A Tale of Economic Corruption Part IV – Death & Taxes

The Full Tale of Economic Corruption

Death & Taxes – Only Applicable to 99% of Us

Credit: Placeholder Gameworks.

To introduce this final installment of my economic corruption series I would like to highlight the inability to pursue the American dream. We have been sold on the idea that through hard work and loyalty in our savage capitalism that one day we too will be able to have enough money that the struggles facing us aren’t applicable anymore, and we can look down from our security on the people who used to be us. This idea of being able to go to college and graduate into your ideal field, work up enough to own a house, and start a family and live happily ever after has been a pipe dream since the 80’s when the boomer generation began consolidating power and wealth through a deregulatory free for all. In the modern American economy the rich and Wall Street dictate all, even the policy coming from our elected officials, so that they can maintain the status quo of maximizing personal profit at the expense of the rest of the planet.

This reality becomes even more evident when looking at the overall assets that younger generations hold in comparison to baby boomers and older. Millenials are hardly able to own their own property, let alone have any type of savings built up in case of emergency. The average person doesn’t even have $400 on hand to pay for an emergency medical or accident bill and nearly half of the workforce is unable to afford a one bedroom rental due to stagnated wages and a reliance on living paycheck to paycheck within the system the upper class has upheld. Now think about how exponentially worse it is going to be for THEIR children in a few years.

Regardless of the booms and busts natural to capitalism, the median household income has slowed from a healthy 41% gain between 1970-2000 down to a paltry 0.3% growth from 2000 to the present. The percentage of income going to upper class households has also surpassed that of the middle class for the first time since its (the middle class’s) inception. Nearly half of the income, 48% of profits generated, in the country goes to a very small percentage of its inhabitants. 5% or less to be specific. 43% of profits are now channeled into the middle class (a 20% reduction since 1970,) and 9% goes to the lower class. (a 7% reduction, but consider losing $70 for every $1000 made if you already have no home or car). The actual amount of wealth, and percentage of growth for it, also significantly favors the top five percent of Americans. In the 1970’s the upper class held around three times as much wealth compared to the working class. As of now they hold just under eight times more wealth than middle class Americans, over 10 times the lower class, and additionally; were the only income group to increase their median household income during the Great Recession. They were also the only group to benefit during the pandemic, as one of the largest wealth transfers in history happened when the top few billionaires nearly doubled their wealth and made over $2 trillion while the working class lost jobs in record numbers, desperately trying to stay afloat during a global crisis.

In 2008, as has been our government’s consistent policy, the same corporations and hedge funds that caused the average American to lose everything were bailed out by the government. The individuals siphoning obscene wealth off of them got their bootstraps tied to a giant balloon funded by politicians who were scavenging on the profits, while back on Earth everything went to shit. Families lost their entire savings, struggled to pay bills and the general cost of living, and some even lost their homes. The most disheartening part about this reality is that we have been brainwashed into allowing the wealthy and government to take advantage of us for their own benefit. Systems and institutions that are in place to help marginalized communities are consistently attacked as enabling freeloaders and incurring a cost to the rest of society.

Conservatives in particular like to use the argument that welfare queens and other racist stereotypes are taking advantage of the system, or that poor people are just lazy and need to get a job to pay their costs of living. The reality is that millions of lower class Americans work their asses off at shit jobs with little pay or benefits, all while taking the brunt of taxation in our income tax system and being forced to pay higher percentages of what little wealth they have. This is due to the fact that they don’t have resources to evade the IRS like rich people do; you can’t prevent having a portion taken out of your paycheck when you aren’t the one writing it.

Credit: NYT. This graph shows just how disgusting the disparity in wealth growth has been.

A recent ProPublica report shows just how disgusting this taxation disparity is, with the richest Americans having paid little to no federal income tax for at least the last decade. People such as Jeff Bezos, Elon Musk, and George Soros have all avoided paying the IRS for years, and in 2018 the disparity reached its worst levels yet. The 25 ultra wealthy that ProPublica tracked (0.0001% of the population) paid a total of $1.9 billion in taxes while normal wage earners footed $143 billion. The cumulative wealth held by those billionaires totals $1.1 trillion, and keep in mind this staggering number is held by only 25 individuals. These billionaires who avoid paying taxes hold the equivalent of all the combined assets of at least 20 million average Americans.

Which group can feasibly afford to pay the government $143 billion and still live comfortably? These 25 people grew their net worths by $401 billion from 2014 – 2018 and paid $13.6 billion in federal income tax. This amounts to a true tax rate of 3.4% for these individuals on average, with those such as Warren Buffet (an advocate for higher taxes on the wealthy, somehow) getting away with paying a rate of 0.1%. The true tax rate for the average American lies just under 30%, while we are making about $65,000 or less per year. One of the biggest factors going into this issue is the fact that lower class Americans have very few actual assets that generate them wealth, most younger generations are going to be stuck renting forever because they aren’t even able to save up enough for a downpayment on a house due to the insane costs of living and high rate of taxation on poor people who have very little generational or inherited wealth to begin with. Taking out a mortgage would put them in further debt to banks, and our society has slowly shifted to force poor people to heavily rely on loans. These predatory types of loans charge extreme interest and ensure that people will never be able to pay them off, continuing to funnel infinite sums into the pockets of the 1% who doll out the money for lower classes.

 Congressmen have been rewarded tens of millions for their efforts to cripple tax and regulatory oversight so that the ultra wealthy can hoard even more of their treasure. When examining the Trump presidency it truly was a grift through and through, trying to funnel as much money into insider pockets within the administration as possible before it all came crashing down. Here I will be discussing the tax cuts that have been wrongfully heralded by his supporters as being the shining star of policy success during his term, but I will be further discussing the corruption and entire fraud of his election in the first place later. 

In 2017 Trump’s administration began rallying Republicans around The Tax Cuts and Jobs Act (TCJA), a “beautiful” tax cut for the wealthy that was intended to go down as one of his legacies. In a closely divided Congress Ron Johnson (Wisconsin) shocked the establishment by claiming he was going to vote ‘no’ on the proposed bill. Despite party loyalty being at all time highs, Johnson insisted they could pass it without him because it wasn’t a low enough break for the wealthy. The senator demanded that tax cuts be even better for ‘pass-through’ companies, claiming they were “engines of innovation.” In reality pass-through corporations make up the bulk of American businesses, and are just entities that aren’t subject to corporate taxes for their profits because money ‘passes through’ into owners’ pockets. These owners are then supposed to pay taxes based on a percentage of this income in their personal returns, but the ultra wealthy have many loopholes around this and lobbied Johnson to lower their tax rates on these businesses even more. Someone like Amazon would be a class C corporation that is liable for corporate tax, publicly traded firms that are massive. (Which, by the way, also got a nice tax cut under Trump’s act).

Johnson’s provision was added and the bill passed, generating billions more saved revenue for the upper class. Due to the provision that Johnson and fellow pass-through proponents claim benefitted small businesses plus the average American, the 1% has taken $24.8 of the $43 billion saved by it’s addition. He was able to boost the cut for pass-throughs from a 17.4% decrease to 20%, and in the end the ordinary business owners, the vast majority of pass-through business owners, only saw $6 billion saved among them. Essentially the upper 1% of business owners were able to keep an extra 7 cents for every dollar on their billions and billions of dollars in profit while the average business owner saw maybe a cent for thousands in profit if they were lucky. The last minute addendum benefitted Johnson and his Congressional colleagues significantly, but those it was the best for are the billionaires that lobby them and pay for lavish lifestyles. 

The Uihlein’s Uline.

Two Wisconsin families in particular gained more from the senator’s interference than nearly anyone else; the Uihleins, of Uline (the office supplies mobile store thing), and Diane Hendricks, a real estate tycoon. These parties had donated $20 million combined to PACs backing Ron Johnson’s re-election, with Liz and Dick Uihlein being dubbed the “Koch Brothers of Wisconsin politics” after donating $8 million to Johnson in 2016. Hendricks donated $12 million to Johnson’s campaign that year and received a $97 million deduction on $502 million worth of income in 2018. In the case of the Uihleins, Uline generated more than $1 billion in profit throughout 2018, and the majority owners were expected to earn $700 million, saving $118 million from taxes with the provision.

Both the Uihleins and Hendricks will earn about half a billion dollars more during the 8 year life of the bill just due to this single pass-through provision. 82 other ultra wealthy households walked away with a collective billion plus in total savings, and based on tax records, Michael Bloomberg ironically received the largest known individual deduction from Johnson’s provision within the bill and netted $68 million from that line. Remember, this was just the income generated for a few individuals by one addition to pass-throughs in the bill; Trump’s overall TCJA was the biggest rewrite of our tax code in decades, crafted in secrecy among a handful of picked Congressional and White House members and generating staggering amounts of income for the top 1%, specifically the top 0.1%. 

Johnson’s intervention into the TCJA wasn’t near the only shady dealing that took place. A lobbyist by the name of Marc Gerson was paid by Brendan Bechtel (CEO of a massive engineering firm, Bechtel) and his family to meet with lawmakers concerning the bill, specifically about adding a stipulation that would entitle their engineering and construction company to the new 20% pass-through add on. This guaranteed that the family’s $2.3 billion plus in profits during 2018 were eligible for a much better tax exemption. Gerson was a part of over $1 million dollars that Bechtle spent within a year to lobby about Trump’s tax bill, with both men meeting top White House officials such as Justin Muzinich, a lead treasury department member. Bechtle’s meeting with Muzinich and the efforts of Gerson led to eight words being added onto the bill that guaranteed his firm would be eligible for the tax deduction; in regards to who the pass-through addition would benefit, it would be “applied without regard to the words ‘engineering, architecture.”

Brendan Bechtle alone received over $64 million in 2018 tax write-offs due to this, and his engineering firm netted other family members hundreds of millions during that year. Bechtle has donated millions to anti tax politicians, yet owes its entire existence to government funding that is backed by tax dollars. Jane Mayer notes that Bechtle was one of the companies that helped build the Hoover dam and in recent years has bid and won major federal projects. Many of their projects were funded by American taxpayers in Iraq as we tried to rebuild parts of the country during the war on terror. Billionaires like Bechtle expect their business to be funded on the backs of the average person while vocally claiming that Biden shouldn’t increase taxes on business to pay for infrastructure because it would be an unfair burden to shoulder business owners with.

 Real Estate magnates were also sure to get in on the Trump cuts, with figures such as Donald Sterling or Adam Portnoy receiving hundreds of millions in benefits from addendums they lobbied to get through for receiving the 20% deduction. Politicians such as Johnson or Henry Cuellar (Texas) claim that they are only helping small businesses and looking out for the American people, yet they’re doing nothing to help their constituents living on minimum wage who can’t afford to whisper in their ear and buy them a nice dinner. Our establishment political sphere is out of touch and absorbed with individual greed, sitting back on their cushy lobbying packages and approving bonuses for themselves, all while getting letters from their voters about how average families can hardly afford to eat.

Nancy rests easy knowing that she won’t have to worry about being fucked over in the economy like the gross ‘average’ American.

Pelosi and the House continually raise Congress’ budget along with their salaries, and even if they say they’re doing it just to keep up with inflation, why would they not at least afford the average American the same? Instead the very same politicians receiving millions from the upper class rail against giving handouts to the average person who needs food stamps. Congressmen will pass through tax cuts that directly benefit their funders with a smile on their face, not blinking twice when those same corporate entities ask for a bailout. However when it comes to ensuring millions of people are paid a living wage, or even have access to healthcare, that is “too expensive.” Congress approves spending hundreds of billions on Wall Street, or devotes hours to ensuring their corporate sponsors can pay less in taxes, then turns around and claims that they lack funds to improve social conditions; you know, the function of the job they are elected to do.

Politicians work no harder than the average person or provide any more importance to economic function, they are simply more adept at manipulating their way into power and getting bonuses while sociopathically ignoring the rest of the country struggling. It is unfortunate our system rewards this type of nepotism and lust for individual power, creating a government in which inside connections and corporate bribery are what drive policy. This is even more obvious when looking at the aid that actually does get sent to “small businesses” and impacts a community, rather than just tax cuts for billionaires or bailout packages from the Fed’s infinite money printer. There are huge discrepancies in the type of funding that disadvantaged community businesses receive, let alone in the amount of businesses that POC or other historically disenfranchised populations own.

During the initial COVID-19 crisis in Portland, white owned businesses benefited the most from relief and shutdowns, as most essential businesses were owned by white corporate entities. Even when dispensaries were deemed essential, the ones that generated the most revenue were those that had the money to rotate through staff in a pandemic (and subsequent wildfire season) and were incidentally all owned by corporate interests. Businesses that really don’t need the help often get it more, and even if they do POC business owners because of the advantages offered to a few in our capitalism.

Unfortunately for us the Fed also decided to do another round of quantitative easing after the Recession, which has proved the ultimate iteration of privilege for insiders on Wall Street. I wanted to show the insider connections and various interests that our politicians have to legislate for instead of the people before getting into QE 2, as it will help the reader understand where all of the billions go that the upper class is generating from Fed policies. As shown in our discussion of the first round of QE wealthy interests made trillions, and Congress readily went along with Bernake when Wall Street came knocking on the Fed’s door for round 2.

Credit: ProPublica/Lucas Waldron, National Bureau of Economic Research. Visual representation of how much the 1% benefitted from Trump’s tax cuts.

In this tale of economic corruption I’ve described the insider connections that facilitate a financial environment leading to events like the Great Recession, along with how the Fed has then taken taxpayer’s money and used it to bail out Wall Street. Additionally, Federal Reserve policy taken too repair the economy has been incurring inflationary costs on the average consumer as they generate endless money to feed directly into the financial industry’s slavering maw. Some of those billions go directly back into the pockets of politicians like Ron Johnson, Nancy Pelosi, or Ed Royce through political donations and direct gifts that show how much Wall Street appreciates legislation crafted perfectly to their specifications. Centralized banking has essentially become the latest grift in our financial history as the original vision that Alexander Hamilton had of a n national bank has been bastardized for the pure profit of the 1% and politicians who enable them. As soon as politicians are voted out of office or retire, they know they can fall back into a steady 6+ figure income at one of the firms that they grew intimate with while in office.

I hope that this series has been informative and fun to read 🙂 I would love to discuss these concepts further, and will be making more posts on the financial sector and our disenfranchising economic world until the end of the month. Cheers!

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