It takes a lot to get me to write about the opinions of The Wall Street Journal because they are so consistently ideological and out of touch. To find out what they say, I can usually skip a step and just read Karl Rove's daily talking points. But last Friday, WSJ personal finance columnist Brett Arends wrote a column that just begs for a fact check, so here it is.
Mr. Arends, who apparently provides financial advice to all comers, completely misses the point about the proposed Millionaires Tax of 2012, which would raise taxes on those earning more than a million dollars a year here in California. And just to be clear, the point is that the uber rich can and should pay more to make the society that benefitted them so handsomely last longer and work better.
Mr. Arends wrote about the measure only because the 750,000-member Courage Campaign created a video highlighting Kim Kardashian's $12 million income (2010 Forbes estimate) and promoting the idea that she could pay more in taxes than someone who makes $47,000. That's a pretty simple premise, incontrovertible we thought. But not to Mr. Arends. Let's look at his arguments one by one.
1. Mr. Arends says, "the (Courage) campaign has the Californian (sic) tax rates wrong... someone earning $47,000 a year wouldn't pay '9.3%' state income tax. That's just their marginal rate -- the tax on the last dollar earned."
Our ad says that Ms. Kardashian pays a 10.3% tax rate; an average taxpayer who makes $47,000 pays 9.3%. Income tax rates are calculated on "marginal dollars," meaning that the tax rate in question only applies to each dollar of income over a certain amount. In this case, he's up in arms because Ms. Kardashian pays 10.3% on every dollar she earns over $1 million, while a middle-class person making $47,000 only pays 9.3% on each dollar over $46,766. (If you're curious, the term "middle-class" generally applies to an individual making between $19,000 and $91,000).
I guess Mr. Arends would have preferred a video with this text: "Kim Kardashian's marginal tax rate for the last 11 million of her 12 million dollars of annual income in 2010 is 10.3%. A middle-class Californian's marginal tax rate for each dollar of income over $46,766 is 9.3%. Do you think that's fair?" Of course, we could have done that, but why? It only confuses the issue, and most people (unlike the super rich) pay their fair share in taxes and understand what a marginal tax rate is. We thank Mr. Arends for clarifying and underscoring how much our current system overtaxes the middle class.
2.
The Courage Campaign is mixing up two different things: The tax rate and the actual amount of taxes paid... Kim Kardashian would have paid about 56,000% more in taxes than a middle-class Californian, not 1% more.
Ms. Kardashian's total tax bill is bigger than someone who makes less than she does! Well, Ms. Kardashian's $12 million income is 255.32 times more than the middle-class earner of $47,000! As I told Mr. Arends on the phone, that's why we have tax rates and not established dollar amounts for taxes. Here's how tax rates work. If Ms. Kardashian were to buy a $500,000 Rolls Royce, she'd pay $42,500 (at 8.5%) in sales tax. If a middle-class taxpayer bought a 10-year-old Ford for $5,500, he'd pay $467 in sales tax, which -- as Mr. Arends points out -- is less than the sales tax paid on the Rolls Royce.
But here's the point: that $467 is about 1% of the middle-class guy's income, but that $42,500 in sales taxes is only about .004% (four hundreds of one percent) of Ms. Kardashian's income, demonstrating yet again that sales taxes are more regressive than income taxes.
3. But this one is my favorite. Mr. Arends decided to argue about federal taxes when our state ballot measure obviously cannot do anything about federal taxes. We wish it could, but alas, it cannot. So Mr. Arends decided to guess how much in total taxes, largely federal, Ms. Kardashian might pay on her income (as estimated by Forbes magazine) and suggests that we left that out to mislead.
I'm still scratching my head over this one, because Mr. Arends quotes me saying, "...as Kim Kardashian pays a higher federal tax rate than a middle-class Californian family, she may be able to write off more of her Californian state taxes, meaning her effective rate might actually be lower." News flash: State income taxes are deductible against federal income taxes, so the more you make, the lower your effective state tax rate. Who knew? Of course, this only furthers our case that Ms. Kardashian should pay a higher rate of state income tax.
4. Finally, here's the old-saw argument. "...Presumably she (Ms. Kardashian) can wiggle that asset (her figure) to another state if California hikes its taxes too high. Then the state will get 100% of nothing." Except that study after study, including this one from Stanford and Princeton, shows that state taxes do not drive the uber rich to relocate. It happens so rarely as to be insignificant.
I had never heard of Mr. Arends before he called me on Thursday, so I did some reading of his old columns. He actually seems like a pretty decent guy who dishes up practical advice, things like "Pay off your credit card" and "Don't take on debt." In one article, he even suggested that underwater homeowners not pay their mortgages. But, as with anyone who has to get attention for his writing, he goofs sometimes, missing the forest for the trees, as he did with the Kim Kardashian video, with which he wants to pick nits (which he fails to do) rather than attend to reality. It's noteworthy that this column generated hundreds of comments, not nearly so many as the one he wrote in February 2008 entitled "Investors Should Step Back and Look at Shaken AIG." Suggesting that AIG might be a good buy, he said, "The likelihood of serious accounting problems has to be remote, for one very good reason: Eliot Spitzer, the New York governor who was then the attorney general, went in there with a magnifying glass during the corporate governance probe three years ago. The company went through a pretty intensive house-cleaning that cost Mr. Greenberg, longtime CEO, his job."
I hope Mr. Arends will step back and look at what the Millionaires Tax of 2012 is all about, not just try to defend a tax code that helps the uber rich while punishing the very middle class he says he advises. Had he done that with AIG, he might have noticed that the very CEOs who undid an entire economy were the forest, while he busily focused on the trees.
Restoring California is a broad coalition of educators, unions and community groups looking to restore critical funding to schools and universities, essential services for children, seniors, and public safety, as well as start rebuilding the state's crumbling roads and bridges. It asks the wealthiest Californians -- people who earn over a million dollars per year -- to pay their fair share to help rebuild the state. Follow us on Twitter at @Restore_CA and like us on Facebook at "Restore California -- Millionaires Tax of 2012."
Follow Rick Jacobs on Twitter: www.twitter.com/rickjacobs
It is so tiresome to read the comments here and elsewhere that say that we have to treat the very rich with kid gloves because they will abandon us if they are asked to give up some of their excess.
Apparently the wealthy today are not willing to pay even a portion of the tax burden they used to pay when California and America were strong.
And as a consequence we have lost that strength as we snack upon our seed corn and fail to invest in our future.
The only way to fix this income redistribuÂtion is:
1. Tax all income at exactly the same rates. The income of the super rich (capital gains and dividents) should be taxed at the same marginal rates as regular income - just as when federal taxes were originally introduced in the USA.
2. Close ALL tax shelters and loopholes that the super rich use to hide a large part of their income.
3. Reform the AMT to only target the super rich - as originally intended! Now the AMT mostly targets the middle class!
4. Introduce new tax brackets for incomes over $1M and $10M. When federal taxes were originally introduced in the USA only incomes of over $1.2M (in 2011 adjusted $) were taxed, at progressivÂe rates, but now there is not even a separate tax bracket for incomes larger that $1M.
The top 0.1% are now paying 15% in taxes (and only on income that they cant hide), while 15 years ago they paid 30%, and 30 years ago - the paid 45%!
.004% is four thousandths of a percent, and .4% is four-tenths of a percent.
I would encourage people to look for work overseas. It's not perfect but it's a heck of an adventure, good money, and a chance to travel and broaden horizons. First 93K is tax free. Don't let the same people who steal your money every year tell you that you have to weather the storm that they created and contribute more for the honor of doing so.
How much of what I make will satisfy you? Give me a percent. No one else ever does so you can be the first. 40 K a year's clearly not my "fair share" so what percentage of my earnings should the government take from me by force of law?
and I didn't say it thrived because of the high taxes. I said it thrived IN SPITE OF the high taxes, which Americans realized were necessary back then and the Republicans of today keep telling us will somehow destroy the economy.
I dropped my subscription when Murdoch took over, after subscribing for over 30 years.
Glad I did.
There is a scientific reason for your observations. I noticed it myself and after a year or so began to investigate WHY? this was happening. Apparently, conservative leaning thinkers process most information through parts of the amygdala, while liberals use a greater portion of the cortex. Since the amygdala was more helpful in cave man times it's not a good portion of the brain to process facts and logic. If you were to google "political leanings and neuroscience" you'd see dozens of reports done with fMRI's that will explain all. I think you'll find it fascinating.
Liberals = Free Thinkers & Modern Day Rennaissance Men
Can you try that again..but this time see when someone talks of the need for logic, then if you were logical, your come back would NOT be "what's wrong with black and white logic as you state? See, I said there's nothing wrong with logic. I said that logic is what you all NEED to start using. OK, is this like a "punk"...like "Candid Camera"?
I don't know if you meant to be serious or what...lol...but if serious, you need to read this whole thread again and try one more time.
I also find Mr. Jacob's faux indignation about having to read and rebut the WSJ absolutely hilarious. It's so beneath the "Chair of the 750,000-member Courage Campaign" to address criticisms circulated in the newspaper with the nation's largest subscription base (over two million, more than twice that of the NY Times). The nose-holding show of contempt is pure comic gold.
Now it's owned and operated by Murdoch.
But the author wasn't putting down the WSJ, just the WSJ opinion page, which is so far right it falls off the end of the flat earth it believes in.
Is there a difference these days? I mean I know there are many people who are wealthy and try to pay their fair share. but all the talk, the talk fro right wingers is about being self righteous tax cheats and then blaming poor people for being poor. That’s it, that is their narrative. Ham-handedly spun by them.
Another take on this here.
http://mises.org/daily/5861/Defending-Kim-Kardashian
Those who value Kim Kardashian are choosing to have her make that money. But when did Kim Kardashian choose to give that money to the state? Oh, apparently that doesn't matter, because you have to "make the society that benefitted them so handsomely last longer" something worthy of involuntary confiscation that is apparently unquestionable..
Why do we take this seriously? Why is it necessary that violence and threats be used to confiscate wealth to pay for services run by a monopoly?
If I don't like Kim Kardishian I merely need to not spend one dollar towards her, but if the state runs something I have to pay whether I think the service sucks or not.
I don't want to implement anything. I want people to be free to pay for what they want to pay for, and not pay for what they don't. The amount infrastructure "should" cost is subjective, just like the amount of value anything has.
But when I say "free" I don't mean people can't enter obligations that require a service fee/etc. Obviously that's permissible as part of a contract or agreement, but they actually have to voluntarily make it.
However, would people voluntarily choose to pay for all the services that California offers? I have extreme doubt. Many of them I'm sure they would pay for, but would be better served without those services being performed by a monopoly.
I'm sure that's happened many times. If you are well-connected with thugs and they keep your store in operation while closing your competitors who won't bow to them it looks pretty good. Just don't get on their bad side.