whom will be voting for Romney. The perfect concentricity of the income-tax-paying and the Republican-voting circles does not bear scrutiny. But the pliability of that number also says a great deal about Romney’s world view—the transitive property of wealth—and will make it hard for him to say (though he tried) that he was only talking about his lack of concern for votes, not for lives. That forty-seven per cent of Americans, by virtue of their tax treatment, “believe that they are victims”; think they are entitled “to you name it”; and are not even persuadable on the question of voting for anyone with the tax policies Romney offers: they are thinking not about growth or their country but their little check. What they are entitled to, in Romney’s view, is only contempt.
And how can they stop being poor? Simply and only by taking “personal responsibility.” And this connects with something else Romney related in the video: the story of his own wealth.
I have inherited nothing. There is a perception, “Oh, we were born with a silver spoon, he never had to earn anything and so forth.” Frankly, I was born with a silver spoon, which is the greatest gift you can have: which is to get born in America.
Romney was the son of a governor and an auto executive who gave him a wealth of connections, a private education, college tuition, a stock portfolio that he lived on while in graduate school, help buying a first house. That he recognizes the value of none of these things is both dismaying and discouraging for anyone who thinks that he will be able to do much to actually encourage opportunity in America. He is clear enough about one difference money can make in life, when he tells those present, “Frankly, what I need you to do is to raise millions of dollars,” and talks about how many foreign customers his campaign consultants have had. But Romney did, in the video, talk about a disadvantage that he feels he has labored under: had his father “been born of Mexican parents, I’d have a better shot of winning this.”
This comment suggests a few things. First, it suggests that he really doesn’t know much about the country he inhabits. Who are these freeloaders? Is it the Iraq war veteran who goes to the V.A.? Is it the student getting a loan to go to college? Is it the retiree on Social Security or Medicare?
It suggests that Romney doesn’t know much about the culture of America. Yes, the entitlement state has expanded, but America remains one of the hardest-working nations on earth. Americans work longer hours than just about anyone else. Americans believe in work more than almost any other people. Ninety-two percent say that hard work is the key to success, according to a 2009 Pew Research Survey. ...
The people who receive the disproportionate share of government spending are not big-government lovers. They are Republicans. They are senior citizens. They are white men with high school degrees. As Bill Galston of the Brookings Institution has noted, the people who have benefited from the entitlements explosion are middle-class workers, more so than the dependent poor.
Romney’s comments also reveal that he has lost any sense of the social compact. In 1987, during Ronald Reagan’s second term, 62 percent of Republicans believed that the government has a responsibility to help those who can’t help themselves. Now, according to the Pew Research Center, only 40 percent of Republicans believe that. ...
The final thing the comment suggests is that Romney knows nothing about ambition and motivation. The formula he sketches is this: People who are forced to make it on their own have drive. People who receive benefits have dependency.
But, of course, no middle-class parent acts as if this is true. Middle-class parents don’t deprive their children of benefits so they can learn to struggle on their own. They shower benefits on their children to give them more opportunities — so they can play travel sports, go on foreign trips and develop more skills.
But tax reform should not come at the expense of progressivity. Income inequality is greater in the US than in the other developed countries of the OECD. The US tax system is considerably less progressive than it was a few decades ago and it does less to counteract pre-tax income inequality than other OECD systems.
Widening inequality is reflected in opportunity gaps between children born into different income groups and a decline in intergenerational mobility: an American child’s future income is more dependent on his or her parents’ income than in most other OECD nations. Mr Obama’s plan counters these trends. The Romney-Ryan plan exacerbates them. ...
Proponents of greater progressivity often call for an increase in corporate taxes but this would lead to slower growth and fewer jobs. The US has the highest statutory corporate tax rate in the developed world. Even after tax expenditures are included, its effective marginal corporate tax rate is one of the highest in the world. Business decisions about where to locate investments are responsive to differences in taxes and have become more sensitive over time. Of all taxes, corporate income taxes do the most harm to economic growth. ...
A more efficient and progressive way to pay for a lower corporate tax rate would be to increase taxes on dividends and capital gains. This would shift more of the burden towards capital owners and away from labour, which bears the burden in the form of fewer jobs and lower wages. Mr Obama proposes to raise rates on capital gains and dividends for the top 2 per cent of taxpayers. Most capital gains and dividends go to this group. Mr Romney would leave these rates unchanged for this group.
Thanks to the child tax credit and Earned Income Tax Credit, a fair number of working families with young children pay no income tax; thanks to the exemption on Social Security, many older Americans pay no income tax. But in middle age, close to 80 percent of the population pays income taxes, and even more, of course, pay federal taxes of some kind.
So the notion that almost half of our citizens are grifters isn’t just vile; it’s also based on a complete misunderstanding of tax realities.
It has proved difficult to find executives and management systems able to control the risk exposures of large financial conglomerates: even the halo above Jamie Dimon looks tarnished. To believe that the control these managers failed to establish will be achieved by the supervisory efforts of junior officials in public agencies is a delusion. Even if regulators had the technical competence, they do not have the political backing. Hotlines from bank boardrooms to ministerial offices are answered as promptly as ever.
When you think of class warfare, you probably think of inciting anger, resentment and jealousy among the have-nots against the haves. That’s what Mr. Romney has accused Mr. Obama of doing, but those charges have always been false. The truth is that Mr. Romney has been trying to incite the anger of a small slice of the richest Americans who need no government assistance but get it anyway, against the working poor, older Americans, the disabled workers and veterans, and even a significant chunk of middle-class Americans. ...
To Mr. Romney, that 47 percent consists of people who do not make enough money to be required to pay federal income tax. They are freeloaders, he said, “who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it.” It is not his job, he said, as a candidate nor apparently as president if he is elected, “to worry about those people.”
By his definition, those undeserving freeloaders include workers in low-paying, menial jobs (sometimes more than one job) who don’t even earn $9,750 a year, the amount at which they would start to owe federal income tax. Also included are older Americans whose Social Security pensions are too low to be taxed, disabled veterans and people who were maimed on the job.
This group also includes some middle-income Americans who make, say, $50,000 a year but are not required to pay taxes after they take advantage of child credits, marriage penalty relief and other tax breaks, many of which are part of the Bush-era tax cuts that Mr. Romney backs with a blind ideological fervor.
But, of course, Mr. Romney was not talking about the Americans who make so much money that they are able to avoid paying any tax at all or who, like him, are able to shelter their incomes in overseas banks or tax loopholes that permit them to pretend that ordinary income comes from investment and thus pay lower taxes. Mr. Romney has been paying, by his own account, about 13 percent to 15 percent of his enormous income in federal income taxes. Just compare that with your own tax return. ...
The right wing has long been whining about people who don’t pay taxes and who, therefore, don’t deserve a say in government. They have it backward. The shame is not that those people don’t pay income taxes. The shame is how many poor people there are when the top 1 percent can amass uncountable fortunes fed by tax breaks and can donate tens of millions of dollars to political candidates to keep it that way.
However, during the period in question, the NYSE allowed customers of its proprietary feeds to receive information from milliseconds to sometimes several seconds ahead of the general public. An article in the LA Times quoted a trader as saying that allowing this to happen was akin to letting those NYSE customer to see “who won a horse race and being able to bet before everyone else.” ...
Why did this happen? The SEC said that the NYSE’s internal system’s architecture (pdf) was designed in such a way that allowed its proprietary customers a faster path to the real-time market data than the public. ...
A former SEC litigator is quoted in the Wall Street Journal saying that although the fine wasn’t large, it was “meant to send a message” to all the exchanges that they need to be fair and non-discriminatory in their business practices.
If that was the intent, it’s likely to have the same effect as telling a teenager to clean up his or her room.
The buyers of the nine full-floor apartments near the top that have sold so far — among them two duplexes under contract for more than $90 million each — are all billionaires, Gary Barnett, the president of the Extell Development Company, the building’s developer, said this week. The other seven apartments ranged in price from $45 million to $50 million. ...
Since late last year, the “trophy” end of New York’s real estate market has been recording eye-popping sales that seem to have little basis in reality. The signed contract for the nearly-11,000-square-foot duplex on the 89th and 90th floors of One57 that sold for about $95 million topped the record sale in March of a penthouse at 15 Central Park West to a Russian billionaire’s daughter for $88 million. In June, Steve Wynn, the Las Vegas casino magnate, paid $70 million for a duplex penthouse apartment above the Ritz-Carlton.
Lose your job and you often lose your health insurance. Get sick without health insurance and you’re likely to understand what it is like to be impoverished.
Romney was talking about nearly half of Americans who work and worry about earning enough to support their families, pay rent or the mortgage, save what they can to send their children to college or invest for their retirement. He was not just talking about the poor but also about middle-income Americans. He was talking about seniors who rely on Social Security. He was talking about the disabled who can’t work and need help. And, yes, he was talking about some folks who could do more for themselves but haven’t for a number of reasons. ...
Big Mama, my grandmother, worked hard and made a decent living as a nursing assistant that allowed her to buy and pay off her home before she retired. She paid all her bills on time. However, she didn’t make enough money to afford health insurance for the five grandchildren she raised, including three with major medical issues. She received medical assistance from the state that covered the bills for my juvenile rheumatoid arthritis, a sister with asthma and a brother who had epilepsy.
My grandmother never saw herself as a victim. She did not have an entitlement mentality. She was one of the most financially responsible people I’ve ever known. Mr. Romney, Big Mama was not a moocher.
The vast majority of what Romney calls the "47 percent," the percentage of Americans who don't pay federal income taxes --which is really 46 percent, but who's counting -- are working poor, retirees and the disabled, including disabled veterans, along with students and some people suffering long-term unemployment after the Great Recession. As Bonnie Kavoussi and others have pointed out, many in this group still pay federal payroll taxes, likely at a higher rate than Romney's own tax rate. ...
According to the non-partisan Tax Policy Center, some 3,000 of the 76 million taxpayers that were expected to pay no federal income taxes in 2011 were members of Romney's cohort, making nearly $2.2 million per year, which puts them in the top 0.1 percent income bracket.
Another 24,000 taxpayers expected to pay no income taxes last year were in the top 1 percent income bracket, according to the TPC, making between $532,613 and $2.2 million per year.
How the heck does this happen? For one thing, as Kevin Roose at New York magazine points out, these wealthy earners benefit to an unusual degree -- as Mitt Romney himself does -- from tax breaks on investment.
Capital gains on investments are taxed at 15 percent, much lower than the top income-tax rate. "Carried interest" income, which Romney and other private-equity executives enjoy, is taxed at the capital-gains rate. And many wealthy taxpayers take advantage of a feature that lets them recognize past investment losses to lower or eliminate their tax bills.
From his perch high atop the class structure, Romney offered an analysis of political motivations that even Marxists would regard as excessively materialistic. He speaks as if hardworking parents who seek government help to provide health care for their kids are irresponsible, that students who get government aid to attend community colleges are not trying to “care for their lives.” Has he never spoken with busboys and waitresses, hospital workers and janitors who make too little to pay income taxes but work their hearts out to “take personal responsibility”? ...
And Romney said not a word about all the redistribution upward in a tax code that favors investment over labor income. That’s why Romney pays federal taxes at a much lower rate than do many in middle class — and why, given his stress on the importance of paying income taxes, he might usefully release a few more of his own tax returns. ...
But here’s the most important point Romney got wrong: Among the wealthy nations, it’s difficult to find one where people work harder than the United States. In a 2005 New Yorker article (written before the downturn), James Surowiecki noted that, compared with Europeans, “more people work in America, and since they work so many more hours, Americans create more wealth.” Yes, the riches enjoyed by the folks at that Boca Raton fundraiser were made possible in significant part by the strenuous efforts of proud, self-sufficient people, including many in the 47 percent.
Romney is not alone in this concern. “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Texas Gov. Rick Perry said when he began his presidential campaign. “We’re coming close to a tipping point in America where we might have a net majority of takers versus makers in society,” Rep. Paul Ryan said at the Heritage Foundation. “People who pay nothing can easily forget the idea that there is no such thing as a free lunch,” warned Rep. Michelle Bachmann.
For what it’s worth, this division of “makers” and “takers” isn’t true. Among the Americans who paid no federal income taxes in 2011, 61 percent paid payroll taxes — which means they have jobs and, when you account for both sides of the payroll tax, they paid 15.3 percent of their income in taxes, which is higher than the 13.9 percent that Romney paid. Another 22 percent were elderly.
So 83 percent of those not paying federal income taxes are either working and paying payroll taxes or they’re elderly and Romney is promising to protect their benefits because they’ve earned them. The remainder, by and large, aren’t paying federal income or payroll taxes because they’re unemployed. But that’s a small fraction of the country. ...
Part of the reason so many Americans don’t pay federal income taxes is that Republicans have passed a series of very large tax cuts that wiped out the income-tax liability for many Americans. That’s why, when you look at graphs of the percent of Americans who don’t pay income taxes, you see huge jumps after Ronald Reagan’s 1986 tax reform and George W. Bush’s 2001 and 2003 tax cuts. So whenever you hear that half of Americans don’t pay federal income taxes, remember: Ronald Reagan and George W. Bush helped build that. (You also see a jump after the financial crisis begins in 2008, but we can expect that to be mostly temporary.)
In a Bloomberg Television interview last year before he ended his presidential run and joined Romney’s campaign, Pawlenty said his “truth message to Wall Street is going to be, ‘Get your snout out of the trough’.” He was viewed as a potential Romney running mate before the former Massachusetts governor selected Representative Paul Ryan of Wisconsin. ...
Pawlenty, who campaigned as a “Sam’s Club Republican” concerned with issues affecting the middle class, will represent the interests of the large financial firms across a broad range of business, from insurance giants such as State Farm Insurance Cos. and money managers including BlackRock Inc. to payment networks like Visa Inc.
When Romney disclosed those views at a $50,000-a-plate fundraiser in Boca Raton, Fla., this year, he and his audience had no idea they were being surreptitiously recorded. Romney obviously believed he was among friends who shared his worldview, which I would translate as: “We must stop coddling the servants.” ...
To all the single parents holding down two minimum-wage jobs to make ends meet, all the seniors who saw their savings dwindle and had to go back to work part time, all the breadwinners who lost their jobs when private-equity firms swooped down to slash and burn — to all struggling Americans, it must come as a surprise to learn how irresponsible they’ve been. And it must be devastating to learn that, try as he might, Mitt Romney will never be able to show these unfortunates the error of their ways. ...
In an elegant dining room where the self-satisfaction was thick enough to cut with a knife, Romney made clear that he sees this election as “us” vs. “them” — wealthy Republicans vs. the unwashed hordes, makers vs. takers. Romney believes half of America is lazy, dependent and, frankly, not too bright.
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