What follows here is a simplified, clarified and abbreviated version of a recent Z Magazine article.
The programs and policies of the past three years have fundamentally failed to generate an economic recovery--except, of course, for the big banks, large corporations, and wealthy investors.
Meanwhile many in the middle class -- 100 million of us, including all the hourly wage earners and the 90 million households earning annual incomes less than $90,000 (Main Street USA) -- still languish in the economic swamp of our continuing recession.
Those suffering the worst are:
- the 25 million unemployed,
- the 10 million homeowners who have experienced foreclosures and bank seizures of their homes, with another million forecast to be added to their number this year
- the tens of millions of workers confronted today with declining real wages and with rising double-digit health-care premiums,
- the millions of students overwhelmed with accelerating education costs, insurmountable indebtedness, and ever more inadequate job prospects
- the tens of millions with shrinking pensions.
And now, about to join their ranks, are millions of public employees who, thanks to Republican zealots like Scott Walker, will soon find themselves hammered on all fronts. Meanwhile, all 115 million American households in 2011 will face accelerating costs for food, gasoline, and local government taxes and fees.
Raising Revenue For the Rich, the Hard Way
There is now more clearly than ever a two-tiered America--and the gap between the two tiers keeps getting wider. From 1980 to 2007 the wealthiest 1% of households saw their share of total income triple, from 8% of the total to a whopping 24% of the total, by 2007. What fundamentally changed after 2007 is that, in order to continue to ensure that the wealthiest 1% continue to increase their share of income, it is no longer sufficient merely to freeze income gains for the bottom 90%. Instead, income is now being directly transferred from the bottom 90% to the top 10%, especially to the top 1%, and even more especially to the top half of 1%. For that reason, programs to help children, the sick, the disabled and the elderly must be cut. Meanwhile, Republicans insist that obscenely profitable oil companies should not have to pay any royalties on their hundreds of billions in oil profits, thus costing taxpayers an additional $53 billion over the next decade.
Also, it should be pointed out that this widening income and benefits gap is a highly conservative estimate. For example, the IRS data on which it is based does not account for income received by the wealthiest households and corporations if it is not reported to the IRS--I refer of course to income that is diverted offshore in order to avoid having it taxed.
Multinational corporations admit that nearly a trillion dollars of theirs has been shifted to offshore subsidiaries, using corporate accounting tricks, in order to avoid paying U.S. corporate taxes on it. If that trillion was effectively taxed at the 35% corporate tax rate, it would produce a tax revenue windfall of about $350 billion. The remaining $650 billion (remaining from the original trillion), repatriated back onshore, to the U.S., would then be reinvested here in the U.S., instead of offshore, thereby being allowed to create additional revenue, in the form of profits of perhaps $100 billion a year. And those additional profits could then raise an additional amount of government annual tax revenue of about $35 billion ever year for each of the next four years.
Even greater, however, is the amount that wealthy households, investors, and small companies have diverted to offshore tax havens. In 1985, it was estimated by the investment bank Morgan Stanley that $250 billion of their money was stashed away in offshore tax havens. In recent years, however, the estimates have risen to anywhere from $6 trillion to $11 trillion, worldwide.
The share of that global total that is held by U.S.-based investors, wealthy households, and corporations, is at least 40% (of the global total) -- somewhere between $2.4 and $4.4 trillion. Much of that is held offshore by institutional investors like hedge funds and other private banks, on behalf of wealthy individuals and the institutional investors they represent. It therefore follows that the wealthiest U.S. households probably have diverted between $1 and $2 trillion to these offshore havens as a means of avoiding U.S. taxes. Assuming that figure to be $1.5 trillion, and also assuming a 35% top marginal tax rate, that's about $500 billion in new tax revenue that could be generated immediately, just by ending the offshoring. Then, assuming the profits from the remaining trillion dollars amounts to an additional $150 billion for the year, the tax revenues thereby generated would be about $50 billion a year after that.
Based on these two tax changes alone, the total new tax revenue raised comes to around $850 billion in the first year and $85 billion a year, thereafter, for each of the next four years, or another $340 billion.
Still a third tax could be levied on excess corporate cash. From his first stimulus program introduced in early 2009, it has been clear there never really was any intent by the Republicans in Congress to directly create jobs. The strategy from the outset was to bail out the banks and big non-bank corporations facing bankruptcy. It was said by the Democrats that if the banks were bailed out, they would then lend to businesses, which in turn would invest, hire, and create jobs. Instead, however, the banks have insisted--for nearly two years now--on hoarding the $1 trillion in cash that the bailout helped them accumulate.
Meanwhile, non-bank big corporations are hoarding another $2 trillion.
The disappointing result of this hoarding is that private sector businesses in 2010 hired only about 1 million of the 25 million unemployed, and about two-thirds of those few who were hired received nothing more than part-time and/or temporary jobs!