American oligarchy and taxation

Increasing percent of budget funded by richest 1% shows dramatic growth in the power of the oligarchs. Key data by conservative "think tanks" hides a call for increased government involvement in plain sight. 




Over the past 3 decades we have seen systematic creation and funding of dozens of prominent "foundations", "institutes", "universities", and "charitable organizations"(in reality being clusters of hired ideologues organized as so called think tanks) that promote reduction of government influence on American oligarchs. Many of these organizations serve as disinformation/public relations propaganda factories to divide and conquer scientists, politicians, economists, and intellectuals as a whole. They are funded by numerous oligarchs (a person rich enough to have extra money to spend on influencing political structures to make even more money and having the psychological will to do it consistently) and have been an effective propaganda arm of the social movement started during Reagan's ascendancy.

Many of the financiers of these propaganda factories are second and third generation oligarchs such as Richard Mellon Schaife. Schaiffe is credited as one of the founding fathers of the Reagan conservative movement and he single-handedly took it upon himself to fund character assassination of Bill Clinton in the 1990s. Schaiffe isn't even an oligarch rich enough to be in the top 100 Forbes list and yet he was able to (through spending enough money on ideological public relations) get millions of foot soldiers and believers for the conservative movement. Whereas some of the original titans of industry, like John D. Rockefeller, sometimes came from humble backgrounds, the children and grandchildren of the tycoons are pure bred aristocracy. Mr. Schaiffe, as such, lives in a social bubble even more isolated from daily realities of most Americans than a French nobility in the 18th century (due to ease of international travel and greater technology gaps between the classes). The heirs see the government as the only organization with enough potential force and legitimacy to influence and stifle the expression of their desires within the world. Many had grandfathers who had their fortunes and organization split or partly suppressed by early 20th century government trust busting and FDR regulations. Instead of dedicating all their energies to aggressively growing the mega businesses from the ground up, the heirs just needed to prevent reversals and hire competent managers. This allowed them to have enough free time to play around with influencing government policy for further enrichment.

Buying out thousands of intellectuals and scientists by giving them salaries in ideological organizations proved to be an effective and relatively cheap way of doing so. The sheer amount of propaganda literature churned out, convinced many college educated and people much poorer than the oligarchs (those making less than 100 grand a year), that government really is the problem when it comes to helping most citizens. Many of the educated whites in America saw themselves as having the potential to make it as big as the oligarchs and thus began to preemptively attack the government. They counted the chickens before they are hatched and said to themselves, "well I will work hard and be successful like those people and nobody better take any of my income to help those uneducated lazies".

The people calling themselves middle class saw the hyper rich as role models. This psychology contributed to the incorrect perception and belief in the idea that it was the uneducated poor who holding the middle class back financially by leeching through the government. The "middle class" thus sided with the small amount of oligarchs when it comes to influencing the government to not interfere in the economy too much. They directly contributed to the poor falling further behind. The oligarchs however, saw the middle class as knowledgeable multitudes trying to get into the oligarch boat, and consistently prevented that by using the uneducated poor through irrelevant wedge issues like abortion and gay marriage.

We saw an absurd scenario develop where the oligarchs relax on a boat and encourage their envious middle class lapdogs (holding on to the edge) to kick the drowning poor still in the water. The rich then yell at the drowning poor to pull at the legs of the lapdogs holding on to the edge (because the lapdogs are no good godless liberals or some other nonsense). The government here are the crew members assisting with prying fingers off the edge and firing cannons at other ships. The blacks and the Hispanics would be those who already drowned through the efforts of the white poor angrily struggling in the water. We now see many ships joining together through globalization with some high rise planks connecting them and the rich mingling and enjoying each others company. The struggle in the water becomes even more violent and desperate.

Many of the thinks tanks (thought only dedicated to evolution of specific propaganda) hide under the umbrella of philanthropy that makes a mockery of actual physical philanthropic efforts of early 20th century tycoons who built hospitals and universities for the poor. This Reaganite "philanthropy" consists of promoting an idealogy of trickle down economics and reduction of government interference in the oligarch's mode of action. Undoubtedly there is some real charitable philanthropy going on as well that serves as an effective public cover. From utilitarian perspective however, the sheer damage done by propaganda tanks to poorest 50% of Americans through PR (and corresponding reduction in government services for education, science, medicine, and consumer protection) vastly outweighs the benefits for the poor from some token scholarship grants and other physical help. For example, George C Marshal "Institute" was funded by entities like ExxonMobil to give money to actual scientists to betray their field and lie about climate change and carcinogenic properties of cigarettes. Many of the propaganda tanks cross link their funding and pass money through chains to avoid direct responsibility. The Schaiffe family is responsible for starting 4 propaganda tanks. One of them, the Sarah Scaife "Foundation", contributed to the same George Marshal Institute that is fighting against consumer warning labels and clean air.

There are hundreds of such examples of propaganda tanks around the world masquerading themselves by various degrees of actual scientific and charitable work. These perception factories have been very effective at co-opting thousands of American intellectuals, researchers, and scientists by paying them to either do meaningless work to hurt the poor or by outbidding their labor and smarts away from genuine organizations that try to be as empirical as possible.

Sometimes however, the actual research done for the purposes of propaganda can backfire by showing in incredible detail the opposite of what's being promoted.

Returning back to the actual title of this article, lets take a look at some of the data provided by the Heritage Foundation. Heritage Foundation is one of the more powerful propaganda tanks for the American conservative movement. It also receives a bit of the Schaife octopus money (although Schaife is one of thousands of people rich enough to give substantial amounts to ambitious politicians who then promote minimal government and who dont care who they need to make an alliance with for money) and actively collaborates with printed media arms of the Republican party such as the Wall Street Journal.

Heritage Foundation has a number of graphs on their website that tries to sell an idea that the rich are being disproportionately burdened by government taxation. The graphs show the richest 1% having paid an increasingly greater share of the total annual revenue collected by the government compared to the poorest 50% of the people. Lets look at one such graph (click graph to enlarge):

It says that the richest 1% paid close to 40% of the tax revenue collected in 2006 while the poorest 50% of the people paid 3%. That is supposed to elicit outrage in the reader in that progressive taxation makes the rich pay many times more and thus unfairly singles them out while many of the poor not only don't pay taxes but get tax refunds. The trend of the top 10% and 1% of richest Americans contributing an increasing % share of the tax revenue (since the early 1980s when Reagan and propaganda tanks took over by the way) is supposed to demonstrate that not only is economic inequality not increasing, but that the fairness of the system is actually decreasing with the rich being singled out for burdens.

The sheer impudence of such argument is best demonstrated at a glance by the same IRS tax revenue reports that is being used. In 2006, the government collected 2,178 billions of dollars from all income receipts to fund its budget and function. The Heritage Foundation 40% figure of the total receipts is 871 billion dollars of the total budget.

The top marginal percent for income tax was 35% in 2006 (for those making over 350,000 grand a year and thus falling into the top 1%). 871 billion includes money collected from capital gains. Only the top 1% is primarily effected by capital gains taxes since their incomes are the most dramatically augmented by capital gains money generation (through stocks and such).

In 2006, the top 1% made 1,844 billions of dollars from all their taxable activities (if they did contribute 40% as claimed by pro-capitalist think tanks). As you see above, a large chunk of that money was generated from capital gains (that the bottom 90% of the population virtually don't come into contact with as part of their annual income). However, the total income was not taxed at 35% throughout since various capital gains (short, long) have taxable limits that are lower than 35%. If all their income was taxed at the same top rate of 35%, it would be very easy to calculate the total wealth that the top 1% made in a year ( total of 871 billion dollars as 35% of the whole).

If the richest 1% ( around 1.5 million people out of the 150 million taxable workers in 2006) made a total of 1,844 billion dollars (23% of all the taxable income money in the society for a year) and gave away 871 billion dollars of it to the government to make that 40% of the total 2,178 receipt contribution, that would mean they gave away 871.2 billion dollars (47% taxed in total) to the government, funding almost half of it. And this is according to the propaganda tank defending them and playing with data as much as possible.

The poor babies.

After taxes, a handful of the crybaby parasites (less than half of 1% of total American population) have half as much money to play around with as the entire American federal government with all its nuclear submarines, millions of workers, and agencies. They have almost as much money as the government of a "superpower" before taxes. Heritage Foundations data actually broadcasts this to the world trying to sell this as some sort of injustice to people much poorer. The taxes collected from the top 1% bring 2.5 more money than the funding of the entire Russian federal government.

It's remarkable that the biggest demonstration of rising inequality (oligarch's increasing tax burden in absence of rising top income tax rates) is shown as the opposite of what it is. If for example, the top 1%'s share of the budget contribution grew to 70% by 2020 instead of 40% (using same top 35% income tax level), it would mean they doubled their income at the expense of everybody else. The poorest 50% contributing less to income tax burden is not a sign that they are becoming more parasitic but that they are becoming increasingly destitute.

Right after World War 1, the top income tax rate was over 70% to help pay for the conflict. In mid to late 1920s, the top rate fell to 25% with consequences that perhaps should not be used by economic libertarians as a social success story. Throughout the 1950s-1970s period, the richest paid up to over 80% in income taxes. What do we remember about that period? A husband could go to work and support a stay at home wife and children with one paycheck as well as have a house and 2 cars. The middle class was growing rapidly and people felt so wealthy, empowered, and secure that they actually decided to help the poorest members of the country through Great Society. Money really did trickle down back then, with the IRS making it trickle down from the oligarchs to most of the people. Majority of the population was not over taxed as much as today, did not resent IRS as much ideologically, and weren't as fearful of the future and other Americans. One of the most corrupt oligarch backed presidents, Richard Nixon, (who began to destructive campaign against the poor with the drug prohibition) was even forced from office by the educated Americans. The decade of 1960s, with the richest paying over 70% in taxes and the bottom 50% having a larger contribution to the IRS, was one of prosperity compared to today.

(click graph to enlarge)

Heritage Foundation actually states that the US system is highly progressive (maybe they're comparing us to the role models of South America instead of hells on earth that are Germany and Scandinavia). Billionaires like Steve Forbes actually ran for office on the single issue of having a flat income tax. Sure, the flat income tax was a good easy way to fund budgets in Eastern Europe in recent years with corresponding social side effects of creating enormous income inequality in the former socialist space. When applied on an existing incredibly unequal society such as United States, the flat tax would just dramatically accelerate oligarch ability to influence the government structures since their money versus the government would grow. There are plenty of superior tax schemes like Land Value Tax that focus on real moneyed interests like land lords to create a more equitable and efficient economic system.

People who don't have enough money to buy politicians and policies must not allow themselves to fall for propaganda organizations (many of which actually get tax free status as "non-profits") that are becoming almost as socially detrimental as organized religion. It is very hard for educated people to side with poor rural whites, blacks, and Hispanics against the oligarchs due to vast cultural differences. Strategically however, an alliance against the

oligarchy makes far more sense for middle class and national survival. Modern Internet fund raising allows mass small donation funding of anti-oligarch propaganda tanks (any education that has a social/political goal motive, influence seeking, and self interest based rather than purely empirical is propaganda).

That is already happening to a degree with left-center organizations emerging. People making less than $100,000 a year still do not have as much money as the rich to spend on anti-oligarch PR but their message would have more effect in Hispanic and black demographics that are resistant to conservative propaganda tank economic messages in the first place. Religion and nationalism are diminishing as wedge issues for the rich to exploit so there is opportunity for majoritarian push to get the top income tax brackets back above 50%. The argument that the rich and their businesses will be driven abroad is a false one since that that is happening anyway and since social networks of government control take time to build. If 100 of the American rich decided to escape to Germany to escape the higher taxes (but still lower than in 50s and 60s), they'd have even more of a hard time influencing and getting to know German political elites. If they decide to emigrate to South America, then perhaps they'd be in their proper place at last and rid American society of bad rubbish.

Land Value Tax for Major Cities

How New York City can leap ahead in upcoming urban competition (Or Story of Joe the Land Baron)






Recent elections in Iceland have punished conservatives who brought the beautiful country to the brink of economic ruin. The new Social-Democratic/Green-Left coalition's leader is determined to integrate Iceland into European Union. The process might take time but the small country will be better protected from international economic shocks with continental currency. Reykjavik would then be the closest European Capital to the New York/Boston axis, even closer than Dublin. A brand new investment opportunity awaits American Northeast as well as a closer point of contact with Europe's economy.

We've seen that the so called Celtic Tiger of Ireland was a paper tiger just like Iceland and Merrill Lynch. Lax regulation, borrowing, and land speculation have lifted the Irish only to knock them down again all the much harder. They've learned along with the rest of the world that living space for citizens is not a stock market to gamble with. They've learned, like many Americans, that you can't buy a house, renovate it a little bit, and resell it for 30% more. That extra addition inside a land improvement is just not that valuable. Reykjavik will not make the same mistake and New York City is too economically important and rent dependent to have housing bubbles seen elsewhere. So how does all of this play into helping New York and our Bostonian brethren to attract the most talent and win the economic hub wars?

The key obstacle to overcome and sharpen New York economy is the land baron.

You say, "Land barons!? Are you mad!? Those haven't been around since Alexandre Dumas' time! Talk about the 21st century now!"

Unfortunately this feudalistic remnant still exists and this faction is stronger than ever. We forget that private land ownership is not only a pre-capitalistic concept but also a non-capitalistic concept. The capitalist does not mix his creative mind, energy, and money to create a field or a chunk of rock in lower Manhattan. No, that rock was already there and taken with the help of a state government using violence, money, or trickery to take it from others. Then the government used men with guns to protect the chunk of land from armed men loyal to other governments. The capitalist is just allowed to play around on the land and build things like factories. However, many people who sit on parts of the land have convinced everybody that they have inalienable right to it since they either got there first, built something useful on it for others, or are renting the use of land to the efficient capitalist so it becomes useful. They passionately make a point that they are not like those other land owners in the world who used their tribe to violently seize it from others or used lies (that's true since then they'd be governments themselves or the Vatican).

At first glance, the argument seems right and fair especially since many "land barons" are rugged good old descendants of frontier men who settled America. Surely the great-great-grandson of a man (who was allowed by Union forces to settle on land after it was ethnically cleansed), is not a land baron if he runs a humble ice cream shop? He is, but not significant to the discussion of helping to increase trade between New York and Europe if he's outside those areas. Let this man run and sell his ice cream to his heart's content in the Midwest for now.

If one looks more carefully at the fine print of land baron arguments, one sees that sometimes a legal squatter on the land just rents the space to the more efficient capitalists. Lets look at a hypothetical example. The land baron (lets call him Joe), might have descended from another back in the day or he could be one from Japan or United Arab Emirates who decides to buy a few square acres in Manhattan. He buys the acres from another baron when local economy is damaged and land is a bit cheaper or when he sees economy growing in the future. He hires a wonderful construction company to build a shiny skyscraper office building. Then he waits for the capitalist to come in and give him rent money to run a business out of the building. Those barons who have land near say, Wall Street, can jack up their rent pretty far and just worry about other barons building taller buildings and offering cheaper rent.

Sounds great for development you say? Well, a shovel also sounds like a great way to dig a ditch in the absence of a bulldozer. However the bulldozer equivalent of directing development does exist and has shown remarkable results in such little gems like Hong Kong and Singapore. But more on that in a minute. Lets return to Joe now. Joe has found that he can create a de facto monopoly sometimes. Maybe Joe buys a couple of pieces of land with airports on them next to a city. Then he charges capitalists (who own airlines), rent to have their facilities and airplanes there.

Joe, trembling with excitement, cried out, "Lets jack up the rent a bit shall we what are they going to do!? Lose out to their competitors by not flying their planes here? Are they going to buy land next to my airports and build their own airports which will take years and lots of money and pressure on local governments? Hah! Let them and then I'll lower the rent again!"

He goes hogwild buying up land with oil fields, mountains full of copper and gold in them, and parts of coastal areas on poor islands to build entire tourist resort chains with casinos on them. Sometimes, in the heady days, organized crime wanted a bit of the cut or offered help but Joe grows too powerful and stops being seen as a person. After a while the local government stops being dazzled by Joe's success, wealth, power, and shiny structures in their communities. They approach Joe and say that perhaps owning all the airports drains too much money from the people by making the capitalists jack up prices. They cautiously warn that perhaps owning the only rail hub through town is detrimental a bit. Making capitalist railroad owners pay more for transit hurts development and progress and raises price of goods for the residents.

Joe replied, "What are you going to do!?! Tax me!? I'll just sell my land to another Baron who will in turn pass on the taxes to others by jacking up the prices even more. Maybe then I'll move out of this state or country and just do this again somewhere else. I hear Cuba's Batista wouldn't do this to me. Why don't I go there build more Casinos? Are you going to forcefully take away my land?? See how that works out for you, get some political capital for that, and then call the guy I sell the land to."

At that, the government officials shook their heads and smiled nervously. They soothingly spoke to Joe, "No, no, no we don't mean it like that. All we want is to form a partnership with you to get a cut of your profits. This way you can be a member of our community and benefit from it as well as be protected by our influence. Let's just iron out an agreement on jacking up prices and we'll even help you out with tax breaks here and there and some lax regulation. We want votes from the people and you are important to us to achieve that goal. Join us in a partnership. You can still sell the land and we'll continue the partnership with somebody else if you want."

Joe thought for a bit and then smiled widely. "What a good reasonable idea! I always felt connected to this city anyway!" he exclaimed as he shook the government's hand.

Sometimes however, the government just acquired key transportation and large assets by buying them and running it themselves. Not being profit driven they, of course, could not compete as effectively and often passed the costs to the tax payer. Sure, a government monopoly (like Port Authority of New York and New Jersey) on airports and subways could artificially keep the prices low so capitalists and their airlines are not too pressured. That however required either higher taxes and fees from ordinary people or required cutting corners here and there.

And thus the infrastructure rotted and got dingier (although the shiny new planes sure were kinda modern). And the price for the capitalists using this government owned land didn't really come down that much at all.

What to do, what to do?

The first step is elimination of taxation on land improvements while jacking up tax on land through equal Land Value Tax for all land owners in New York City. LVT is the only tax with no deadweight loss since amount of land is fixed. Singapore and Taiwan have utilized it effectively and beautiful cities like Sydney achieved wonderful efficiencies in infrastructural improvement. Land Value Tax has been proposed in America and New York City many times (for an example, see this NYT article from 1899 explaining that those barons living next to new subway lines will help pay for the economic benefits that the new line brings).

The land barons or as they're now called landlords (what other profession has a lord in the title?) have killed the idea in the United States. However, now that educated are migrating to the cities it's time to milk those who own the new apartment buildings. No, buying an apartment inside somebody else's building is not wealth. Reselling it to somebody else (and fueling the bubble) just makes the apartment owner the baron's stooge who bought a seat on somebody else's car. The artificial overvaluing like this and the bubble that it creates is a massive transfer of wealth to a parasitic non-capitalist feudal class of middlemen. All land owners should pay a tax (rent) to the government that protects their property with tax payer paid thermonuclear weaponry. Lets not contribute further to failed sub-urban economic structure by making it cheaper for people to live in suburbs through low (compared to tax on improvements) land taxes currently. Lets free the capitalists having to deal with land barons from dealing with middlemen and lets make those capitalists who are also land barons more efficient.

The second step is to sell off land on which subway, bus, and railroad infrastructure sits to private companies.

The third step is using 21st century trust-busting to make sure all the private owners are competing and not joining forces. Teddy Roosevelt knew what was right for America and really contributed to making capitalism better, more efficient, and less in cahoots with feudal parasites. Let's do one better than a republican 100 years ago. Lets save capitalism by letting capitalists using the land breathe freer and by allowing them to really use their creative energies in competition. Let the real landlord, the New York City government, get the fat checks and make the city more attractive to trade. Ice cream owners in Midwest and other competing urban hubs like Los Angeles can follow or do their own thing. Lets make New York City an ever better connector to the economy of Europe and a source/receiver of talent and investment. Lets make Joe the Baron into Joe the Capitalist

For more information:

http://en.wikipedia.org/wiki/Land_value_tax