ROLDO: Why Ordinary People Pay Most of the Taxes

By Roldo Bartimole

There’s a lot of talk in the air these days about the inequality of income in the United States. Who’d a thought?

And a lot of discussion everywhere about who pays the most in taxes. Republicans argue that the rich pay almost all of our taxes.

Not true.

Why does President Barack Obama’s secretary pay at a higher rate than he does? Why do most of us pay a whole lot more of our income than Republican presidential candidate Mitt Romney?

This discussion of taxes, however, is much, much too narrow.

If paying federal taxes is where the inequality ended, the 99 percent might not be sitting pretty. But it doesn’t end there.

The truth is that tax unfairness is much more severe than most think. And the lower your income the more unfair.

The disparity between those with wealth and those hanging on is disgraceful.

The average wage earner pays progressively much more than the present arguments about inequality suggest.

That’s because we are loaded with regressive taxes, fees, penalties and other charges that weigh very heavily on most people. Many of these hit middle and lower income people who don’t have to pay a penny of federal taxes. So they pay. And pay. And pay.

To people with money these regressive taxes are no more than a nuisance. To the rest of us they are a hardship.

(For an amazing example to what extent wealthy people will go to avoid paying taxes this New Yorker magazine piece by James Stewart will amuse and infuriate you.)

These smaller taxes and fees make inequality much worse. They add up over the year.

You can start here in Cuyahoga County with city income (payroll) taxes.

If you make seven bucks an hour you pay at the same rate as those who make $200 an hour or $2,000 an hour. And it starts with the very first buck you earn. And it extends to the very final dollar. No deduction at all.

As I well know, some people who don’t pay federal taxes because of their progressivity have to pay city taxes. They hurt. Often if you work in one city and live in another you pay both in both places, with some reduction. So we have double taxation.

What’s fair about that?

Of course, the taxpayers who Republicans say pay no federal taxes – maybe 50 percent of workers – DO pay other federal taxes called withholding taxes. They can be a significant slam to the family budget. As someone who worked independently I know how painfully because I had to pay both the employee and the employer side. It’s 12.4 for Social Security and 5.8 percent for Medicare on earnings. If employed, your employer pays half. The wealthy, of course, get a break. If one earns more than $97,500 you don’t pay a penny more in SS taxes.

Then add in state income taxes, which unlike city payroll taxes, are at least progressively applied. Still it hurts.

If that’s where it ended one could wipe some sweat off the brow and begin using hard-earned income for essentials. Or even a goodie. Or for savings.

But that’s not the end for the average person. Not at all.

Likely the biggest financial hit is the sales tax, a highly regressive tax.

You pay state and local sales taxes almost every purchase you make.

This major tax never seems to be recorded by the commentators. Even economists, who talk and write about the tax inequities most common working people pay, seem to ignore it.

In Cuyahoga County the sales tax is 7.75 percent and on almost everything – from an automobile to toothpaste – carries this charge. Luckily no one has tried to put the tax on food. Hold your breath.

Buy a car for $35,000. The sales tax would be $2,712.50. A $2 tube of toothpaste adds 16 cents. These dollars and pennies add up over a year.

Think of all the things an ordinary family buys from small items as toilet paper to a bar of soap – all taxed at near 8 percent – to not infrequent purchases as computers, TV sets, refrigerators, stoves and other appliances.

Add to these taxes on gasoline, special fees, as the $8 a month ($96 a year with 25 cent increases each year) garbage collection fee recently added in Cleveland, driving license fees, auto fees, admission taxes (8 percent in Cleveland) another 8 percent on parking in the city to say nothing of countless meters that usually take 25 cents a half hour. Not to mention the cost of a parking ticket if the meter runs out.

The ordinary person is taxed in countless ways the economists and op-ed writers never bother to see. Yet these regressive taxes are used more and more often by hard-pressed cities, squeezed by state and federal cutbacks.

Shaker Heights wants a half percent more sales tax to 2.25 percent. The reason likely is that Republican Gov. John Kasich relieved more wealth citizens of the estate tax. That loss hurt Shaker and other local communities.

This kind of shifting of the tax burden happens often. More often than we know.

Cuyahoga County is famous for this shifting of the tax burden. To Cuyahoga politicians there are no luxury taxes. Only regressive ones.

My example:

Three Cuyahoga County taxes of recent times tell the story: Since February 2007 taxpayers here have paid $93,597,901 in cigarette taxes for the arts; since January 2000 taxpayers anted up $176,563,764 in sales taxes for the med mart/convention center; and from August 2005 residents shelled out $90,347,213 in alcohol/cigarette ‘sin’ taxes for Browns Stadium. That’s $360 million in sharply regressive taxes. No effort was made to find a luxury tax that would hit higher income people instead of these pesky taxes that sharply hit lower income people.

I recently totaled as best I could with the help of a County Auditor official the cost of our sports facilities. All financed with regressive taxes. It was more than a half billion dollars, all rest on regressive taxes and have up to another decade to pay. Actually more, since behind the scenes the same business people are plotting extending some of these taxes.

These tax subsidies are often accompanied by tax abatements and exemptions. This relieves some of taxes. Typically others have to pick up that lost revenue.

Frequently, arrangements are made to shift public revenues to private and non-profit interests. For example, Browns Stadium and the Rock & Roll Hall of Fame & Museum sit on free city land. No one questions this gift. Certainly the news people never do.

Politicians, pushed by private interests from the Greater Cleveland Partnership (formerly Cleveland Tomorrow, formerly Greater Cleveland Growth Association) invent other ruses to shift costs from themselves to the public. They are infuriatingly active in shifting the costs to the public.

Here’s how some of it works:

Back in 2003, Cleveland city council – lobbied by an array of high-priced private legal and financial consultants – worked out a deal where an extra 3 percent admission tax, instead of going into the city’s revenue stream, was diverted to the Rock Hall. It meant $160,000 a year of city taxes would not go to the city but to the Rock Hall. In addition a sum of $2 million already accumulated by this 3 percent surcharge was allowed to be kept by the Rock Hall.

The cost of the $92-million Rock Hall facilities is financed essentially by revenue that should have gone to the Cleveland schools. It’s difficult to keep up with these special transfers of money and the Plain Dealer never even tries. I check back in 2003 and noted that $1.8 million – just from the years 1999-2001 – of property taxes were diverted from Tower City properties to help finance the Rock Hall facilities. In other words, the money that would have gone to public use went to the Rock Hall. For 20 years.

These are not unusual deals.

The major example presently is the $400 million plus (not counting interest on financing bonds) that goes to finance the medical mart/convention center, a predictable white elephant that will eat up more public revenue in the future. It’s essentially to help certain businesses though sold as a job creator.

Example: City admission taxes collected at the Quicken Arena went to reduce the team’s rent. It should go to the city. The fans pay the tax. The team owners get the benefit. Why? It’s the way the game is rigged over and over. Since the public isn’t reminded of these corrupt deals, no one really has to own up to responsibility.

Example: Gateway garages (one has been sold to casino interests) did run deficits constantly. Why? Because Tim Hagan and Mike White gave team owners 250 free spaces EVERY DAY. Not just game days. Further, some 1,500 free spaces were reserved on game days for luxury box holders and 1,700 spaces for special events at the arena. How generous of public officials.

Example: I haven’t collected these figures recently but in the first four years of the Browns lakefront stadium the property taxes exempted totaled $16 million, more than half of which would have gone to the Cleveland schools. For the year 2001 alone, the Gateway properties and Browns Stadium cheated Cleveland school kids of $10.3 million.

You would think that this important information might be brought to you on a consistent basis by our daily newspaper. This is a service, however, they never seem to think pertinent enough to report.

I wrote back some years ago that the cost to the city – between 1996 and 2008 the Gateway garages alone – built remember primarily for private businesses – cost the city $30 million. To help pay for this the city had to raid its parking meter and parking lot collections to pay this debt. Go figure.

At the time, Steve Strnisha, as city finance director under Mayor White and a Gateway board member, argued the garages would MAKE the city money, noting that the garages would be “a good investment on the part of the city.” Then why is the city losing millions of dollars on the garages? Strnisha remains a vocal consultant of many projects seeking public funds.

Only in a rigged game would he ever be heard by public officials as a voice to be believed.

As I once wrote, these guys sell refrigerators to Eskimos.

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Here’s What the School Reformers Wrought

Only days after Mayor Frank Jackson claimed compromise achieved on his (really the corporate community’s) school reform package this headline appeared in the Plain Dealer:

CITY SCHOOLS TO CUT 500 TEACHERS, SHORTEN DAY, ELIMINATE CLASSES.

Well, I’m sure glad to see such progress, Mr. Mayor.

And the Page One piece in Tuesday’s PD has Mayor Jackson “in the spirit of transparency,” telling reporters the blame for the firefighter’s robbery of the city in the shift-switching scandal belongs to a chief assistant law director. Jackson for months ignored his safety department hierarchy for the debacle. Jackson wants transparency when apparently he means low altitude fog. He has become laughable but apparently the newspaper and the entire City Council have lost their sense of humor.

It’s apparent this scandal is going to seep into the ground unless the IRS maintains its low level sense of humor about evasion of taxes. One can only hope.

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Mandel — Another Turn Back the Clock Republican

Could the Republicans pick a worse candidate to oppose Sen. Sherrod Brown than Josh Mandel? Can’t think of how.

The guy’s arrogance and ambition put the young Kucinich to shame.

Josh is a kind of juvenile delinquent of privilege.

I’m a Sen. Brown fan. I’m even a Sen. Brown contributor. So maybe I’m biased.

But that really has nothing to do with my assessment of Mandel. Mandel’s political stupidity cries out for appraisal.

Here’s mine: LOSER. Big loser.

Biggest money loser in a long time. I can’t imagine how much he’s going to spend for each vote he gets.

I don’t have to say it because in many stories in the Plain Dealer people say it. Doesn’t he have a state job? Why isn’t he doing it?

Brown is a working Senator. Every day. He’s also a serious guy. Smart, too.

The other guy oozes, “Please make me a Senator?” Why? “Because I want to be one.”

Not a good enough reason Josh. Bye, bye.

 

 

He was a 2004 Cleveland Journalism Hall of Fame recipient and won the national Joe Callaway Award for Civic Courage in 1991. [Photo by Todd Bartimole.]

 

 

 

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