“GOP VALUES” — How The GOP Shows Favoritism to Unearned Income over Hard Work

Something else I don’t understand about Republican dogma…

GOP rhetoric seems to idealize the virtues of hard work:  “Pull yourself up by your bootstraps.” “Just get a job.”  “Quit freeloading.” It’s like they actually believe the Horatio Alger myth.

But look at our federal tax structure, and the changes Republicans have forced through since Ronald Reagan.   There is no reward for hard work.  Instead, our current tax system is tilted strongly in favor of those who already have money.  Investment income — unearned income — is now taxed at about half the rate of wage income.

Flashback to the 2011 debt-ceiling crisis: “Even an architect of the Bush tax cuts, economist Glenn Hubbard, tells Rolling Stone that there should have been a ‘revenue contribution’ to the debt-ceiling deal, ‘structured to fall mainly on the well-to-do.’ Instead, the GOP strong-armed America into sacrificing $1 trillion in vital government services – including education, health care and defense – all to safeguard tax breaks for oil companies, yacht owners and hedge-fund managers. The party’s leaders were triumphant: Senate Minority Leader Mitch McConnell even bragged that America’s creditworthiness had been a ‘hostage that’s worth ransoming.’ ”

Now, let’s look at the impact that this VERY ODD tax preference has had on the US economy.

What happens, when our tax system rewards investment income, rather than actual work?

  1. Private equity “investors” use acquired corporations to borrow money – and then use that borrowed money to pay themselves dividends.  “Investment”?  Not hardly.  The acquired corporations go belly-up when they can’t pay pack the debt, leaving hundreds (or thousands) of workers unemployed.  Read “What Mitt Romney Taught Us about America’s Economy.”
  2. CEOs take more compensation as dividends, rather than wages.  Even accounting for inflation, top-tier taxpayers took home six times more dividends in 2009 than in 1992.  “But each dollar paid to the CEO in dividends costs the company (and the economy) a whole lot of money that could have been reinvested. Going back to Fred Smith as an example, his 15 million shares in the company represent only a fraction of the outstanding stock. For Mr. Smith to receive $8.5 million in dividends, personally, the company has to pay out well over $100 million in total dividends – money that could have been invested in new hires, or new planes, or new facilities (or improved employee benefits).”
  3. Some of those CEOs “invest” that money in politics.  And the cycle repeats itself.

“Pull yourself up by your bootstraps”??!? Bootstraps are getting very hard to find, these days.

(But please don’t shop for them at Walmart.  The corporation’s “Lowest Prices” policy has had a devastating effect on the US economy.  “Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.”   Meanwhile, Walton family members – who receive about half of all dividends paid by Walmart – are doing just fine.)

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About Liz Iacobucci

Liz Iacobucci is the former Public Information Officer for the State Employees’ Association of New Hampshire, SEIU Local 1984. Over the past three decades, she has served in government at the federal, state and municipal levels; and she has worked for both Democratic and Republican politicians.
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