2011-11-25 / Columnists

It’s My Turn

Commentary By Janet Kelly

I am both a Certified Public Accountant and a licensed high school English teacher (long story), and am now retired. On October 5, I marched with about 8,000 other people from Foley Square to Zuccotti Park, where the Occupy Wall Street Movement started. On October 11 I marched with maybe a few hundred people (and almost as many reporters and photographers) from East 59 Street and Fifth Avenue in Manhattan, around the Upper East Side. That day, my picture was taken by a photographer and it appeared in Newsday the next day. The photographer thought it was news that a grandma was knitting a sweater as she walked around and chanted “We are the 99%.” I was sorry to miss the Washington DC demonstrations to mark the dedication of the Martin Luther King Memorial on October 15, but I had to babysit for my grandchildren, who are one of the reasons that I march in demonstrations. Family first.

I am fortunate to be retired with adequate income. Why am I dissatisfied enough to march around, chanting, with people I don’t know? Here’s a chart that comes from the Congressional Budget Office, the organization that reports to Congress on financial matters, and keeps track of how government programs perform. The CBO is the gold standard for financial information about the United States and has an impeccable reputation. I have never heard any whiff of scandal about this agency, in the 25 years since I got my CPA license. This chart starts in 1979 and ends in 2006 (most of these reports are a few years old because of the lag in collecting and analyzing financial information for the entire country).

A quick check of an income graph shows that the top one percent of income earners have seen their income after all federal taxes, including Social Security and Medicare taxes, go up 275 percent, while everyone else’s after tax income has basically stayed flat (even the top 96-99 percent of earners). These are not typical income earners getting most of their income on their annual W-2 wages report. They probably inherited a good deal of the money which is invested for them by their financial advisers and private bankers. Their income didn’t increase because they discovered a cure for cancer, or a replacement for foreign oil, or did any work at all.

The main reason for these obscene increases in income is reductions in income tax rates (especially the Bush tax cuts which are supposed to stop on December 31, but the Republicans want to continue) and non-enforcement of the tax laws. The laws are not enforced because the Internal Revenue Service (yes, I know you don’t like them) has not gotten the budget allocations they asked for in 30 years. This doesn’t affect most wage earners, because most of us have all our income automatically reported to the IRS, and we do not itemize deductions on our tax returns because the standard deductions have been raised ($11,600 for a married couple, for example). The people who benefit from the low IRS budgets are businessmen who cheat on their taxes, and rich people whose financial advisers find so-called tax shelters for them, some of questionable legality. As long as the IRS is short of cash, they can’t pursue these people. By the way, the average IRS agent collects $3 in evaded taxes for every $1 they are paid. So the low IRS budgets are costing the federal government money, not saving money.

Now, another way that the top 1% has earned more money is because of changes to a tax that applies almost exclusively to them: the federal estate tax. The Republicans like to call this the Death Tax, and they say it applies to small businessmen and farmers. This is an outright lie. In order to pay an estate tax, the deceased must own more than $3.5 million in property after deducting all debts owed, including debts such as mortgages. Not many small businessmen or farmers own that much property.

The Congressional Budget Office’s issue summary of December 28, 2009 on Federal Estate and Gift taxes states that “less than 2 percent of adults who die each year have typically left estates large enough to be taxable.” (Generally, states with estate taxes do not tax estates that are not taxed by the federal government.) But even though few people have to pay this tax, “The Congressional Budget Office (CBO) projects that, “under current law [emphasis added], federal revenues from estate and gift taxes will be $420 billion … over the 2010-2019 period.” The friends of the 1% want to make sure they don’t have to pay that tax, which would have a significant effect on easing the federal deficit.

The estate tax is under attack on two fronts: Congress and the IRS, which has always audited every estate tax return which is filed. Congress has lowered the rates several times, with a 2009 top rate of 45%. The Republicans have been trying for years to repeal the estate tax entirely. Since that failed, they repealed it temporarily in 2010. Anyone who died that year, regardless of how much they owned, owed no estate tax. This was sometimes called the “throw Grandma from the train,” repeal, as it gave heirs a reason to hasten the death of their wealthy relatives. In 2011, the estate tax was reinstated, but the wealthy and those who work for them are still trying to repeal it.

More insidious is the attack on enforcement of the estate tax. The reason every estate tax return was audited is that valuing property is a tricky thing. The accountants and lawyers who file the returns try to undervalue property. Every audited return had the taxable amount increased by the revenue agents in the estate tax division of the IRS. So President Bush used his executive powers in the last year of his second term to help his wealthy friends. He cut in half the staff of revenue agents in the Estate Tax Bureau of the IRS. This was announced on a Friday around August 15, at a time when not too many people are paying attention. You know, the kids are coming home from camp and the family is going on vacation. I noticed the article in the New York Times, and I understood what it meant: there would not be enough agents to do the work, and those who were left would be demoralized. Now, estate tax agents bring in $29 dollars for each dollar they are paid. So once again (remember the $420 million from 2010-2019 projection by the CBO) this is going to cost the government money, not save it. Not to mention being sneaky. I don’t remember a great outcry, but this is not something a lot of people understand.

So, I march. There are other reasons, but these are major for me.

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Looks as if you're marching

Looks as if you're marching with the wrong crowd. Taxes and so forth are basically a government thing, so perhaps it is the tea party you should align with. They're avowed issues are, governmental overspending & waste. The movement is many times larger than OWS and will effectively determine the governance of America in the next election cycle. Whatever your misgivings about Wall Street, one might be that they are the biggest contributors to the party of tax & spend. Though, this year, they seem to be withdrawing the support they had once lavished on them.

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