Ecuador Creating Alternative to Neo-Liberal Model is an interview from The Real News.

Jayati Ghosh: Ecuador raising taxes on wealthy, higher royalties on oil companies and making large social investments
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Dr. Jayati Ghosh is Professor of Economics and currently also Chairperson at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi. Educated at Delhi University, Jawaharlal Nehru University and the University of Cambridge, England, her research interests include globalization, international trade and finance, employment patterns in developing countries, macroeconomic policy, and issues related to gender and development.

What is interesting about Equador is the chance to learn from their experiment. If only the U.S. would keep its grubby paws off of Equador.

I still don’t know why the model that they are eschewing is called Neo-Liberal, I think it is just plain Non-Liberal.

The Atlantic article, Have Democrats Succeeded in Pre-Destroying Romney?, has the teaser,

Inside the left’s little-noticed, relentless, brutally effective campaign to tear down the Republican front-runner in advance of the general election.

Further down in the article is the quote,

“The key date for us is in November,” he said. “What we’re doing is educating the community to the positions that this candidate, Mitt Romney, was taking as he sought our votes. Mitt Romney’s going to find this little anchor placed around his neck getting heavier and heavier.”

Here is a video referenced in the article,

I am just disappointed that, as a Democrat, nobody told me about this wonderful plan. I have been telling a certain Senatorial campaign that they need to be educating the public, and all I get is flak for making my comments.

Mitt Romney payed less than 15% on his REPORTED income. What if his REPORTED income is actually far less than his real income, and it is all legal?

When Romney donates an appreciated asset to charity, he gets to deduct the full value from his income in the calculation of his net income. That means he gets to deduct what he paid for the asset plus whatever capital gain has occurred while he owned it.

He is not required to declare the appreciation in the asset as income and he has never paid taxes on that appreciation. However, he is allowed to use that appreciation to cut his taxes on his REPORTED income.

In other words, he has far more income than he is legally required to REPORT, and he gets to use that unreported, untaxed income to cut his taxes on his reported income. This is in effect a negative tax rate. The more the asset appreciates (the more he earns) the less he pays in taxes.

So not only does he tell you about his unfair lower tax rate than the tax rate paid by the ordinary, middle-class tax payer, he also has to report far less of his income than does the ordinary, middle-class taxpayer. Even Warren Buffet, who tells you it is unfair that he pays a lower tax rate than his secretary does, doesn’t tell you the full story of how much less he pays.

This is just another trick played on the middle-class by the very wealthy. You can use this trick too, but I am not sure if any of my readers can make millions of dollars a year, year after year, using this trick.

What do you think of a candidate who uses these tricks and yet pretends to the voters that they do not exist and that he doesn’t know about them?

The middle-class voter knows that she or he is being ripped off, but they don’t know the half of it. Would they appreciate a candidate that told them about the half they don’t know?

This is the same issue I mentioned in Comparing Taxes Paid By Past Presidents and Presidential Candidates. The facts about how to use this tax trick are documented in Donate Appreciated Assets.

I repost this because I think this way of stating it has far more impact than the description in my previous post. The headline is more catchy, too.

If you don’t listen to this interview with Marisa DeFranco, you won’t know what you are missing for a candidate for U.S. Senate. Yes, you think you are perfectly happy with Elizabeth Warren. What if there were a better candidate, but you refused to listen? How would you feel if you found out later that you got second best?

In the interview below, you have to go through a couple of minutes of talk before Marisa DeFranco comes on. Please don’t let this deter you.

The interview will actually start faster if you click on this fast start link than if you click the play button in the fancy graphic below.

Candidate for U.S. Senate from Massachusetts, Marisa DeFranco, is still fighting. The Dem field quickly winnowed with the sudden fame and fund-raising success of Elizabeth Warren, but not Defranco. She’s a solid progressive and an activist immigration attorney. Expect to see her going head to head in the race toward the Dem primary. She updates her on her campaign.

Here is a snippet, Elizabeth Warren on her Super PAC pact and a plan to sell IBM stock ‘in a heartbeat’ if elected, of Elizabeth Warren’s appearance on The War Room with Jennifer Granholm.

I am a little nervous about this pact now that I hear the penalty is a contribution to a charity. The effectiveness depends on the size of the required penalty. If a third party were to air an ad at a certain cost and the penalty were the cost of producing and airing the ad, then it might be sufficient to drain the coffers of the candidate’s campaign by an equal amount. Anything less and it might still be beneficial to the third parties and the associated campaign to run these ads.

The other problem with the pact is that if Warren supporters feel like she is running an ineffective campaign, they are now powerless to help her. Shades of Martha Coakley refusing to take advice from her friends.

Robert Reich has a very insightful piece The Biggest Risk to the Economy in 2012, and What’s the Economy For Anyway?.

The crisis of American capitalism marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles – even though the lion’s share of consuming and investing is done by the wealthy – the real crisis centers on the increasing efficiency by which all of us as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.
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Yet these great deals increasingly come at the expense of our own and our compatriots’ jobs and wages, and widening inequality. The goods we want or the returns we seek can often be produced more efficiently elsewhere around the world by companies offering lower pay, fewer benefits, and inferior working conditions.

I look at this as another example of the paradox of our ability to do harm from our individual actions, but our inability to correct the problem unless we take action as a group.

No individual’s refusal to forgo a deal is going to help bring back jobs to this country or improve the working conditions of people in another country.  Thus, there is no incentive for the individuals to refuse the deal in sufficient numbers to change the situation.

Rules can be changed so that such great deals that depend on the disadvantage of others are no longer allowed.  However, changing the rules is not something an individual can do.  This is something that society must organize to do.

If we take a look at the macro view, getting rid of the “great deal” could raise our costs and our incomes by equal amounts so that there was no actual change in our living standards.  There would be no change in the amount of goods and services bought and sold.  There would be no increase in employment. So where would an improvement in our living standards and employment levels actually come from?

I think the change has to come in the fraction that the middle-man sucks out of the process without providing a commensurate societal benefit.  This middle-man is management particularly at the very top end.  It is not that they provide no service.  It is that the rewards are outsized compared to the service provided.  This comes about by concentrations of wealth and power that allows these people to get the rules  changed to skew the market into providing these people with outsized rewards.

Some of the rules changes allow vulture capitalists to use a company’s own cash to finance a leveraged buy-out.  Then the vultures  suck that cash out of the company for their own benefit.  Even worse, they cause the company to go deep in debt to further enhance the vulture’s rewards.  The company goes bankrupt leaving the workers and the investors in the lurch while the vultures walk away fat and happy.

Other rules changes allow banks to fraudulently create mortgages that are then sold to investors with lies about their safety.  When the bubble bursts, the mortgage borrowers lose their homes, the investors lose their money,  the homes go to waste, and the bankers go away fat and happy.

So both kinds of behavior problems, racing to the bottom as workers and earners, and deregulating to allow fraud must be fixed by an organized society.  Frequently we call that government.

There is no use crying about government growing so large.  The non-government forces, international businesses, have grown large.  We cannot expect those players to be controlled by tiny, disorganized governments.  Governments have to work across international borders to put controls on businesses that work across international borders.

From the Washington Post, we have the article Iran, perceiving threat from West, willing to attack on U.S. soil, U.S. intelligence report finds

U.S. intelligence agencies believe that Iran is prepared to launch terrorist attacks inside the United States in response to perceived threats from America and its allies, the U.S. spy chief said Tuesday.

This may be what the U.S. intelligence chief may be saying to the public, but we know from past history that this may bear little resemblance to what the intelligence analysts actually believe.  I am waiting for Seymour Hersch or Gareth Porter to come out with a report on what the intelligence experts really think.

Actually, this perceived threat seems to be our government’s fondest hope.  They seem to be desperately looking for an excuse to attack Iran.  Perhaps if they can escalate the threats to Iran, they can get Iran to act on those threats and try to do a preemptive first strike on us.

If Iran refuses to attack us by midyear in time for Israel to launch an attack on Iran, perhaps we can just make up an attack on us.  Latest reports (see Israeli Officials: Attack on Iran Must Come ‘By Summer’) have Israel afraid that if they wait too long, Iran will have all its nuclear facilities underground and safe from Israeli attacks.  How many Americans is Obama ready to kill so that he can have the Bush excuse for attacking Iran?

I received this email from Senator Bernie Sanders.  It talks so much sense about overturning the Citizens United Supreme Court Decision, Postal Reform, and Keeping Social Security Safe From Deficit Reduction, that I just had to post it here.

Talking Points Memo has an article, CHART: How Romney’s Tax Rate Stacks Up To Recent Presidential Candidates’, with an interesting comparison.

I maintain that this does not even paint the full picture of how much less the ultra-wealthy pay in taxes than the average middle-class person.

Instead of looking at income as these charts do, it would be interesting to look at how each person’s wealth changes from year to year.  I don’t have figures, but I have some explanations that sound plausible to me.

Typically the very wealthy have their wealth tied up in investments.  The value of these investments can go up substantially from year to year without causing any reportable income as far as the government is concerned.  That increase in wealth that is not income is called unrealized capital gains.  It may all be on paper, but the lifestyle of the wealthy is improved by these gains even if they are not realized right away.

The accountants among my readership will have to verify this, or you can believe Kiplinger’s article, Donate Appreciated Assets, but I believe that if a wealthy person gives away to charity some stock with unrealized capital gains, the wealthy person gets to deduct the full value of the stock.  The difference in what the person paid for the stock and what the deduction is may be huge, but it has never been reported as income and it has never been taxed.  The price the person paid for the stock plus the untaxed gain now becomes a tax deduction.

The wealthy person may have more cash in his or her bank account by giving money away.  The extra cash comes from not paying taxes on reported income because of the charitable deduction. Pretty neat trick, huh?

Thus we have Romney paying at a rate of over 30% on the part of his income called ordinary income and 15% of his income from capital gains.  Yet somehow the average of the over 30% rate and the 15% rate is less than 14%.

I have not gone into the pluses and minuses of taxing unrealized capital gains, so don’t leave with the impression that I am saying we ought to tax unrealized gains in the same way as we tax realized gains.  However, you should go away with the idea that the inequity, as large as it appears in the above charts, is actually much larger than the appearance.  Something needs to be done, but the details of that deserve a whole other blog post.

Well, what do you know? I have a couple of previous posts that may fit the bill.

• The Property Tax Scandal in the US
• Time For A Wealth Tax?

Here is the ad by Presente Action.

Watch this hard-hitting television ad that reveals Rubios anti-Latino record…