More on Property Taxes; More on Bill Black

by Chris Sturr | January 25, 2011

Tax the Rich

TAX THE RICH

(1) More from Polly Cleveland on Property Taxes: A couple of posts ago I complained about the New York Times’ coverage of deficits and taxes.  The one that really steamed me reported on a NYT/CBS News poll in which a majority of people allegedly preferred cutting spending to raising taxes as a way of dealing with the federal deficit.  But it turns out the poll asked people these questions:  “Do you think it will be necessary or not necessary to cut back on government programs that benefit people like you?”  and “In order to reduce the federal budget deficit, do you think it will be necessary or not necessary to increase taxes on people like you?” The first question sidesteps the divisive question of paying for other people’s social services (though framing it that way allowed the Times to conclude that people are wary of cuts to “entitlements,” which is surely true); but the second question left no room for people to express the view that the rich should be taxed more heavily.  Ugh.

Anyhow, here’s more from Polly’s blog about one way we could tax wealth; she addresses one of the other Times articles that irked me last week:

To End Deficits, Allow Localities to Raise Property Taxes

Yes, property taxes are unpopular. So are sales and income taxes—yet states don’t forbid localities to vote for an increase. In the name of democracy and fiscal sanity, let’s free our citizens to tax property for the services they need.

By Polly Cleveland, on January 23rd, 2011

In Higher Taxes Wouldn’t End Some Deficits (Jan 20) the New York Times reported how a few state governors have timidly proposed small income tax increases. There’s a better alternative: undo the legal shackles that keep residents of towns or school districts from voting themselves higher property taxes.

Property taxes are wealth taxes, intrinsically more progressive than income taxes—because personal and corporate property ownership is much less equal than income. Until World War II, property taxes were the dominant tax in the US. Since then they have been constricted by caps—notoriously Proposition 13 in California in 1978—and whittled down by exemptions and favors for influential owners. New York State’s constitution already limits property taxes to 2% of real value; Governor Cuomo proposes a further cap. Still, in an age of income tax loopholes, property taxes remain the only tax many rich people and corporations pay.

Read the original post.

(2) More on Bill Black: Bill Black, former banking regulator and author of one of the feature articles in our current issue, Still Banking on Fraud, just spoke at the North American Securities Administrators Association (NASAA) annual enforcement conference in Charleston, S.C. He wrote to us:

I just returned from giving the keynote talk to NASAA’s annual enforcement conference in Charleston, SC (see today’s WSJ article about one of the state securities commissioners, Alabama’s Joseph Borg).  NASAA is a group that really gets it.  They send hundreds of frauds to prison every year.  Conservatives/liberals/Dems/Repubs — it usually doesn’t matter what the commissioners background is — these state secruties regulators know that fraud is a severe problem, self-regulation fails, and restraints on civil suits v. frauds and aiders & abetters are excessive.  Their views deserve to get far more attention (at the SEC, in Congress, and the media) and they could be very helpful allies.  This is the centennial of the first blue sky law (Kansas).

Note also that one of the people Bill mentions in his article, Franklin Raines, has been in the news recently.  Here’s what Bill said about Raines, the former CEO of Fannie Mae:

Senior executives can also use their ability to hire, promote, compensate, and fire to suborn employees, officers, and outside professionals. As Franklin Raines, chairman and CEO of Fannie Mae, explained to BusinessWeek in 2003:

  1. Investment banking is a business that’s so denominated in dollars that the temptations are great, so you have to have very strong rules. My experience is where there is a one-to-one relation between if I do X, money will hit my pocket, you tend to see people doing X a lot. You’ve got to be very careful about that. Don’t just say: “If you hit this revenue number, your bonus is going to be this.” It sets up an incentive that’s overwhelming. You wave enough money in front of people, and good people will do bad things.

Raines knew what he was talking about: he installed a compensation system at Fannie Mae that produced precisely these perverse incentives among his staff and made him wealthy by taking actions that harmed Fannie Mae.

Why is he in the news? Because  Gretchen Morgenson broke the story that Raines and other execs from Fannie and Freddie are having their legal defense bills picked up by taxpayers, to the tune of $160 million.

So not only are we not taxing the rich very much, we’re paying their legal bills when they defraud us!

–Chris Sturr

4 comments

Comments (4)

  1. If Raines were so self-serving or corrupt why was the Bush Administration is such a big damn rush to move him out as CEO of Fannie. He would have fit right in. The Bush Administration replaced Raines in 2003. If they wanted to change Fannies course they had plenty of time before the pace mortgage fraud hit full gallop in 2006. Instead, they wanted their own guy in place so as to insure Fannie would fully participated in the rape of the consumers and taxpayers.

    Yes, Raine made big bonuses as the head of multi-billion dollar entity. It is so strange that that is now an issue when the idea of CEO’s earning huge incomes has been foisted upon the public as desirable by Wall Street, politicians and the media for a few decades now. Compared to the Goldman Sachs honchos, Raines’ income was peanuts. The fact is that Bush’s henchmen would have hung Raines’ for malfeasace if they could. But they inspected everything down to his underwear and they couldn’t

    Raines avoided the worst outcome of the legal onslaught because he had extensive support from his board, both Republican and Democrats, and because he sought thorough review and endorsement for Fannies accounting by Fannies accounting firms.

  2. The attack was on Fannie and Freddie, it is true Raines was an investment banker wannabe and understood incentives and understood his advantage. But the attack was on the GSE model because non-agency securitization needed qualified borrowers to bundle with crap to get AAA ratings. Certainly you have heard the stories of people with good credit that qualified for Agency loans but were put into non-Agency gimmick loans that were more profitable. The Republicans ONLY act to benefit private business, it is part of their religion and is very predictable. Their attack on the GSE model was to shut it down so more gimmick lending could transpire in the private sector.

  3. Silly Liberals you will destroy the economy just to feel good?

    I’m sorry for the “silly liberal” comment. It’s a lazy shortcut to what should be a more substantial argument that liberals are not concerned about serious issues and are satisfied with feel good answers in place of real solutions.
    Along the same lines, some liberals admit that the “tax the rich” approach is just political, as in just to gain favor with the masses. They back it up with “most want raise taxes on the wealthy so why not?” which is exactly what I am talking about. We don’t live in a Democracy! The people can’t just take property from others just because “most want to.” I’ve cought some that make my point for me by contradicting themselves by saying “Most millionaires will find a way around it” and then turn around and say that it would bring more money into the government coffers.

    Now lets look at Obama’s latest tax the rich bill. Logically only the small business man would suffer because of having little capital to move around to avoid the new tax. If that brings in any money it will be at the expense of some of the jobs that small business provides. The real rich are not in need of income at all (remember they are rich) so they have the flexibility to avoid the taxes no matter how you configure it. So if you raise tax on income there will be less income & less money to the coffers. If you raise taxes on capital gains there will be less investment (to avoid any capital gains) and so less gains, still less money to the coffers, AND less money in the economy! Talk about the rich hording money? This is a government mandate to! Can you say “gold at a new all time high?”

    So liberals, Obama still makin’ ya feel good?

  4. Who’s a liberal? Who’s an Obama supporter?

    Until you populate your political universe a bit more (hint: there are people to the left of liberals), I won’t bother responding.

Leave a Reply

%d bloggers like this: