Tax Justice | Saturday Workshop 3 | WPC-14

**DISCLAIMER**

Notes & Copyright

[Personal Note: This is the last workshop of the weekend, so the last of the WPC-14 workshop posts. I may post my final paper for the associated independent study course, as well.]

Tax Justice

Facilitators: Jax Hermer and Zeke Spier

Facilitators introduce themselves. Jax is here on behalf of an organization called Resource Generation, which helps affluent youth use their funds for social justice. Zeke works with a social justice group (don’t recall the name) and works with a lot of diverse racial/ class groups who often deals with these types of questions.

They asked us to go round the room and introduce ourselves by name, preferred gender pronoun, and why we’re here.

Jack (prefers male/ he) is an accountant by trade. He loves numbers, hates taxes. Says numbers/ accounting are neat and orderly, but taxes are political and not at all orderly or sensible.

Me (female/she) interested in social justice, has an accountant in the family so kind of here sideways.

Then they all spoke too fast and I didn’t get their names.

Wxx (pref: female/ she) likes accounting and numbers | Wxx (pref: female/ she) is a Greener student helping with the budget and learning about taxes, has become interested in politics and the rhetoric around it | Aprilla (pref gender neutral) interested in taxes/ how confusing they are/ why don’t they make sense/ why is she still getting refunds? | Wxx (pref: female/ she) feels like she has a Robin Hood mentality toward taxes and wants a more nuanced understanding | Wxx-– wants deeper understanding of taxes; doesn’t get it | Wxy (pref: male/he) wants a deeper understanding of wealth, race, and taxes | Kitti (pref: female/ she) says taxes and social justice dovetail with both of her jobs and she has an interests in the subject. | Linni (pref: female/ she) reflected on the unequal distribution of wealth and the inequality in our country, and is interested in learning how taxes impact that | Pat (pref: none, does not believe in gender pronouns) is trying to have an economic theme to his workshops and this workshop fit for this timeframe | Kris (pref: female/ she) says this is pertinent to her life right now as she is going to college in NYC and feels like people think of welfare in terms of government funded programs, but not corporate tax breaks. | Aaron (pref: male/ he) is interested in learning more data to back up his beliefs about the tax system and what those more knowledgeable than him are doing about it.

Zeke explains why they asked about preferred gender pronouns (which is that it’s the polite and respectful thing to do, and that it’s presumptive to assume you can tell someone’s gender identity by looking at them), and says Disclosure: They are not tax experts and cannot give tax advice. Then he and Jax begin introducing terms and definitions.

Taxation Terms & Definitions

  • TAX:  It is something we have to pay to the government. Required to fund government services.
  • RACIAL WEALTH GAP:  This is the disproportionate distribution of wealth held by white people and people of colors. Result of discriminatory laws and policies that unfairly benefit the group in power.
  • FLAT TAX SYSTEM:  When everyone pays the same amount of tax, regardless of income or wealth.
  • REGRESSIVE:  Where the tax rates decrease as income rises. Regressive taxes in Washington state would be sales tax, and a Federal regressive tax is payroll tax, which caps out at a certain income and does not charge taxes for income above that amount.
  • PROGRESSIVE:  When the tax rate increases as the amount taxed does.
  • TAX BRACKET:  This is the rate of percentage at which the top amount of income is taxed.
  • MARGINAL TAX RATE:  Pay the same rate at each tier of income (for instance, imagine tax rate is 10% up to $20,000 but 8% for 21-40,000 and 5% for 41-60,000. So if you earn $60,000, the first $20,000 wld be taxed at 10%, then the amt after that would be txed at 8% and 2% consecutively.). US uses marginal tax rate system.
  • CAPITAL GAINS TAX RATE:  Taxes paid on earnings from investments, which in US is much, much lower than the taxes paid on income and property.
  • EFFECTIVE TAX RATE:  Percent of income actually paid after deductions and exemptions are calculated. It is how much you actually paid in taxes at the end of the day, after everything is accounted for.
  • DEDUCTIONS:  Before you pay taxes on income you get to take certain deductions (property taxes or charitable giving or having kids). Deductions are for taxable income.
  • EXEMPTIONS:  Certain activities that are not taxed, like municipal bonds, mean that the income is not taxed either. Exemptions are for non-taxable income.
  • ESTATE TAX:  Inheritance tax, essentially. It is not taxed at all below 5 million. An accountant did clarify that while the inheritance itself is not taxed, the gains/ income/ investments from it can be taxed.

Zeke say it’s complicated on purpose, and that’s part of the racial and class disparity inherent in the tax code. People who have access to accountants and lawyers can game the tax code, but people who don’t have that access can’t figure it out on their own and are hosed (financially speaking). Also Zeke says the argument commonly used against an Estate Tax is that it’s basically double taxation, which is unfair. He says this is a new idea, historically speaking.

Zeke and Jax unveil a graph with three lines on it. The purple line traces the stop marginal tax rate from 1913 – 2013. The pink line traces the amount of the wealth that is held by the top earners (the 1%). The green line traces union membership. Zeke tells us the first Federal income tax was written in 1913. At that time, the Marginal Tax Rate was 20%, and 18% of the wealth in society went to the top 1%.

They split us into groups and ask us to discuss amongst ourselves what historical events may have occurred to causes the spikes and dips on the graph.

Groups

My group consists of an Accountant, the girl who likes accounting and numbers, and a dude who came in after the introductions. The numbers girl says she doesn’t know much about history, but she guesses wars and stuff caused most of the dips. I gave a brief overview of my understanding of the wars, taxes, and union movement since the introduction of the Federal tax code. The accountant said he was already familiar with the history. The groups then merged back for the class presentation.

Presentation: First Quarter | 1913-1938

During this time, we saw WWI, the growth of industrialization and manufacturing, the birth of radical social justice movement in response to income disparities; unionization; the New Deal, the Stock Market Crash, and the Great Depression.

Zeke says before the income tax was implemented in 1913, the government collected duties and tariffs to pay for their wars and programs. The top spike of a 75% MTR in this time frame was on incomes of about $77 million or more a year. It was about paying for WWI, and the government asking the extremely wealthy to chip in and do their part. That was seen as a patriotic duty. He pointed out that although Social Security and Welfare were passed, they primarily benefited white workers. Colored and agricultural workers were excluded from the programs and protections.

During this period, the MTR gets as high as 75% and as low as 25%. The amount of wealth going to the top 1% was as high as 25% of societal wealth and as low as 20%. The idea of lowering taxes to strengthen the economy is not a new idea. It is a very old one. It happened during this era and did not help — in fact, it deepened the income inequality and contributed to the Great Depression. He also touched on the unionization and labor movement through the Flint Sit-Down Strike, and how the labor movement improved the income equality situation.

Second Quarter | 1938-1963

This era saw the Spanish Civil War and Hitler/ WWII. Ideals of patriotism and contributing to the war effort were present in financial discussions and the rise of the labor movement. After the war, the GI Bill allowed many white veterans to get college educations, house, property, and so on. After WWII was the threat of the Cold War/ red scare, and the anti-communist/ labor sentiment. This was also when the Civil Rights Movement really took off.

During this time, the top MTR was 94% on incomes about 2.5 million. In today’s money, that means you could earn 10 million on top of that, and you would only get 5 million of that earned 10 million. The unionization rate at this time was as high as 29% of the population. The amount of wealth going to the top 1% went as high as 10% of societal wealth and as low as about 8%.

This era saw a very high MTR, relatively low income inequality, and racial income inequality gap increasing. This is the time when the white middle class really grew. Someone suggested that the economic security accompanying this rise is what gave white folks the space and lack of stress to focus their attentions and emotions on the Civil Rights Movement and racial equality.

During this time there was full employment and high employment. The workers had more power, which meant the wealthy/ businesses/ corporations had less. They had to negotiate with workers. 1953 saw the lowest unemployment rate in history (2%).

Discussion

Another attendee pointed out that this time frame is when the international monetary fund was created/ started, and that this fund facilitated the eventual outsourcing and exploitation of workers.

Zeke and Jax are questioning/ doubtful of this assertion, stating the impact of the international monetary fund is seen in the next quarter.

Attendee backtracks, says it started in the 1950’s as a positive way of restructuring other nations, but the seeds and power structures were there for the future worker exploitation.

An accountant says the extremely high MTR created incentive for the wealthy to keep their money in investments and such in order to hold onto the wealth and pay fewer taxes. Further, many of the extremely wealthy began sequestering their money into the corporations they owned in order to grow their wealth in a non-taxable way — a move that led to the growth of the corporation.

Return to Presentation

Jax/Zeke take control of the discussion again and refocus on their lecture. They specifically address race, the Japanese internment and the dispossession of Japanese farms/ homes/ businesses occurred in this era. This was also when the rise of the Bracero Program occurred, a government program to bring in Mexican workers on temporary visas as farm and agricultural labor, which meant they could not unionize or their visas would be revoked and they would be deported.

Third Quarter | 1963-1988

Vietnam War; explosion of social justice movements (anti-war, Civil Rights, feminism); lack of access to gas lines and gas shortages; the oil embargo, massive inflation; 3 recessions in 12 years; Regan broke the unions (Air Traffic Controllers); corporations began getting involved in politics and policies.

The top 1% is angry about the high amount of taxes they’ve paid and their funding for social programs for poor people. Reagan tapped into this anger by introducing the myth of the Welfare queen and the claim that poor people were gaming the system. By feeding their anger, he gained their political and financial support. They used the Southern Strategy (racism) to get poor white people to vote against their own best interests. This was also when promotion of the “me” generation with an eye to reducing/ preventing social justice and student movements was strong. Reagan and his ilk introduced the concept of “Trickle Down Economics.” The popularity of this idea tied into the growth of the political ideal that all taxes are bad, no matter what. Historically, that was considered a very unpatriotic view, but Reagan and the angry wealthy introduced concepts like the Taxpayer Protection Pledge and financial deregulation with taxes as the bogeyman. This era also saw the war on drugs and resultant mass incarceration of minorities.

During this time, the top MTR was as high as about 70% in the 1970s and as low as 60%. Unionization started the era at a high of 18-20%, but dipped as low as about 16% by the late 1980s. The amount of the nations wealth going to the top 1% was about 8-9%.

FOURTH QUARTER | 1988-2013

NAFTA, which connected to the international movement of exporting jobs. The repeal of Glass-Steagal in 1999, which led enabled financial institutions to get into their creative protections and risky investment strategies. The Tech Boom bubble and crash in the 1990s, and the mini bubble followed by the post 9/11 crash. 9/11, Iraq, and Afghanistan. The housing crash in 2008 — which was the single biggest decrease in wealth in the Black American community in the entire history of the US. Black American wealth had been seeing a steady increase/ dip/ increase pattern since 1964, and their wealth was primarily concentrated in housing and property. White people’s wealth tends to be more in investments. With the housing crash, Black Americans saw a 3-1 loss of wealth comparative to whites. Welfare reform in 1996, the restructuring of the bankruptcy laws, the Bush tax cuts, etc. etc. Lowest union enrollments ever, rising cost of tuition, and explosion of predatory lending practices.

In this time, the MRT has gone as high as 35% and as low as 25%. Income disparity has seen as much as 20% of social wealth go to the top 1%, and union membership has been as low as 10%.

Discussion | Personal Impact and Future Visions

XX:  Most concerned about tuition and the impact on students. She is going to increase her participation in social movements and protests.

XX:  Is union and is working on some union initiatives.

XY:  Social movement and justice are improving and there should be more change than ever, yet 53% of people still vote republican and he is confused.

Me:  Yay union, don’t throw baby out with bathwater, need to organize retail sector.

Class Goals

  • Work on local stuff like the initiative regarding Washington income tax.
  • Educate students on tax history, and keep learning for ourselves.
  • Figure out different way to fund education rather than through property taxes.
  • Get involved with tax reform movements.
  • Encourage financial literacy.
  • Educate and organize the youth.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s