Game Plan for a Flat Tax, Social Security Cutbacks and Austerity

[Hannah Bell]

Obama's Sellout on Taxes
By MICHAEL HUDSON


Monday’s deal to re-instate the Bush era tax cuts for two more years sets up a 1-2-3 punch. First, many former Democratic and independent voters will “vote with their backsides” and simply stay home (or perhaps be tempted by a third-party candidate), enabling the Republicans to come in legislate the cuts in perpetuity in 2012 – an estimated $4 trillion to the rich over time.

Second, Obama’s Republican act (I hate to call it a compromise) “frees” income for the wealthiest classes to send abroad, to economies not yet wrecked by neoliberals. This paves the way for a foreign-exchange crisis. Such crises traditionally fall in the autumn – and as the 2012 election draws near, it will be attributed to “uncertainty” if voters do not throw the Democrats out. So to “save the dollar” the Republicans will propose to replace progressive income taxation with a uniform flat tax (the old Steve Forbes plan) falling on wage earners, not on wealth or on finance, insurance or real estate (FIRE sector) income. A VAT will be added as an excise tax to push up consumer prices.

Third, the tax giveaway includes a $120 billion reduction in Social Security contributions by labor –reducing the FICA wage withholding from 6.2 per cent to 4.2 per cent. Obama has ingeniously designed the plan to dovetail neatly into his Bowles-Simpson commission pressing to reduce Social Security as a step toward its ultimate privatization and subsequent wipeout grab by Wall Street. This cutback will accelerate the point at which the program moves into supposed “negative equity” – a calculation that ignores the option of restoring pension funding to the government’s general budget, where it would be paid out of progressively levied income tax and hence borne mainly by the wealthy, not by lower-income wage earners as a “user fee.”

So the game plan is not merely to free the income of the wealthiest class to “offshore” itself into assets denominated in harder currencies abroad. It is to scrap the progressive tax system altogether. The Democratic Congress is making only token handwringing protests against this plan, no doubt with an eye looking forward to the campaign contributors two years down the road.

Crises usually are orchestrated years in advance. Any economic recovery typically is shaped by the way in which its predecessor economy collapsed...

http://normsnotes2.blogspot.com/2010/12/game-plan-for-flat-tax-social-security.html

[StarsInHerHair]

1. a cell phone 'early termination fee" changed to "Leave the USA fee"

expensive enough to prohibit corporations from continuing to chase the world's cheapest labor.

[Name removed]

2. Deleted message

Message removed by moderator. Click here to review the message board rules.

[laughingliberal]

3. K & R nt

[lostnfound]

4. I was thinking a flat tax would be fine IF the first $50,000 (single) was exempt.

And wouldn't that be simple to sell to the public?
But the pubs would never allow that.

[Hannah Bell]

5. sure they would. people with income under $50K mostly don't pay much income tax currently

anyway.

but your plan would be a bonanza for the superrich.

[lostnfound]

6. I don't believe so. Most of their income is taxed as capital gains at 15%

and the FICA taxes don't apply above 103K. Even low income people pay 7.45% because of FICA (not to mention the equal amount paid on their earnings by their employers), and the total tax percentage paid by the middle class is far higher than on the super rich. If we taxed long term capital gains the same as ordinary income, and the first 50,000 was exempt, everyone up to 100K or so would likely get a tax cut.