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The Great Tax Con Job

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Republicans are using the T-word - taxes - to attack the Obama healthcare program. It's a strategy based in a lie.

A very small niche of America's uber-wealthy have pulled off what may well be the biggest con job in the history of our republic, and they did it in a startlingly brief 30 or so years. True, they spent over three billion dollars to make it happen, but the reward to them was in the hundreds of billions - and will continue to be.

As my friend and colleague Cenk Uygur of The Young Turks pointed out in a Daily Kos blog recently [1], billionaire Rupert Murdoch loses $50 million a year on the NY Post, billionaire Richard Mellon Scaife loses $2 to $3 million a year on the Pittsburgh Tribune-Review, billionaire Philip Anschutz loses around $5 million a year on The Weekly Standard, and billionaire Sun Myung Moon has lost $2 to $3 billion on The Washington Times.

Why are these guys willing to lose so much money funding "conservative" media? Why do they bulk-buy every right-wing book that comes out to throw it to the top of the NY Times Bestseller list and then give away the copies to "subscribers" to their websites and publications? Why do they fund to the tune of hundreds of millions of dollars a year money-hole "think tanks" like Heritage and Cato?

The answer is pretty straightforward. They do it because it buys them respectability, and gets their con job out there. Even though William Kristol's publication is a money-losing joke (with only 85,000 subscribers!), his association with the Standard was enough to get him on TV talk shows whenever he wants, and a column with The New York Times. The Washington Times catapulted Tony Blankley to stardom.

"Fellowships" and other forms of indirect sponsorship of right-wing talk show hosts have made otherwise-marginal shows and their hosts ubiquitous, and such sponsorships of groups like Norquist's anti-tax "Americans for Tax Reform" regularly get people like him front-and-center in any debate on taxation in the United States.

All so they could run a tax con on the American people, thus keeping Moon and Murdoch and Scaife and Anschutz (and others) richer than you or I could ever even imagine.

All of this money was spent - invested, really, since it's been more than saved back in low income tax rates on millionaires and billionaires - to convince Americans that up is down and black is white when it comes to income taxes. Here's how it works:

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Rich Person's Tax Effect

If a person earns so much money that he doesn't or can't spend it all each year, then when his taxes go down your income after taxes goes up. This is largely because there's little to no relationship between what he "needs to live on" and what he's "earning."

Somebody living on a million dollars a year but earning five million after taxes, can sock away four million in a Swiss bank. If his taxes go up enough to drop his after-tax income to only three million a year, he's still living on a million a year, and only socks away two million in the Swiss bank. His "disposable" income goes down when his taxes go up, and vice-versa. (Technically, the word is "discretionary" income for after-tax, after-living-expenses income, but "disposable" income has become so widely used as a phrase to describe discretionary income I'll use it here.)

The Rich Person's Tax Effect is the one that virtually all Americans understand - and, oddly, most working class people think applies to them, too (this is the truly amazing part of the con job referred to earlier).

But it doesn't.

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Working Person's Tax Effect - version one

Most working people spend pretty much all of what they earn - their "disposable/discretionary" income is close to zero. Savings rates in the US among working people typically are small - one to five percent - and during the last few years of the W. Bush administration actually went negative. So the take-home pay that people have after taxes - regardless of what the taxes may be - is pretty much what they live on.

As economist David Ricardo pointed out in 1817 in the "On Wages" chapter of his book "On the Principles of Political Economy and Taxation," take home pay is also generally "what a person will work for." Employers know this: Ricardo's "Iron Law of Wages" is rooted in the notion that there is a "market" for labor, driven in part by supply and demand. So if a worker is earning, for example, a gross salary of $75,000, his 2008 federal income tax would be about $15,000 ($802.50 on
first $8,025 of income; $3,687.75 on income from $8,025 to $32,550; $10,612.50 on income from $32,550 to $75,000), leaving him a take-home pay of $60,000.

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Thom Hartmann is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program on the Air America Radio Network, live noon-3 PM ET. His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People," "What Would Jefferson Do?," "Screwed: The Undeclared War (more...)

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Conservatives have been able to convince tens of m... by Don Smith on Tuesday, Jul 21, 2009 at 1:19:25 PM
today the uber-rich are spending hundreds of milli... by Rob Kall on Tuesday, Jul 21, 2009 at 2:50:10 PM
Its not just the Uber rich who con folks, its our ... by Tommytoons on Tuesday, Jul 21, 2009 at 3:45:38 PM
"Americans need to learn what Europeans know about... by michael murray on Tuesday, Jul 21, 2009 at 4:14:51 PM
Thank you Michael for speaking the truth!The probl... by Raphael Sidelman on Wednesday, Jul 22, 2009 at 11:13:00 AM
Thank you for the refresher. I am going to print t... by Johnny T. on Tuesday, Jul 21, 2009 at 5:26:18 PM
... by Don Smith on Tuesday, Jul 21, 2009 at 7:14:59 PM
Economists are in general agreement that credit av... by sesquiculus on Wednesday, Jul 22, 2009 at 12:13:06 PM
As always, the truth is 180 degrees from what the ... by Perry Logan on Wednesday, Jul 22, 2009 at 5:13:34 AM
Perry sez Re Clinton: " .......he lowered interest... by sesquiculus on Friday, Jul 24, 2009 at 10:10:20 AM
They won't believe you. They won't even listen to... by PrMaine on Wednesday, Jul 22, 2009 at 6:43:27 AM
Ya raise the tax rates on "the rich" too high and ... by sesquiculus on Wednesday, Jul 22, 2009 at 10:29:22 AM
Scientists have found that humans naturally have a... by wagelaborer on Wednesday, Jul 22, 2009 at 12:47:41 PM
You either don't get my point or are deliberately ... by sesquiculus on Wednesday, Jul 22, 2009 at 7:00:14 PM
Similar to previous ones, this last bursting bubb... by sesquiculus on Friday, Jul 24, 2009 at 9:41:36 AM
There are many myths that most American were bough... by Pulladigm on Wednesday, Jul 22, 2009 at 4:31:49 PM
Let's destroy the useless rich and their endless r... by John Hanks on Wednesday, Jul 22, 2009 at 6:52:59 PM
Good stuff.  But I'm convinced we should tax the ... by Michael Dewey on Friday, Jul 24, 2009 at 8:05:18 PM
Let's take the issues on one at a time.  From wha... by Devaron DLH on Friday, Jul 24, 2009 at 8:23:45 PM
What are we willing to pay for freedom? How about ... by Andy Hailey on Saturday, Jul 25, 2009 at 2:43:58 PM
6/16/08: "Hundreds of Super Rich Under Investigati... by trail the dogs on Friday, Jul 31, 2009 at 3:23:52 AM