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Press seen as failing to deal with economic abuses

COMMENTARY | October 01, 2005

Martin Lobel of 'Tax Analysts' rebukes he-said-she-said reporting; lists areas needing improvement and heads a group that tries to provide help and direction for the news media


Q. Did we need a bill that gives $14 billion in additional tax subsidies to energy companies?


Q. How do we justify decisions to cut the IRS enforcement budget and audit those who earn less than $25,000 a year four times as much as those who earn over $100,000?


By Martin Lobel



The key to an effective democracy is an effective press. One place an effective press is sorely needed is in coverage of the economy, a vital underpinning for democracy. But here the press, by and large, is failing. It too often reduces stories to “he said, she said,” with little real analysis.


Over the last 30 years the middle class has stagnated economically while its tax burden has increased. Statistics show that the economy is growing but most of the benefit has gone to the top 1/10th of 1 percent of the population, which has been able to shift a significant portion of its tax burden to the middle class. Middle class people, the overwhelming majority of Americans, have been able to maintain their standard of living only by working harder and longer, and by borrowing, especially against the increasing value of their homes.


The press has reported these failings but has hardly ever examined them.


Middle class consumption and spending are now increasingly at risk. What will happen when the housing bubble, or “froth” on the housing market as Alan Greenspan puts it, bursts? How many people or institutions that hold mortgage-backed securities will be at risk when the value of the real estate is lower than the mortgage?  Isn’t it the role of the press to focus on this and similar economic issues which affect so many people so deeply?


Numerous explanations have been suggested as a cause of the increasing income disparity between the very rich and the middle class: the breakdown of capitalism; the failure of antitrust enforcement; the development of a class of manager-mandarins who have little or no connection with the employees or owners of large corporations; the failure of large pension funds and financial institutions, which hold controlling interests in major corporations, to control management salaries because their executives sit on each others’ boards and have a common interest in receiving excessive salaries; the increasing complexity of financial schemes that allow those who devise them to receive huge incomes without regard to the benefit generated; and the lack of government supervision or enforcement of regulations intended to allow the market to work efficiently because of pressure from those who are abusing the system, e.g. the recent battle over merely registering hedge funds just to reveal who runs them.


What is particularly shocking is that the income disparity is greater after taxes than before. Whatever role the government has in creating the income disparity between the top 1/10th of 1 percent of the population and the middle class, it should not be using the tax code to widen the gap.


Theoretically, in a democracy this situation will self-correct when the voters understand why they are hurting economically and throw out those responsible. Gasoline prices, which have almost doubled this year, may finally force the press and, not incidentally, the poorer and middle classes to focus on the Administration’s economic policies. With gas prices at record high levels and oil at over $60 a barrel, did we really need an energy bill that gave more than $14 billion in additional tax subsidies to the energy companies, which are enjoying record high profits?


Unfortunately, the Administration has so far been successful in diverting the attention of the press away from its economic policies, which are returning us to the 1890s (Karl Rove meet Mark Hanna) by focusing attention on gay marriage, fetal rights, and other emotional issues that are of little practical relevance to most people.


The press should stop acting like trained seals and start asking serious questions about the abuses of our economy. For example, how can we justify cutting the IRS enforcement budget dramatically over the years when the number of tax returns and schemes to illegally evade taxes have increased even more dramatically? How can we justify auditing those who earn less than $25,000 four times more often than those who earn over $100,000? How can we justify eliminating or cutting back the estate tax on the very rich?


I am Chairman of Tax Analysts, a 501( c )(3) organization that is dedicated to providing accurate, timely information about our tax system and economy so that people can make rational decisions. It publishes Tax Notes, State Tax Notes, International Tax Notes, and others, all of which can be found on a Web site, www.tax.org. While  tax practitioners pay for these resources, the press can go to them and get information about issues gratis. As David Cay Johnston, who won a Pulitzer for his coverage of tax issues in The New York Times, said, “When I took this job, I remember that Jim Steele of Barlett and Steele said to me, ‘There’s one thing you need to do: you need to read Tax Notes religiously.’ And he was right.”


The press must provide more sophisticated coverage of our economy and tax system. There are lots of organizations like Tax Analysts that can provide the hard economic data and reasoned analyses that the press can use, so there is no excuse for reporters  to write about political horse races rather than substantive issues. Whether the Democratic Party will take advantage of the Republican Party’s plutocratic policies and force the press to cover them is still an open question. The answer will probably depend on whether the press responds to the middle class unease about the economy by providing answers to the questions the public is or should be raising. We should no longer see bumper stickers reading “Invest in America, Buy a Congressman.”

thinking outside the income tax box
Posted by Wyn Achenbaum - tax reform activist
10/02/2005, 03:58 PM

So much of what passes for tax reform discussion is stuck inside the income tax box, and when, once in a while, we get outside that box, we only hear about taxes which amount to being sales taxes, which is an equally confining and, may I say it, dumb option.

There is a better way, and unfortunately, even the graduates of our most respected institutions of higher learning have not been exposed to it in the course of their educations.

Beyond the income tax box, and beyond a national sales tax, there is a better way: collect for the commons a share of the annual value of something none of us can claim to have created, but which much of our common spending helps maintain: LAND VALUE. Urban land and waterfront land are extremely valuable and appreciate for reasons that have nothing to do with the current landholder. Why on earth do we allow 99% of that value to stick in private pockets? Why aren't we reclaiming 90% of it, or 95% of it, for the commons?

There. Now you've seen it in black and white. Land value is huge, and we let it be privatized when in a just society, the annual value of the land would be the foundation of our common spending (which would allow us to tax sales and wages at very low rates or not at all).

Think of the effect of Pork spending. Mostly, it increases land values for some lucky, well-connected individuals. The Federal government spends big, the lucky individuals profit big, and 1% of the land value goes into local government's pockets, while the other 99% lodges in private, or corporate, or REIT, pockets.

No wonder we've got problems!

If the members of the journalism community could wrap their minds around this alternative, and open the minds of Americans to the possibility that the land rent is a viable funding source, far more just than wages or man-made products, we would be on our way to solving some of our most serious social and economic problems.

But of course journalists are no better educated in economics than most other people.

If your education in this field has been neglected, one starting point is http://www.henrygeorge.org. ...No, this is not a new idea: our great grandparents are likely to have understood it (as did Mark Twain, Winston Churchill, John Dewey and many others we respect today), and had their generation acted on it, we would not have many of the social problems we are faced with today.

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