Flat tax flounders

By Carl 

Inherent in the current sooper sekrit budjit soopercommittee Congress is setting up in response to the budget crisis, a re-write of the tax code is inevitable.

The time has come for an overhaul of the tax code, to be sure. Right now, taxes on the rich are the lowest they have ever been since Herbert Hoover was president (You'll notice the bookend of terrible unemployment and low taxes on the wealthy, too.) The effective tax rate on the wealthiest one percent (i.e., the rate the wealthy actually pay in total, after deductions, deferrals and exemptions) is the lowest it's ever been.

In turn, deductions that are available to the middle class that promote what had been good public policy (for example, the mortgage interest deduction in order to encourage home ownership) have become warped and twisted to such an extent that they actually create bad public policy. The recent collapse in the housing market is a terrific example of too much of a good thing, in terms of taxes. It only occured after the right to deduct the first $125,000 off the gain on the sale of a home, which had been limited to senior citizens as a one-time-only deal, was expanded to include practically the sale of any residence.

The alternative minimum tax (AMT), originally devised to ensure that the wealthiest pay a fair share of their income in taxes, has become a bane of the middle class. It was never indexed when first implemented in 1986 (at the $30,000 threshold for individuals, $40,000 for a married couple) and only peaks this year at $48,450/$75,000. It drops again next year to $33,750/$45,000. The AMT penalizes people who live in expensive states with high taxes, people who own homes (it phases out the mortgage interest deduction,) and/or have children, and people who like to give money to charity to lower their tax burdens.

It is, in other words, effectively a flat tax of 26% (28% if your income is over $175,000).

Which leads me to today's topic: the flat tax.

Now, given that there are so many "libertarians" who would call for a flat tax in the midst of this rigamarole, I thought it would be a useful prophylaxis to examine why it's a bad idea.

First and foremost, the flat tax is highly regressive, penalizing the poor while subsidizing the wealthy. On it's face, it seems fair (this is part of why many have euphemistically called it a "fair tax"). After all, dollar one gets taxed at, say, 10%, dollar one hundred at 10%, dollar one million at 10%. The guy making a million pays $100,000 in taxes. The guy making $100 pays $10.

Flip the numbers, though. The guy making $100 is left with $90 to buy food, clothing, shelter. The guy making a million is left with $900,000 to buy the same things. Granted, the millionaire is likely to buy more expensive stuff, but here's the thing: he has a choice as to how much he can spend, but not how little. It's that last part, how little to spend, that comes into play.

The guy left with $90 has to meet a threshold to feed, house and clothe himself. Let's say that will cost him, in total, $80. He's left with $10, and must make a choice what to do with the rest of his money: put it away for retirement, splurge on a movie, save it for a rainy day. The guy making a million, also spending that $80, is left with $899,920 to just go nuts.

How is this subsidizing the wealthy? Glad you asked. Unless you want to assume private roads and private infrastructure, the government is going to be the one who wires the community, who paves the roads, who builds the subways. You'll notice the poor soul can't afford a car and walks to work, yet his taxes are paying for things he can't possibly avail himself of, much less benefit from.

A guy making a million bucks is part of a population that is less than one half of one percent of the whole. Good thing, too, because it will take 10,000 people making $100 bucks to equal his income (and to be fair, his tax liability).

None of whom can benefit from the spending that he benefits from.

So it's regressive in terms of the actual taxation, but also regressive in terms of the benefits derived from that taxation. The poor will receive less from the government than the rich under a flat tax system, by definition.

Too, the income tax helps mask another annoying fact of the American tax code, which is that other taxes are highly regressive: sales taxes, property taxes, excise taxes, tolls on highways, mass transit fares, all have to be paid by rich and poor alike in direct proportion to the value of the benefit obtained, which means the rich skate by yet again on the backs of the poor.

There are other reasons the flat tax is a ludicrous proposition. For one thing, it discourages savings, since that would become effectively a double tax: you're taxed on the wages and the interest earned on the money you've socked away. It discourages investment in businesses, for similar reasons. It discourages saving for retirement, since the income that is building towards that is taxed now.

Some might argue, well, Social Security would be off the table. OK, except that the employer portion is taxable at the corporate level (since we're flat taxing all income, no restrictions) so you're double taxing the same money. Revenue is fungible. It doesn't matter how it's apportioned.

Plus, you'd have to raise Social Security taxes to cover the now-heavily-reliant population. And that means wages would now be double taxed even more heavily (you pay SSI and Medicare tax on gross income. You pay income taxes on gross income).

In other words, a flat tax would kill the few American businesses still left.

Lower the corporate tax rate to compensate? American corporations already pay a marginal rate that's among the lowest in the world, and the effective tax rate of the corporatocracy is (based on the Fortune 500) about 18%. So if anything, a flat tax would raise taxes on corporations. Not a bad thing, in my book, but you can bet your bottom dollar ExxonMobil would disagree vehemently, and continue to offshore money.

Proponents of the flat tax point to the success it's had in other countries (Montenegro and the bankrupt Iceland, neither of which is an economic model I'd choose to follow in any other respect), conveniently forgetting that no state that currently has a flat tax had to transition from a progressive taxation to the flat tax.

And in many of these countries, adding in the equivalent of the Social Security tax raises their tax levels *higher* than many if not most states with progressive rates.

It seems to me the Clintonian shibboleth about welfare -- "mend it, don't end it" -- applies to the progressive tax system, too.

(Cross-posted to Simply Left Behind.)

The Koch funded echo chamber

By Creature

If I was still blogging, I'd so post this video. Well, since I still have the keys here at The Reaction, what the hell.


[Via Digby]

Living in pain is easy; dying with dignity is hard -- a review of How to Die in Oregon

By Edward Copeland

In 1994, Oregon became the first state to allow doctors to prescribe lethal doses of medication to the terminally ill so they wouldn't have to endure all sorts of crippling pain and the assorted loss of functions and powers that turned lives into something that could hardly be called living anymore. Tonight, HBO premieres the great documentary How to Die in Oregon, which personalizes the law, telling the stories of several Oregonians who weigh the option of whether or not to end their suffering. It's a powerful, emotional film that hits particularly close to home for me. It's also something everyone should see, especially in a time when compassion and rationality on a wide variety of issues seem to be in short supply.

Sometimes it's difficult when reviewing a movie — narrative or documentary — such as How to Die in Oregon that you know will deal with issues that are important to you. It makes critical distance harder to have. On the other hand, if you feel the film (or play or TV show for that matter) botches the presentation, you're liable to be harsher than you would be otherwise. Thankfully, that's not the case with How to Die in Oregon.

The documentary opens with a home movie of Roger Sagner, who became the 343rd person to have his suffering ended legally after the passage of Oregon's law. As his lethal dose of Seconal gets mixed for him, his volunteer from Compassion and Choices, the advocacy group that helps most people with their final act, asks him the two questions that they are required to: "Do you know you have the right to change your mind? and "What will this (drink) do to you?"

Sagner answers very quickly, "It will kill me and make me happy." He then gives his last words, first of love to his gathered family members, and then his final statement:

I thank the wisdom of the voters of the state of the Oregon for allowing me the honor of doing myself in on my own volition to solve my own problems.

What I wouldn't give if the wisdom of Oregon voters could somehow be bottled and slipped into the entire country's water supply, since we have a short supply of rational-thinking adults. Oregon also legalized medical marijuana, which has shown great progress in easing the pain for people such as myself who have multiple sclerosis, but then again 15 other states and the District of Columbia have joined Oregon on that law. Unfortunately, I'm stuck in a state which has a governor and legislature doing its damnedest to drag us back to the 19th century, prior to its and which on the last General Election ballot had as a priority a state question making sure that no state judge used Sharia law in making rulings.

When Oregon voters approved its Death With Dignity law, only the countries of Switzerland and the Netherlands had legalized the practice. Since then, forward-thinking voters in Washington state and Montana also have approved such laws. Worldwide, Luxembourg is the only country to legalize it since. Worldwide, debates go on everywhere, but they always run into the same opposition, usually from churches and the religious, who most of all should watch How to Die in Oregon and maybe they'd understand this is about compassion — and isn't compassion a basic tenet of most religions?

The film was directed, produced and photographed by Peter D. Richardson and won the Grand Jury Prize for Documentaries at this year's Sundance Film Festival. I don't know its competition, but How to Die in Oregon definitely proves award-worthy. Richardson establishes an amazingly intimate rapport with the film's interview subjects. His main focus stays with a 54-year-old woman named Cody Curtis who successfully beats liver cancer once only to have it return stronger and with a six-month death sentence attached, making Curtis face the idea of taking the lethal dose when the cancer returns.

Given an expiration date and knowing what kind of pain she faces, Cody decides that she won't let cancer and doctors control what remains of her life and she sets a date to take the lethal dose, which gives her an unexpected sort of freedom, even though her entire family isn't happy about it, especially her son Thomas, who asks his mom if she won't struggle for herself, can't she struggle a little for him?

Thomas moves past that, but that's what prevents laws such as Oregon's from being the law everywhere — friends and family, partly out of love but out of selfishness as well — can't bring themselves to accept the idea of their parent or child or whomever choosing to die, even when they witness the amount of pain that person goes through for long periods of time and know deep inside that it only get worse and that person's life will not end well under any scenario.

Before we meet Cody, the film introduces us to Sue Potter, a seven-year volunteer for Compassion and Choices and one of the group's most active. We see her make one of her first stops to a man lying in be, obviously having a particularly bad day. Potter explains to him that she's there to talk with him because he's contacted the group about ending his life.

"End my life? I'm already in life," he tells her. "I've already ended life. I want to exit life."

Potter explains what it's like for people who get to these conditions. "These people have lost so much control and they'll tell us repeatedly that they want the medicine for control."

The actual process requires filling out a form with the extremely long title REQUEST FOR MEDICINE TO END MY LIFE IN A HUMANE AND DIGNIFIED MATTER. It requires the signatures of two witnesses attesting that the person seeking the lethal dose is of sound mind.

As Cody Curtis says at one point in the documentary about having the lethal prescription in her house, should she need it:

It's very comforting to know they're here. I don't have to go through any more bureaucracy... They're here when I decide... It's not like when I'm in the hospital and they tell you, "You have to have another CAT Scan" or "We're taking you down for another procedure." It's my choice when to take them and whether to take them. My volunteer has told me I'll know and I'll just have to trust her on that. I'll know when my life isn't worth living anymore.

While the film keeps Curtis as its center, it has plenty of time for sidetrips to other dying people, interview subjects such as Derek Humphry, author of the once controversial book Final Exit, as well as Seattle's Nancy Niedzielski who leads the campaign for a similar law in Washington.

Niedzielski's story really illustrates the need for such laws. Her husband Randy was diagnosed with brain cancer. Nothing doctors could give him would alleviate the pain and the condition got so bad sometimes his eyes would literally pop out of their sockets. Randy finally decided to end treatment, since none of it was going to save his life or ease his pain. He went to a hospice and asked if they could help him do what they could to end his life quickly, but the hospice workers said they couldn't because that was illegal in the state of Washington. Randy told them that he would move to Oregon so he could take advantage of the Death With Dignity law, only he was told that he was so weak and near death by then that he wouldn't survive long enough to establish Oregon residency, a requirement of the law. His last request was that his wife change Washington's law and she helped lead the campaign for two years until its passage in 2008.

You get to see the usual opposition as when Nancy serves on a phone bank and gets an opponent of the law's passage and actually challenges the caller on what so many people don't seem to understand on any issue: They are free to think it's wrong, but why do they think their belief should be imposed on everyone else? Why is the idea of choice (and I'm not using it in terms of the abortion debate here) so revolting to them? You also see Nancy interviewed for a radio program where the host calls what she is seeking "assisted suicide," a term which offends Nancy and most others who support Death With Dignity. Nancy tells him that suicide is when someone who is otherwise healthy and would live for many more years decides to end his or her life because he or she is clinically depressed. Unfortunately, in the 47 states that don't have this law, that's how they treat people who are in chronic pain: as if they are just depressed and need shrinks and medication, like a teenage boy whose girlfriend just dumped him.

It also has something to do with what you hear in passing in a segment that plays excepts of the Washington debate on talk radio where a man talks about having to be placed in long-term care and how it's eating up his inheritance. Not that I ever had a fortune in savings, but I've watched it evaporate thanks to my medical costs. It doesn't help that my sole income is Social Security Disability Insurance and for two years running, Social Security recipients have been denied cost-of-living increases under the argument that the rate of inflation hasn't been high enough to justify it. Of course, this hasn't prevented Congress from giving themselves cost-of-living hikes to their six-figure salaries both of those years.

Then there is Medicare. Part A the "hospital part" is free, but if I wanted Part B, I would have to pay a premium which would be deducted from my meager Social Security check. On top of that, one of my doctors won't take Medicare patients and others are threatening not to because of talk that their fees might be reduced. Therefore, I didn't take Part B, staying on the health insurance that was funded by my employer who still considers me an employee on long-term disability, even though I receive no salary. The government tries to blackmail you into taking Part B, telling you that for each year you don't sign up, the premium will increase a certain percentage for every year you didn't. As far the increasing number of doctors who refuse Medicare patients, Lawrence O'Donnell pointed out last week that in 1960, before Medicare, the average family doctor's salary was $10,000. Just four years after Medicare's enactment, that average had increased to $24,000. Today, that average is something around $130,000 a year. For specialists, it's about $333,000 a year. And these poor babies fear cuts. By the way, Part A, the "hospital part" only covers you if you are admitted to a hospital. If you have outpatient procedures at a hospital or are taken to an emergency room at a hospital, that doesn't count. That's Part B.

The entire health-care industry, with the government as co-conspirators, opposes laws such as Death With Dignity because they want to bleed everyone dry first. The system for people who are chronically ill but not terminal actually is set up so that you really can't get financial help unless you are broke first. That's what they want: It's how the system is set up. Pardon my digression. I'm writing this to praise a wonderful documentary on an important topic.

Oregon isn't immune from this either. How to Die in Oregon also tells the infuriating story of Randy Stroup, a 53-year-old uninsured man diagnosed with prostate cancer who had to depend on the Oregon Health Plan. After his first treatment, his doctor recommended stronger chemotherapy and the health plan sent him a letter denying the treatment, but giving him a list of other options, including the Death With Dignity Act. This was a man who wasn't terminal and could be saved.

"To think they'd put a price tag on my life," Stroup said, "by saying they'd pay to kill me but they wouldn't pay to help me." Sounds very reminiscent of when Arizona recently cut their program for people awaiting transplants. One way or the other, it all comes down to money in the end.

The center of How to Die in Oregon and much of its power belongs to Cody Curtis' story. After setting a date to take the medication, she find a happiness and freedom. Instead of everything revolving around her impending death, it becomes about life again and she ends up not taking it on the date she set and actually living beyond the six months she was told and with few signs of the pain she feared. It's as if she's been given a gift and gets more time with her husband and children, but eventually the cancer does kick in with its pain and complications. As she had said before after her brush with the disease, it's a relief to know the medication already is there in her house when she needs it and it's up to her to choose when that time is. Director Richardson's choice in filming the conclusion of Cody's story proves both perfect for the documentary and for Cody as well.

From beginning to end, Richardson's compelling documentary takes you on an emotional roller coaster. It would have been easy to turn How to Die in Oregon into a propaganda piece supporting Death With Dignity laws, but he just lets his subjects talk and the audience has the experience. No embellishment is necessary.

How to Die in Oregon premieres on HBO tonight at 8 p.m. Eastern/Pacific and 7 p.m. Central. Truly, it should not be missed. 

(Cross-posted at Edward Copeland on Film.)

This day in history - May 1, 1894: Coxey's army reaches Washington, D.C.

By Richard K. Barry

 

On May 1, 1894, "Coxey's Army," a protest march of unemployed workers led by Jacob Coxey, a populist leader from Ohio, arrived in Washington, D.C. The march took place in the second year of a four-year economic depression, which was the worst in United States history up to that time and prior to the Great Depression considered the worst the U.S. had ever experienced.

The intention of the march was to protest unemployment caused by the "Panic of 1893" and to press the government to create jobs by building public works projects.

Economic instability was largely attributed to railroad overbuilding and questionable financing, which created bank failures and a credit crunch.

Railroad bubble. Housing bubble. Pick your bubble.

And then, of course, there was that whole bimetallism thing, but that's too much to go into here.

Although the march was a failure in attaining immediate goals, it did contribute to a process that led to unemployment insurance in the future Social Security Act.

Memo to Republicans: Markets have always been far from perfect and government intervention has frequently been required to help make things right.

(Cross-posted to Lippmann's Ghost.)