Via stltoday/news/opinion/columns/the-platform/editorial-money-hogging-is-hurting-missouri-s-economy/article_7555eeba-2277-5c6d-aae8-f741be5865c4.html The credit rating agency Standard and Poor’s reports that growing income inequality is making it harder for Missouri and other states that depend heavily on income taxes to pay their bills. Why is that? When fewer people have more of the money, and when nearly everyone in the state is taxed at the same 6 percent rate, state revenue can’t keep up with the demand for services. And with ever more people needing help from the state (because the people at the top are keeping money that used to be distributed through good jobs), the problem snowballs. Polls show that at least two in three Americans regard growing income and wealth disparities as a problem. And most think the government has a role in fixing it, though they don’t think it’s as important as creating jobs and paying down the national debt. More about that irony shortly. For the moment, let us note that most Americans vaguely agree that income inequality is a problem. But when Republicans say that fixing it would mean income redistribution — socialism! — Americans are against that, too. Income inequality needs a better name. Let’s call it money-hogging. Connect some dots: If corporations were expanding and reinvesting income the way they did in first three decades after World War II, there’d be far more jobs. If wealthy corporations and people paid a fair tax rate, the national debt wouldn’t be so high. In the 1970s, corporations retained and reused about 60 percent of their profits. Today that’s about 10 percent, reports economist William Lazonick in a Harvard Business Review article titled ”Profits Without Prosperity.” Stock prices and dividends are up, the Dow’s above 17,000. In 2007, 90 percent of America’s stocks, bonds and mutual funds were owned by the wealthiest 10 percent of Americans; the top 1 percent owned half of them. Stock buybacks are increasingly popular; companies use their cash to buy their own shares. This inflates the value of stocks, which rewards executives whose bonuses are tied to stock prices. For companies, bonuses are tax-deductible as business expenses, which is more money that doesn’t go to paying the national debt. From 1978 to 2011, roughly the same time period that corporations and executives were learning to keep their money instead of reinvesting it, executive salaries grew 725 percent, according to the Economic Policy Institute. Workers salaries grew 5.7 percent, which doesn’t keep up with inflation. Jobs used to be the way that income was distributed. Your labor earned you a share of the company’s income. If the company did well, you got a raise. But because of globalization, automation and computerization, there are fewer and fewer jobs, paying less and less. Workers have less leverage. The money that’s coming in is being hogged at the top. So how does that play out in Missouri? From the 1950s through the 1970s, Missouri averaged more than 9 percent annual growth. But from 2000 to 2009, it averaged just 1.8 percent growth, the S&P report says. “The findings from our research indicate that tax revenue growth slows as income inequality rises, regardless of a state’s tax structure,” said the report, written by S&P credit analyst Gabriel Petek. In 2013, the personal income tax made up about 67 percent of Missouri’s general fund revenues; the corporate income tax adds another whopping 5 percent. What if Missouri replaced the income tax with higher and broader sales taxes, as anti-income tax crusader Rex Sinquefield has proposed? It wouldn’t help, the S&P report suggests. Money-hogging impacts sales tax revenues just as it does income tax revenue. Less affluent people have to spend most of their money; affluent people can save a lot of it. Changing the taxing structure is unlikely to offset the damage done by money-hogging. The geniuses in the Republican-dominated Missouri Legislature have responded to the state’s fiscal problems by cutting taxes at every opportunity. Bigger individual income tax deductions. Phasing out the corporate franchise tax. Passing out tax credits and sales-tax exemptions to favored industries. This year, they voted to cut the 6 percent income tax rate and phase out income taxes for business owners. The magical thinking is that all of this will create investment, more jobs and higher revenues. If past is prologue, most people at the top will keep their money, not reinvest it. The good thing is that the tax cuts won’t start to take effect in 2017 unless revenue grows past a certain benchmark. At the rate Missouri is going, that’s not going to happen. Money-hogging is real. It is perpetuated by wealthy donors who buy unlimited influence in elections and in the Legislature. It means fewer jobs, at lower pay, and less money for vital state services to an ever-expanding population of dependent people. All of the dots connect, and the picture that results is not pretty.
Posted on: Fri, 19 Sep 2014 20:16:29 +0000
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