Dysfunctional Do-Gooders

“The nonprofit sector, which roots for the underdog, supports tax breaks to the wealthy because charitable deductions help us.”

--Jan Masaoka, CEO of the California Association of Nonprofits (quoted in the Bay Citizen)

Corruption or Rational Response to an Irrational Premise

Non-profit organizations are often the strongest advocates for the neediest Americans, yet they also tend to be strong advocates for tax breaks for the nation’s millionaires. From their perspective, this is not a corruption, but an expedient: they desperately need money and the wealthy are the ones most able to provide it. Not only do the rich have more disposable income to give away, but the tax system provides incentives for them to give to charities by allowing them to write-off their donations.

This may seem paradoxical, but only because charities and non-profits start with an irrational premise. Some believe they can solve a social problem by giving money or services to its victims, while others accept the social problem as a natural or unsolvable reality and hope only to lessen the suffering through assistance to the victims. In either case, donations become the primary goal since the rest of their goals are unachievable without money, while the actual causes of the problem are either ignored or tolerated as a normal or acceptable part of reality.

Charities are Big Business

The issue of dwindling charitable donations came to the fore in this year’s presidential campaign when Mitt Romney insisted he could lower the deficit while maintaining low tax rates for the rich by slashing their deductions. Obama’s 2013 tax plan also included a cap on charitable deductions for those in the highest tax bracket. Both plans would reduce incentives for the wealthy to donate and likely result in reduced revenues for non-profits.

Charities received almost $300 billion in donations last year, according to a recent study by Bank of America. 0ver70% of this came from individual donors and half of that came from the wealthiest 3% of U.S. families. Therefore, any threat to the charitable donations tax deduction could significantly affect revenues for nonprofits. Martin Feldstein, a Harvard economics professor believes that ending this deduction would result in a 40-65% drop in donations to nonprofits.

While most charities are non-profits, they often have large payrolls and sometimes even have officials who earn six-figure salaries. This is particularly true for hospitals and other large non-profits. However, even smaller non-profits have employees who are dependent on the donations for their modest incomes. Furthermore, many people choose to work for non-profits rather than the private sector in order to help people in need and thus they are very invested in keeping the donations rolling in, regardless of where they come from.

Charity Perpetuates Need

Charities exist to help people in need. Helping the needy is compassionate and good. However, charities seldom ask why their clients are in need, nor do much to end that need. On the contrary—if they ended the need, they would end their entire reason for being and put themselves out of business. Instead, most use their donations to feed their bureaucracies (e.g., employee salaries, lawyers, lobbyists, rent), provide handouts and services to clients, and do public outreach and education (to encourage a constant influx of donations).

If the goal is ending poverty or hunger, then the charity’s goals should also include ending income and wealth inequality. This cannot happen by taking money from the wealthy, which only perpetuates the wealth gap and the illusion that they are doing good for society. Similarly, if the goal of a non-profit hospital is to provide quality healthcare for everyone, then they should fight for a single payer healthcare system that provides access for everyone while keeping costs low, rather than charging exorbitant fees to those with insurance and begging for handouts from donors for the indigent and poor.

Supporting tax breaks for the wealthy has the opposite effect. It increases the wealth gap by reducing wealthy individuals’ tax liability and it discourages social investment in solving social problems by ensuring that charities stay in business to provide handouts. Thus, people can continue to rationalize not providing free or subsidized housing for everyone who needs it so long as there are homeless shelters and soup lines.

It’s the Money, Stupid, Not the Teachers

The results are in from the latest public opinion poll on teachers. According to the 44th annual Phi Delta Kappa/Gallup Poll of public attitudes toward the public schools, 71% of respondents say they have trust and confidence in the nation's teachers. 43% of parents and 35% of Americans in general say money is the biggest issue, up from 17% in 2002.

While it is heartening to know that two-thirds of respondents are willing to pay higher taxes to improve the schools, it also shows a lack of understanding about the main causes of the  achievement gap and other K-12 education problems: high poverty among the students and low taxes for the wealthy. The former is the main cause of low student achievement. The latter is the main cause for shrinking school budgets.

Increasing property and income taxes would certainly add more money to state and local budgets that could be used for schools. However, to actually end the yearly uncertainty over education budgets and provide the kind of surplus necessary to shrink class sizes, increase course offerings, renovate dilapidated facilities, hire adequate nurses and librarians, and provide the quality that parents really desire, there will have to be substantial tax increases on the wealthy, including large increases in capital gains and inheritance taxes, in contrast to nominal income and sales tax increases that would disproportionately impact middle and lower income families, as proposed in California’s Proposition 30.

The 1% Pays Only 10% of Their Profits to Feds

According to the Harper's Index, corporations paid only 10% of their profits in taxes last year, compared with 40.6% in 1961.

What's changed?

The ruling elite have been able to slash business taxes over the last 25 years. Simultaneously they've increased their profits by working their employees harder, longer and faster, while paying them less. According to Harper's, 3/4 of their increased profit margin is due to depressed wages.

What hasn't changed?

The ruling elite then, like today, had a monopoly on political power and the machinery of production, compelling the rest of us to sell them our labor under whatever conditions they dictated. There was still homelessness, unemployment, poverty, hunger, want and privation. They were befouling the air and water, poisoning low income communities, pillaging poor countries in the global south, and slaughtering civilians whereever U.S. hegemony was being challenged.

California’s Skyrocketing College Tuition

While inflation has been at a relatively low 3.6% for most goods and services, it has been skyrocketing in several key sectors, particularly healthcare and college education. Across the nation, average college and university tuition and fees have increased 8.3% this fall, according to the Los Angeles Times, while in California, the increase was 21%, nearly four times the national average.

For students considering getting their general ed requirements out of the way at cheaper community colleges, fees in California have increased 37%. While this is a dramatic hike, particularly for low income students who had carefully budgeted based on last year’s fees, the $1,119 they must now pay each year is still a discount compared to the $3,288 students pay at two-year colleges in the rest of the country.

While some argue that students can pay for much of this with grants, scholarships and loans, the fact remains that student loan debt is at record levels ($830 billion) and has now surpassed credit card debt nationally. According to the study cited in the Times article, roughly 56% of students who earned bachelor's degrees at public colleges in 2009-10 graduated with debt averaging $22,000. At private nonprofit schools, the average debt was $28,100.

Considering how few jobs there are right now, recent graduates could be in debt for a very long time. However, the jobs available to those with a bachelor’s degree are generally not the highest paying jobs. So even if they are lucky enough to get a job right out of college, they will not necessarily be able to pay back their loans any time soon. If they go onto graduate school, their debt burden upon graduation could easily be in the six-figure range, depending on the type of degree.

While California’s community colleges and Cal State University systems are still cheaper than their counterparts in other states, tuition at the elite University of California system is now considerably higher than the national average. University regents have blamed the yearly increases on budget cuts from the state and it is true that the state slashed UC’s annual budget by half a billion this year. However, as the state’s premier institution of high learning, UC has been bringing in considerable additional revenue from its research and discoveries ($128 million in patent income in 2007-2008). One might reasonably ask why this hasn’t been used to help defray costs for undergraduate education.

Additionally, while the university has been jacking up student fees and allowing faculty salaries to stagnate, it has been rapidly piling on new administrators with executive salaries. Over the past decade, the number of administrators has nearly doubled. UC was spending over $2 billion a year on their salaries back in 2008. However, according to a Faculty Association newsletter from 2008, the cost of just the superfluous administrators was $800 million. Furthermore, they have not been content with exorbitant salaries. 36 of the highest paid university executives recently demanded tens of millions of dollars in increased retirement benefits.

None of this should be surprising, when California’s more than 600,000 millionaires have demanded (and won) steadily decreasing income, property, and business taxes over the past three decades, depleting the state of revenue that could have been used to help fund public universities and K-12 education.

Rich Get Richer By Not Paying Taxes (Or Employees)

Greed (by Muffet)

Democracy Now reported yesterday on a new study that found that 25 of the nation’s top 100 corporate executives made more last year than their companies paid in taxes. The study also found the salary difference between corporate executives and workers had grown from a ratio of 263-to-1 in 2009 to 325-to-1 last year.

Meanwhile, Congress recently approved a debt deal that that excluded tax hikes on the nation’s wealthiest individuals and corporations, thus perpetuating historically low tax rates. The tax rate for the highest bracket is now only 35%, yet from 1982-86 it was 50%, and from 1971-81 it was 70%. From 1936 to 1981 it never dropped below 70%. In fact, the only time prior to 1987 in which this tax rate dipped below 63% was in the roaring 20s, when the wealth gap was also massive.

In California, for example, revenue from corporate taxes has declined by 50% since 1981 and the wealthiest residents now pay a lower tax rate than they did two decades ago. Meanwhile, in two years, Californians will have added more than $100 billion to their personal income, with $20 billion of it going entirely to the richest 1% of Californians, and $60 billion going to the top 20%.

Those Radical Nurses: Make Wall Street Pay!

Wall Street Speculators, We're Coming For You (Image by Barbara Bessa)

Nurses from across the U.S. are planning to call on Congress members on September 1 to support a tax on Wall Street financial speculation. The OB Rag and the Left Labor Reporter say that nurses will be joined by other groups who are planning soup kitchens to help feed the hungry and homeless, community speak outs and street theater to draw attention to the growing wealth gap. Events are planned in large cities like Boston, Chicago, San Francisco and Orlando, as well as smaller cities like Corpus Christi, Texas, Marquette, Mich., Bakersfield, Calif., Dayton, Ohio, and Worcester, Mass.

Nurses Marching (On Wall Street???) Image by timefornurses

 Sponsored by National Nurses United (NNU), the RNs will be calling on Congress members to support a Wall Street transaction tax and make it “pay for the devastation it has caused on Main Street.”

In a recent piece in the New York Times, Nancy Folbre, an economist at the University of Massachusetts at Amherst, wrote that a 0.5% tax on trades of stocks, bonds, derivatives, currencies, credit default swaps, future options, and other exotic speculative transactions could bring in $175 billion annually. Contrary to the crocodile tears of Wall Street speculators, economist Mark Thoma says that only short-term trades will be affected by the tax, and these are based on speculation that has little social value.

Mark Thoma is being too generous. There is no social value whatsoever, only profits for a few rich people. And the nurses are being too generous, as well, asking for only a pittance from people who can afford far more. What about marginal tax rates, corporate tax rates, capital gains taxes and inheritance taxes, each of which is at record or near record lows? If the rich had to pay taxes at the rates they were paying under their hero Reagan, which were higher than today, the government might bring in hundreds of billions or even a trillion each year. And if they paid the 80% marginal tax rate of the post-WWII years, it would easily over a trillion annually.

According to the Left Labor Reporter, the NNU’s September 1 action is part of the union’s ongoing campaign to “Heal America; Make Wall Street Pay,” whose goal is to get Americans back to work, provide health care to all, and help the working class regain some of the ground we’ve lost over the last 30 years.

Of course Wall Street should pay through the teeth, but this will not heal America. In fact, regaining the ground we’ve lost over the last 30 years, will only take us back to a time when the wealth gap was huge rather than monstrous. The world will still be dominated by a tiny minority of people who will still possess the vast majority of the wealth and for whom the rest of us will still be forced to toil. There will still be poverty, as there was 30 years ago. There will continue to be people who lack health care, decent housing, adequate food, free time, or control over their own wellbeing and destiny.

Taxing the rich is a bandage and perhaps a decent first step. But if we really want to heal America, then we need to be fighting for an end to the wage system and bosses and for a system in which everyone has access to the good things in life.

Republican Teachers Rebel Against Party, Demand Higher Taxes

Republican teachers in the California Teacher Association’s (CTA) Republican Caucus, are calling on their local Republican legislators to get on the bandwagon and support Gov Brown’s tax extensions, according to the CTA. Why not, the taxes will hurt the poorest members of the state most, while letting the wealthy off the hook and Republicans are the party of the rich, right?

The Republican teachers made the statement at a news conference at the Visalia Adult School, in California’s Central Valley, which includes some of the poorest counties in the state. Ironically, Central Valley teachers are not particularly well-paid and will be harmed by the tax extensions, while the wealthy ranchers and oilmen of the region will be hardly affected.

Unfortunately, they were a little late to the party. It is way past the deadline for getting the measure on the ballot. In fact, if the legislature doesn’t come up with a budget today, its members will stop getting paid. In response, the Democrats have come up with an austerity plan that will balance the budget without raising taxes, a plan that they believe they can pass without Republican support.

Here are some of the cuts (as reported in the SF Chronicle):

An additional $150 million each will be slashed from the UC and CSU university systems (they each lost $500 million in March

$3.5 billion in money owed to K-12 education will be delayed for another year

$1 billion earmarked for early childhood education will be transferred to the general fund

Control of state buildings will be given away to private companies