Returning Democracy to the (Natural) People

Today marks the second anniversary of the Supreme Court ruling in Citizens United v. FEC, which unleashed unlimited spending by corporate "persons" to influence our elections. We saw some of the effect of this in the 2010 mid-term elections, and we're seeing it already this year in the wildly expensive and nasty fight for the Republican nomination. But, while Citizens United expanded the concepts of corporations as legal persons and money as speech, it didn't start there.

It actually started about 125 years ago with the case of Southern Pacific Railroad v. Santa Clara County. In that decision, the court held that the railroad corporation was entitled to rights under the 14th Amendment. Many cases between Southern Pacific and Citizens United have further expanded the concept of corporate rights and personhood, often at the expense of human citizens.

But the humans have not given up hope, and have begun to fight back. Move to Amend is an organization trying to pass an Amendment to the Constitution that would clearly state that corporations are not people, and money is not speech. Yesterday, they held rallies across the country themed as "Occupy the Courts" aimed at overturning Citizens United and educating people on the need for a Constitutional amendment.

I attended in San Jose, where our rally took place in Saint James Park, across the street from the very courthouse where the Southern Pacific case began 125 years ago. There were a few speakers, including a city councilman and a woman who was fired from Walmart for being a whistle-blower, followed by a skit of "campaign speeches" from a robot representing different corporations. We then marched through town, past the Federal office building, and ending for second, smaller, rally in front of City Hall.

At its height, there were maybe a couple hundred of us. Not too large, but a good sized group for a rainy weekday. But where was the media? I saw only a couple of people who seemed to be taking notes or a few professional photos, but no TV crews. The Move to Amend folks are going to need to get much better at PR if this movement is to take off.

Passing a new amendment to the Constitution may be difficult, but is not impossible, and the stakes could not be higher. While there has always been an undue influence of money in our political process, Citizens United amplifies it hundreds of times over. Corporations are now able to give untraceable millions to SuperPACs that are not bound by any of the controls or limits that we've placed on candidates or individuals. They can say pretty much anything and will drown out the voice of We the People.

We have to make it clear to our leaders, and to the corporate interests that fund them, that democracy is for us human citizens only, and is no longer for sale to the highest bidder. One person, one voice, one vote.

Why 15% Should Matter to the 99%

This week Mitt Romney let slip the real reason why he's reluctant to divulge his tax returns. It's not how much money he earns that he's hiding - we're all aware that it's a considerable sum - it's the tax rate he pays on that income that is controversial.

Because Mitt's income is mostly from investment earnings, he pays the capital gains rate of 15% on his millions rather than the current top marginal rate for wages of 35%, or even the average middle-class top marginal rate of 25%. This has left his supporters to explain why this very wealthy man should pay a lower tax rate than most middle-class Americans.

Capital gains, we are told, are very special because of the risks involved. Not every investment pays off, after all. Very true. But, of course, that's why losing investments can be written off as business expenses and deducted from one's over-all income, reducing one's taxes. So, why, when an investment is successful should it be taxed differently than regular employment income?

Well, 15% of $1,000,000 is still more than 25% of $75,000! Kinda like how, if you buy in bulk at Costco, you get a lower price on food. That's fair, right? Well, in as far as that analogy does hold water, the tax code already has provisions for the "bulk buyer" (IE: additional children = additional deductions). In my case, my home (modest by CA standards, but expensive by national standards) gives me quite a mortgage interest deduction. Add that to my business and other expenses and I probably deduct as much from my income than a minimum wage worker earns in a year.

But on the taxable portion (after deductions), I gladly pay a rate that's somewhat higher than the minimum wage worker because of my relative success. And somebody who earns 10-20 times what I do should pay a little higher yet. Certainly no less a percentage. So, why so much lower?

Well, they say, the rich need an incentive to invest. Why bother if your earnings after taxes will barely keep up with inflation? When I hear this argument I always have to reply that I don't think the rich are as lazy as you think they are. I have faith in their entrepreneurial drive that they'd still invest, create, and build, even if capital gains were taxed as regular income. As long as the tax rate is below 100% any gains are still better than a mattress full of cash (and, no, I'm not suggesting a 100% tax).

If you buy that "incentive to beat inflation" argument, then people should be turning down C-level jobs that hit the 35% marginal rate, and even middle-management positions in the 25% range, and all the MBAs would be looking to work in mail rooms. It turns out, however, people prefer to have 65% of $500,000 over having 75% of $75,000. So, why does investment income require a tax rate so much lower than income from labor?

Gosh! You're just envious! After all, everybody has the opportunity to invest and get the tax benefits of capital gains! Well, perhaps we do have that opportunity, but not to the same extent. According to the Washington Post, "The 400 richest taxpayers in 2008 counted 60 percent of their income in the form of capital gains and 8 percent from salary and wages. The rest of the country reported 5 percent in capital gains and 72 percent in salary." When you defend 400 out of 312,877,450 with "everybody can do it," it's more than a bit of a stretch.

Here's the thing about all this in relation to Willard Mittens Romney: the millions he makes each year from capital gains are not even from investing his own money. There is no risk involved. Mitt's millions are part of his retirement agreement with Bain Capital. Every year he gets a nice slice of Bain's profits, even though he hasn't worked there in 13 years.

Of course, while most of his income comes from Bain and other capital gains, Mitt does work part-time as a public speaker. He describes his income from speaking fees as "not very much." It's actually $374,000/year. As a point of reference, $380,000 is the cut-off point for being in the top 1% of earners.

Capital gains have not always been taxed as low as 15%. This rate is the result of tax cuts (from both GW Bush and Clinton) that were supposed to inspire and encourage the wealthy to invest more, thus creating new jobs. As you can see, that plan didn't quite work out.

Many Republicans are now pushing for a new rate on capital gains: 0%. Romney, in his defense, is not one of them (although he does have other tax cuts in his plan). But if Newt Gingrich is elected, Mitt's tax bill will fall to nearly nothing.

So, please, remind me again, why are capital gains taxed so much lower than income from actually working for a living?