Ten Ways the Wealthy Dodge Taxes

Ten Ways the Wealthy Dodge Taxes:

Ten Ways the Wealthy Dodge Taxes

Saturday, 13 April 2013 10:14By Alexander Arapoglou and Jerri-Lynn Scofield, AlterNet | Report

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Mitt Romney. (Photo: Gage Skidmore / Flickr)How Mitt Romney stashed millions in a tax-free IRA, and other mysteries.

Have you read about the billionaire who pays a lower income tax rate than his secretary and gives advice for how much income tax other people ought to pay? You might want to ask: “How does he do it? ”

We don’t know the complete answer to that question. No doubt, only his army of tax advisers does. What we’d instead like to share are 10 ways the current tax code allows the rich to accumulate vast fortunes, subject to little or no tax. And, unlike the offshore account tax fraud that gets so much press and regulatory attention, many of the most egregious tax avoidance scams are perfectly legal.    

1. No income means no tax. Imagine two men living in the same town. Joe owns an oil exploration corporation. Pete, a geologist, works for Joe. Pete finds oil, billions of dollars worth, and when he does, Joe gives him a $1 million bonus.

Pete pays income taxes on $1 million and keeps looking for oil. Joe, the boss is now a billionaire. Although he has not sold any oil yet, the bank lends him money against the find and he builds a mansion, buys a nice car and lives it up. Even though Joe has become richer by billions of dollars, he pays no income tax. Why? He has no income.

This simple example illustrates an important point: The biggest income tax loophole is the definition of income. For most people, what counts as income is simple to see—it’s their salary, and maybe, if they’re lucky, a bonus. Yet for the very wealthy, salary is trivial—if they earn one at all. That’s not where their riches come from. Instead, their money comes from “carried interest” (which we’ll explain more fully below) and from the appreciation of their ownership interests in stock, real estate and other assets. Every year, Forbes and other magazines show how the wealth of hundreds of individuals increases by hundreds of millions from one year to the next. As long as this increase is not defined as income, no income tax is due.

And, surprise, surprise: all these things are effectively taxed, if at all, at a much lower rate than the income tax rates that apply to simple salaries and bonuses. It gets even better: increases in the value of shares of stock, and of real estate, aren’t taxed until sold and if never sold, may never be taxed. What about estate tax, you say? After all, it used to be said, “The only things that are certain are death, and taxes.” But now, with good ”advice,” that’s no longer true. Stick with us and we’ll explain how.

2. Why investment managers pay lower tax rates than their secretaries. Some of the wealthiest people in America manage hedge funds, private equity funds, or real estate partnerships, and typically, these investment managers receive a very small salary, relative to their total compensation. But don’t feel too sorry for them—they’re not working for free. Instead, most of their compensation comes in the form of a share of the fund or project they manage. This ownership share is called a “carried interest.” And currently, it’s usually taxed as a capital gain instead of ordinary income.    

Okay, why does this matter, and what does it mean in plain English? It means that when the manager’s tax bill comes due, he owes the federal government 20 percent in taxes-- the current tax rate on long-term capital gains-- rather than the 39.6 percent rate that applies to ordinary income. This dodge halves his effective tax rate on these earnings. It’s just this loophole that Mitt Romney used to pay less than 15 percent— based on the legal capital gains tax rate at the time—on the millions he cleared while head of Bain Capital. This compares to the nearly 40 percent in federal income tax that a top surgeon, or anyone else whose earnings are defined as ordinary income, pays on his money.

Congress has been trying to eliminate this loophole since 2007, but every time they get close to a fix, lobbyists beat them back. After all, no one likes to pay more taxes. But some of us pay more than the favored few.

3. How tax delayed can become tax never paid.Taxes on the appreciation of assets—the value of a company, a stock portfolio, or the increase in real estate held for investment purposes—qualify as capital gains, rather than ordinary income. We’ve already seen the big advantage of calling something a capital gain: it’s taxed at a lower rate.

There’s another benefit to how the tax code treats these assets: no tax is due on the increase in the value of these assets until their owner sells them to realize the proceeds. That means, no matter how much one’s wealth increases on paper, one doesn’t need to pay the government a dime in income tax until the property—whether real estate or paper assets -- is sold.  

Let’s go back to our simple example of the oil entrepreneur. What if he never sells his oil property? No tax is due. He just keeps spending money he’s borrowed against his holdings. Or suppose he trades one piece of real estate for another? Under like kind exchange rules there would also be no tax due, no matter how much the pieces of property are worth. Compare this to how the tax code treats the ordinary married couple who’ve done well with a home purchase, and has to pay capital gains tax on any gain of more than $500,000. Although this might sound like a lot of money, many retirees who live in places where real estate’s expensive have to pay such taxes. They cannot get exclusions for millions and billions. They must pay the tax that’s due.

Suppose the billionaire bequeaths his billions to his spouse. Spouses can receive unlimited bequests without estate taxes, and better still, the value for tax purposes is “stepped up” at death so that if everything is sold to realize the gains, no income tax is due as there is no capital gain. The “cost” of the billions was redefined to be value at death.

The current US income tax system doesn’t impose taxes on wealth. Nor is much appreciation in assets such as stocks and real estate ever taxed by the estate tax system. The result: tax delayed can become tax never paid.

4. The charity scam. Another way the wealthy avoid paying taxes on their billions is to make charitable donations. If you donate property, you never have to pay income tax on that donation, whatever it costs you and how much it’s worth right now. Well you might say, at least someone benefits from the charity. Whether or not the charitable donation is a scam in whole or in part depends on the answer to that old question: qui bono? Aka, who benefits? That’s where the real scam takes place.

And there’s no legal requirement that a charity must spend its wealth. In fact, IRS rules require only that charities spend about 5 percent of their investment assets annually, and all or part of this amount can be spent on salaries and “expenses,” rather than devoted to the charitable purpose the charity purports to be serving. So, what happens with a charitable trust, set up by a billionaire, and controlled by one of the billionaire’s children? The child gets a job and a salary for life. Maybe a mansion to live in and entertain in as a fringe benefit. This is a great gig for the heir.

What about the taxes due? No income tax is due on the money the parent donated to set up the charity—even though the parent may have made the charitable donation so as not to pay any tax on an appreciated asset.  

Similarly, no estate tax is due on this donation, ever. And all the money donated to the charity is protected from divorce, or any creditors because even though the donor’s heir controls the charity, the law says that heir does not “own” the trust.

The non-profit sector is a very big tent. It houses genuine do-gooding institutions that contribute to society by deploying resources to improve public health, reduce poverty, and improve the environment. But charitable trusts that just go through the motions so that the lion’s share of benefits is realized by a donor and heirs are also allowed inside. And other types of distortion are rampant, such as charities that promote a certain worldview or political philosophy, often cloaked in some form of intellectual or educational rhetoric.

Bill Gates and Warren Buffett got lots of great press in 2010, when they launched the Giving Pledge, committing America’s wealthiest to giving away half their wealth to charity. Since then lots of big names— Michael Bloomberg, Larry Ellison, Carl Icahn, George Lucas, Michael Milken, Peter Peterson, Ted Turner, Mark Zuckerberg-- have all signed on. Sounds great—so philanthropic. Would it be churlish under the circumstances to ask for more details?

5. What is an expense? Those damn Yankees. Our main focus is on personal income taxes. But we can’t resist taking a few swipes at corporate income tax rules, especially since these largely benefit rich people.

One way to lower taxes is by claiming offsetting expenses. When you go to a baseball game, who rents all those expensive skyboxes? Almost always it’s a corporation. The most expensive restaurants are called expense account restaurants because businesses foot the bill for these meals, and individuals who dine out on the corporate dime aren’t taxed on these benefits. After all, they’re working while they devour vintage wines, eat foie gras, and if they’re lucky, catch foul balls.

Of course, there is a limit on how much even pigs can eat. The real tax-free compensation comes from corporate limos, corporate jets, corporate chefs, corporate apartments, and even corporate barbers. Not everyone gets a chance to enjoy these freebies, which are in fact largely limited to the 1 percent at the top of the corporate food chain.

So, you cannot deduct the interest payments for the used car you need to get to work, since the tax code says your car isn’t a business expense.  Nor can you deduct the price of your daily subway or bus ride to go to and from the office. But you can bet that the Goldman Sachs banker who works late, pays nothing for his free ride home in a corporate limo. That’s considered a business expense for Goldman, and is allowed as a deduction on its corporate tax return. And if you’re a fat cat who rides in a Gulfstream, even better. A corporate jet trip for the offsite meeting in the Caribbean followed by a few rounds of golf is also a perfectly legal tax deduction. Some companies even insist that their CEOs use corporate jets for all their trips, even vacations. Why? “Security,” they say. It wouldn’t do for these folks to have to stand in line with the rest of us, and remove shoes, surrender Swiss Army knives, and discard oversize shampoo bottles before they’re allowed to board an airplane.

Good record keeping is all it takes to avoid taxes on what some would say should be treated as untaxed compensation.

6. Catch me if you can. All rules are subject to interpretation. Is this starting to sound familiar? Many tax shelters are created to reduce income or delay the recognition of income by redefining it as something else or offsetting it with cash or non-cash expenses such as depreciation. The way U.S. tax law works is that if the IRS or a court hasn’t said a tax shelter is illegal, you’re free to try it. If you’re caught, the worst that will happen is that you’ll have to pay taxes due, plus interest and perhaps some penalties. And that only happens if you’re caught. The IRS and state tax authorities have no idea of what interpretation is being used—no matter how ridiculous--  unless it is discovered in an audit. Now, how likely is that? Currently, about 1 percent of tax returns are audited in any one year. Even when they occur, audits are seldom all encompassing. Many creative interpretations go unnoticed for years.

Other countries follow more sensible rules. They require prior approval of creative tax code interpretations. So, in other words, it’s not legal to follow a certain tax strategy unless the tax authorities declare, upfront, that it is. Such a policy discourages the most aggressive tax avoiders from pushing their luck, and places all tax players on a level playing field. Our system instead encourages companies and individuals to pioneer the most creative tax minimization strategies. Do we really want to be a world leader in such activity?

7. He who pays the piper calls the tune: corporate welfare. Currently, 17,500 registered tax lobbyists work overtime to pack the U.S. tax code with special interest benefits. Big agri, ethanol producers, mine owners, clean energy companies—all line up to demand special tax concessions. Some of them might seem to make sense: allowing drug companies to deduct the costs of research and development into the next big drug blockbuster. But even when they do seem to make sense, there’s a big overall cost to the economy of all these tax breaks. They distort economic activity, moving it away from profit-seeking endeavors to where the biggest tax concessions may flow.

A second serious concern is how these tax concessions worsen inequality: how many of those lobbyists do you suppose work on behalf of the ordinary U.S. taxpayer, the two-income family working hard to make ends meet? And when it comes time to draft a new tax law to squeeze out a bit more revenue, where do you think it comes from: the rich whose interests are well-represented in Washington, or the rest of us?

8. You get what you pay for. If you think this discussion is impossibly convoluted and complex and wonder why, you have no further to look than the experts. Our tax preparation and avoidance industry is massive. It bills by the hour. The more complex the tax code, the more complex the avoidance vehicles, the more billable hours. Therefore it’s no accident that the U.S. income tax code, when last we checked, is now nearly 74,000 pages long. More than 1.2 million people are employed as tax preparers—more than the number of police and firefighters combined, according to Face the Facts, a nonpartisan project of George Washington University-- and about 3 million people are involved in ensuring “compliance” with the tax code, including 90,000 IRS employees. Those who can afford it can hire the most astute experts, whose stock in trade is interpreting and defining the tax code to their best advantage. Remember Leona Helmsley? “Only the little people pay taxes.” Leona, you may recall, did do time for tax fraud, but for those who aren’t quite in the Queen of Mean’s class, and get competent advice, there’s usually no penalty.

9. Sorry, your fishing boat doesn’t count: it has to be a yacht. Our income tax system purports to be progressive. Yet one of the biggest tax breaks, the mortgage interest deduction, is anything but. This deduction allows homeowners to deduct mortgage interest payments on both a principal residence and one vacation property to reduce their income taxes due. But if you’re a renter, no such luck: someone making minimum wage cannot deduct his rent payment.

If you’re rich enough to afford a yacht, it’s another story. So long as it contains a built-in galley, an installed toilet, and a sleeping berth—no fishing boats, please-- you’re entitled to a tax deduction on the interest you pay to finance this “vacation property."

Most other countries, by the way, don’t subsidize home ownership in the same way via the tax code. And it’s worth mentioning that some of these countries—such as Australia, Canada, France, and Germany— have not seen the same vicious boom-bust real estate cycle that we have.

10. Individual Retirement Accounts (IRAs): $21 million makes a nice nest egg.Congress has set up various programs that allow people to fund retirement accounts that accumulate, tax-free, until these savings are tapped to fund someone’s retirement. Regular IRAs allow a person to contribute money, on a “pre-tax basis.” No tax is due on the money when it’s earned, so long as it’s placed in an IRA account. Nor is any tax due on interest or dividends earned, or the increase in the value of the investment. Income tax is only due when sums are withdrawn, after a person hits retirement age, and if a person dies before he withdraws his money, this money isn’t subject to estate tax.

The maximum IRA contribution limit is $5500 annually (rising to $6500 for those over 50). Similarly, many Americans participate in 401(k) plans offered by their employers. With these plans, the maximum annual contribution is $17,500 (increasing to $23,000, for those over 50). Finally, certain types of pension plans—used by law firm partnerships, consulting firms, joint medical practices, and sole proprietors—allow individuals to contribute as much as $50,000 to a retirement plan, under similar tax-advantaged conditions.

So, we wonder, with such clear contribution limits in place, how did Mitt Romney end up with between $21 million and $102 million in a tax-free retirement account, as he himself reported in his tax returns?

If Mitt contributed the current annual maximum donation -- $50,000 -- for 20 years, he’d only end up with a contribution of $1 million. Where did the rest of the money come from? It must be from the returns he earned on his investment. As the rest of us know when we look at our 401(k) statements, it’s, ahem, extremely unusual -- some would say next to impossible-- for an investment to increase by 20 times, or 100 times, even if we hold it for 20 years. These wonderful returns could be the result of good fortune, but more likely are the result of the best tax advice, with Mitt’s IRA able to invest on favored terms not available to anyone else. 

The only reason we know about Mitt’s spectacular run of luck with his IRA is that he was forced to disclose his income tax returns when he decided to run for president. How many other 1 percenters, we wonder, have also been similarly lucky with their retirement plans?

The solution to America’s retirement crisis might be to give Mitt a job as retirement czar, showing the rest of us how we can earn similar stunning rates of return on our retirement savings. This could be a bipartisan initiative, with newly unemployed Hilary Clinton chipping in expertise on how to trade cattle futures.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

ALEXANDER ARAPOGLOU AND JERRI-LYNN SCOFIELD

Alexander Arapoglou, professor of finance at the University of North Carolina's Kenan-Flagler Business School, has been a derivatives trader and head of risk management worldwide for various global financial institutions.

Jerri-Lynn Scofield has worked as a securities lawyer and a derivatives trader.

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Revolution Is a Warm Gun: Rethinking the Left's Positions on Violence and Gun Control

Revolution Is a Warm Gun: Rethinking the Left's Positions on Violence and Gun Control:

Revolution Is a Warm Gun: Rethinking the Left's Positions on Violence and Gun Control

Saturday, 13 April 2013 00:00By Arun Gupta, Truthout | News Analysis

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Assault weapons on display at The Freedom Shoppe gun store, which was holding a sale in anticipation of new gun control measures, in New Milford, Connecticut, April 2, 2013. (Photo: Wendy Carlson / The New York Times)

Tony was the first gun-toting revolutionary I ever met. A Jewish African-American studies major, he quoted Frantz Fanon in the twilight of the Reagan era. When he popped by the school cafeteria, he was usually upset about something - the frat-boy student government, the state of Black America, a shop owner admonishing a customer, "Don't Jew me." Tony once vowed if a revolt suddenly "went down" in Baltimore, where we went to college, he would join in. "It would be premature," he said, but he would nonetheless grab his assault rifle and give his life fighting alongside the rebelling urban underclass. I thought, "This guy has a death wish."

I didn't realize how right I was. One day in the cafeteria, someone said, "Did you hear about Tony? He killed himself. Gun to the head." Rumor was his young wife and baby daughter were at home when he did it.

I've been thinking about Tony and what he represented in terms of the left's relationship to guns. Namely, why is it that so many leftists - and by leftists, I'm referring to self-described radicals and revolutionaries, not liberals - are against gun control?

Despite the Aurora and Newtown massacres, it's almost impossible to pass effective gun-control measures. It's not enough to attribute lax gun laws to our founding mythology, a violent culture or the power of the gun lobby. After all, same-sex marriage has triumphed, and reproductive rights still exist, despite the same mix of power, money and culture in the opposition's corner. 

What's missing from the pro-gun-control camp is a genuine grassroots campaign, and that's where the left comes in. Pick an issue and the left is organizing around it - climate justice, labor, rape culture, immigrant rights. But why not gun control? Because, most leftists, myself included, agree with the principle Tony advocated, which is political violence - meaning collective self-defense - is a necessary though not sufficient means of securing freedom from a violent state. 

Before you equate radical with bomb-thrower, realize Americans, with few exceptions, support state violence. Yet some support gun rights and some oppose it. Many leftists are in the former camp. To confirm this, I asked a couple thousand Facebook "friends" if they opposed gun control and their reasons why. The responses came pouring in:

"Is a state monopoly on arms in the best interests of the working class?"

"Gun laws, much like drug laws, are used to oppress the poor and people of color."

"We can't have a revolution without them."

"Governments already have too much of a monopoly on violence and we will one day have to bring this one down."

"I'll be damned a cop can have a gun but I can't."

"Gun control laws ... are another step down the incline to a full-fledged police state."

"[I support] the right to bear arms - because I'm horrified that racist whites are heavily armed in areas of the country that oppose democratic rights." 

Judging from these comments, many leftists agree with the right that the biggest threat to society is not mentally ill shooters like Adam Lanza. It's the state. The implication is that the solution to a society with too many guns is more guns. That's why leftists tend to shrug off gun control. They see it as impinging on their freedom, or at least as something that doesn't affect them.  

But I'm rethinking this position and now conclude that a society awash in guns is more of a detriment to the left project of emancipation than a means to secure it.  

This is not an abstract argument. Obama's gun-control push is on the ropes after thebill banning semi-automatic pistols and weapons, as well as high-capacity magazines, died in the Senate. Remaining measures include providing resources for school "tip lines, surveillance equipment, secured entrances" - such as metal detectors and armed police - and enabling the use of National Guard troops to "ensure schools are safe." That's right. The response to guns in schools is to put soldiers cradling machine guns in schools. 

Without bottom-up pressure, like the campaign that's blocked the Keystone XL pipeline thus far, legislation is beholden to those with the most money and lobbyists, in this case the NRA and gun manufacturers. As liberals and gun-control NGOs play an inside game, they lack the skills, base and inclination to organize the kind of movement that can disrupt the balance of forces. 

Loathe to grant the state more power, leftists have sat out the gun debate. However, every Aurora and Newtown convinces a terrified public to trade civil liberties for security, allowing the police, already equipped with tanks, armed helicopters anddrones, to gain more weapons, more powers, more surveillance and less oversight. Ironically, much of the left's energy is focused on reining in police powers, such as campaigns spearheaded by Cop Watch, Stolen Lives, INCITE!, and Critical Resistance, and extending to projects led by liberals and libertarians in the NAACP,ACLU and Electronic Frontier Foundation.

Thus, the left should connect the dots by framing gun restrictions as part of the effort to limit police powers, abuses and surveillance. Unlike the right, the left does not believe the state of nature is a war of all against all. Central to the left project is demilitarizing society, and by using this as the umbrella, gun control can provide an opening to shackle the state instead of the people. But first, the left needs to rethink the role that violence plays in social change. 

Let me explain. My journey was different than Tony's (he was an ex-Marine), even though I arrived at the same conclusion, that violence from below is often legitimate. I began my political education devouring works by Gandhi, King and Gene Sharp, solidifying my belief that nonviolence alone would triumph. Reading the Managua Lectures by Noam Chomsky shattered my naiveté. In his signature style, Chomsky mined the official record to demonstrate how the US government greets peaceful change with violent terror. President John F. Kennedy admitted as much in 1962 when he said, "Those who make peaceful revolution impossible will make violent revolution inevitable." With shamefully few exceptions, conservatives and liberals, corporations and unions, pundits and intellectuals, supported the cold war. 

Soon, I was marching in support of armed revolutionaries in El Salvador and South Africa. At the same time, I was being arrested for nonviolent civil disobedience, alongside storied Catholic pacifists like Philip Berrigan and Elizabeth McAlister, to oppose US policies repressing these movements. 

There is nothing contradictory about the two approaches. The Farabundo MartíNational Liberation Front in El Salvador and the African National Congress in South Africa calibrated the mix of violent and nonviolent tactics that would best advance their struggles according to "the constellation of forces." Movements turn to violence after nonviolence alone proves futile, as in Southern Africa, Nicaragua, Vietnam, Iran, Palestine, Guatemala and Syria. Of course, popular violence is often defeated, and some violent tactics, like suicide bombings, are self-defeating. A New York Times article on nonviolent resistance in the West Bank village of Nabi Saleh observes that Palestinians there "insisted they had the right to armed resistance; they just don't think it works." As such, they viewed suicide bombings not as "a moral error so much as a strategic one." 

Nonviolence can work for limited campaigns or to change the political class, as the civil rights movement and Egypt's democratic revolt did. But rarely, if ever, does nonviolence uproot the old order. Governments crush nonviolent movements all the time, as in Czechoslovakia and Mexico in 1968, Uzbekistan in 2005, and Bahrain in 2011. Nonviolent resistance alone is futile against the Pentagon, as proved by the Iraq and Afghanistan wars. As for the Indian independence struggle, it left relatively untouched caste divisions, the grip of rural landholders over the peasantry and the capitalist economy. 

One has to dissect the social context: What are your vision and goals? Who is in your camp? Who is sitting on the fence? Who opposes you? Only then can a movement determine which tactics are likely to build support and power that can undermine their opponents while bringing their vision to fruition. This analytical process becomes evident in when and how leftists decide which armed resistance movements to support. 

For example, when Israel, the US muscle in the Middle East, pummeled Lebanon in 2006, leading left-wing intellectuals, including Chomsky, Gore Vidal, Howard Zinn, Judith Butler, John Berger, Eduardo Galeano, Arundhati Roy, Tariq Ali and Ken Loach, published a "Statement in Solidarity with the Peoples of Lebanon and Palestine." It decried "The deliberate and systematic destruction of Lebanon's social infrastructure by the Israeli air force [as] a war crime, designed to reduce that country to the status of an Israeli-US protectorate," and offered "our solidarity and support to the victims of this brutality and to those who mount a resistance against it." On one level, it's an unremarkable statement, as the right to resist illegal wars and occupations is enshrined in international law. But they were also boldly acknowledging that only Hezbollah's trained army, not protests, tweets or petitions, could counter Israeli aggression. 

The domestic situation is more complex. H. Rap Brown hit the bull's-eye when he quipped, "Violence ... is as American as cherry pie." The mile markers of US history are colonization, genocide, slavery, the American Revolution, Manifest Destiny, the Civil War, World Wars, cold war, Korea, Vietnam and globe-spanning coups, counter-revolutions, drug wars, proxy wars, secret wars, drone wars and the war on terror.

The public, liberals included, reflexively backs state violence. Only in America is a state headed by a Nobel Peace Prize winner who's bombed seven countries and asserts the right to globalized kidnapping, torture and secret kill lists not seen as the grotesque absurdity it is. On top of that, Americans gorge on violent movies, television, video games and sports, as they blindly support state violence - a mere 4 percent of the public "strongly opposes" drone strikes against terrorist "suspects" - but they will denounce "violent anarchists" if a scrawny black bloc protester smashes a Starbucks window. The left wants to overturn this order, but it knows the hammer will come down on it for anything but peaceful dissent. So the left has shunned violence for years. Some hapless youth might get ensnared in FBI terror plots, but left-wing leaders aren't making threats about "Second Amendment remedies" or brandishing guns and placards invoking the warning, "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." 

Despite living in a deeply violent society, armed resistance is suicidal, as even Tony recognized. So I call myself a "strategic pacifist," meaning violence is counterproductive under present conditions. Even property destruction has become self-defeating, as shown last year on the West Coast, where prosecutors jumped on incidents of window-breaking to repress Occupy Wall Street-related movements. At the same time, I argue that categorical pacifism - secular advocates of which are about as common as green penguins - is ahistorical and apolitical because it imposes a one-size-fits-all ideology, denying the specifics of history and the political constraints every movement faces. It's so rare, in fact, that a few years ago, while talking with fellow activists at the War Resisters League, it dawned on us that not one was an absolute pacifist. Many people claim to be antiwar, but a little prodding will get them to admit World War II or the American Civil War was justified.  

This is the contradiction at the heart of the left's relation to guns. Despite its peaceful character, the left is unwilling to abandon the idea of violence. As Malcolm X put it: "By any means necessary." Therefore, allowing the state to circumscribe gun rights means surrendering power.  

There is a flaw in this formula, however. Popular violence is merely an instrument to bring about an ideal society free of violence. While violence against the US government is inevitable abroad, does it make sense here? One of the few public intellectuals to engage with popular violence is Slavoj Žižek, who writes: "every act of violence against the state on the part of the oppressed is ultimately 'defensive.' ... for the oppressed, violence is always legitimate (since their very status is the result of the violence they are exposed to), but never necessary (it will always be a matter of strategy whether or not use violence against the enemy)." 

That's the rub. The main strategic concern for social movements is not to declare war on the state, but to create broad-based organizations that can first resist through every peaceful means possible. That involves maximizing public space in which to organize while minimizing state repression. Public space was essential to Occupy Wall Street's success, and OWS still hasn't recovered from the violent evictions. But it's a fallacy to equate violence as a means to one day overthrow the state with violence as a means of protection for movements to claim public space. 

This is why many leftists fetishize guns as Tony did. It's easier to feel the power in the cold steel of a rifle barrel than to trust the arduous path of building a collective movement that may yield social power years down the road, if you're lucky.  

I got a taste of this false sense of power during ex-cop Chris Dorner's war against the LAPD. The paranoia in Los Angeles was palpable, with the incessant thump of choppers, jumpy cops and locked-down schools. The police verified Dorner's bitter manifesto by shooting up innocents and neighborhoods, and engaging in what appears to have been his pre-meditated murder. Dorner was lionized as a folk hero - with tens of thousands of people liking dozens of Facebook pages - and one commentator comparing him to a real-life Django Unchained. But Dorner's rampage also bolstered support for the police, and you won't build a movement by celebrating mass murder.  

In this light, support for Dorner, as well as for gun rights, is a sign of social impotence. I think Tony gravitated to guns for that reason: weakness, not strength. They were his solution to a troubled society and his own troubled life. Likewise, the left looks for silver bullets to its predicament of powerlessness. Refusing to engage with the state doesn't make it disappear; it just becomes a bigger threat. Trying to use the state apparatus to constrict the state is tricky, but many cherished freedoms - from habeas corpus to abortion rights to freedom of speech and assembly - involve precisely that. Otherwise, we sit back and watch as the state grows more powerful and society grows more violent.

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Social Security: Can Democrats Save Obama From Himself? | Alternet

Social Security: Can Democrats Save Obama From Himself? | Alternet:

  ECONOMY  

Huffington Post / By Robert Kuttner

 151 COMMENTS

Social Security: Can Democrats Save Obama From Himself?

The plan to cut Social Security will destroy any hope of recovery.

Photo Credit: Shutterstock

April 8, 2013  |  

President Obama picked the very day that new job creation collapsed to propose a deflationary budget deal featuring cuts in Social Security and Medicare. This is perverse economics and worse politics, on several grounds.

The economy created just 88,000 jobs in March, down from close to 200,000 in other recent months, for one main reason: The January 2 budget deal and the March 1 sequester that hiked taxes on working people and cut public spending.

In the January deal, payroll taxes on working people were raised by some $120 billion. The more highly publicized tax hike on the top one percent raised less than $65 billion. The sequester added another $85 billion of budget cuts. The combined economic contraction will be about $270 billion this year, and according to the Congressional Budget Office the result will be to cut economic growth roughly in half.

But the deal that Obama is trying to coax the Republicans into accepting would cut the budget at this rate for an entire decade. The economics are just insane. There is no evidence that banks are waiting to lower interest rates (which are already rock bottom) or businesses waiting to invest, pending progress on a grand budget bargain. Businesses are hesitating to invest because customers don't have money in their pockets -- and a deflationary budget deal will only make the economy worse.

The politics are worse than the economics. President Obama, violating every rule of smart negotiating, has put his final proposal on the table -- cuts in Social Security and Medicare in exchange for the Republicans' (still imaginary) agreement to raise taxes -- before the Republicans have made a single concession.

The Republican habit is well-established -- take Obama's "final" offer as the new starting point and demand further concessions. With this strategy, our president has let them take him to the cleaners for more than four years now, and is still hoping that sweet reasonableness will produce compromise. It never has and never will.

The worst part of all may be the president's offer to cut Social Security, using the sneaky, backdoor method of reducing the annual cost of living adjustment, disguised as a technical change, wink-wink, nod-nod.

The gimmick is "chain-weighting" the consumer price index. The premise is that the CPI overstates inflation because when prices rise, people find cheaper substitutes. There are two problems with this. First, hard-pressed consumers indeed find ways to pinch pennies, but cat food isn't Chicken of the Sea. Second, old folks actually face higher inflation than the rest of us because they spend so much of their budget on health care, whose costs are rising faster than other goods. The elderly are also suffering from the rock bottom interest rates that the Fed is using to keep the economy on life supports -- which translate into very low returns on savings.

If Democrats stand for anything, it is defense of Social Security and Medicare -- America's two most broadly beneficial and most beloved government programs -- and the president just gave away this last bit of product differentiation. You have to wonder where he is getting his advice. (Bob Rubin, maybe?)

Social Security benefits should be increased, not cut. The share of workers with traditional pensions is down to about 15 percent. The rest either have no pensions or have 401k plans that are not pensions at all. 401k's, like IRAs and Keoghs, are tax-sheltered savings plans. More than half of people between 55 and 64 have no pension and no retirement plan at all other than Social Security.

What we need is an increase in core Social Security benefits, and a second tier of Social Security as a universal, fully portable pension. It could be funded by raising taxes on the rich, whose effective tax rates have been steadily cut for four decades, and who now command more of our national income than ever before.

If you don't read any other piece of policy wonkery this year, you owe it to yourself, your parents, and your own golden years to read "Expanded Social Security," the recently published report from the New America Foundation (co-authored by my Demos colleague, Robert Hiltonsmith.) It provides a politically serious blueprint for expanding the retirement income of the elderly, rather than selling them out. If we had a Democratic Party worthy of the name, it would get behind this proposal and change the entire dynamics of the Social Security debate.

The Beltway pundits and supporters the view that the economy can deflate its way to prosperity love to take the president and the Republicans to task for "kicking the can down the road," meaning refusing to make a grand bargain that trades cuts in social insurance for increases in taxes. But that can looks pretty good compared to what's under discussion.

Every Democrat in Congress should be standing up to the White House and refusing to back a budget that cuts a nickel from Social Security or Medicare. Yes, we need to reform those programs, but not in the context of an ill-advised set of general budget cuts that will only sandbag the fragile recovery. In the case of Social Security, reform means increasing, not cutting the income support of the elderly. In the case of Medicare, reform is spelled National Health Insurance.

In the past, Republicans have saved Obama from himself by refusing to consider any tax hikes. Now, I'm beginning to think, it's time for Democrats save him from himself. And the Democratic Party. And us.

Robert Kuttner is formely co-editor of The American Prospect and a senior fellow at Demos. His latest book is "Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency."

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Suspect charged in Boston bombing case:

Suspect charged in Boston bombing case

Kevin Johnson and Doug Stanglin, USA TODAY2:39 p.m. EDT April 22, 2013

Dzhokhar Tsarnaev, 19, has been charged and could face the death penalty.

(Photo: Robin Young via AP)

STORY HIGHLIGHTS

• White House rules out declaring suspect an 'enemy combatant'
• Some lawmakers ask if authorities missed warning signs
• Investigators probe how two brothers allegedly became radicalized

Dzhokhar Tsarnaev, still in serious condition with gunshot wounds, was arraigned in the hospital Monday on federal charges in connection with the Boston Marathon bombings that left 3 people dead and more than 180 injured.

Tsarnaev, 19, is specifically charged with one count of using and conspiring to use a weapon of mass destruction, resulting in death and one count of malicious destruction of property using an explosive device resulting in death.

The charges carry the maximum penalty of death.

Among the most damning pieces of information in the 11-page criminal complaint against Tsarnaev, is surveillance camera footage that allegedly captures him slipping the backpack reportedly containing the explosive device off his back and placing it at the location where the second bomb exploded.

According to the complaint, the suspect may have taken a photograph of the backpack after dropping it to the ground and later was seen talking briefly on a cellphone before the first bomb detonated a short distance away.

As attention was drawn in the direction of the initial blast, the suspect appeared "calm'' and later walked away from the site where 10 seconds later the second bomb exploded.

Authorities have said that a pressure cooker packed with explosives was used in at least one of the two explosions at the finish line of the annual race in Boston's Copley Square last Monday.

The FBI searched Tsarnaev's dorm room Sunday at the University of Massachusetts at Dartmouth and seized BBs, a large pyrotechnic, and "a blackjack and a white hat of the same general appearance as those worn by Bomber Two at the Boston marathon on April 15."

The complaint also contains a chilling account from the victim of a late Thursday night carjacking in Cambridge, Mass., who said one of the Tsarnaev brothers approached the man's car and "tapped on the passenger-side window.'' When the window rolled down, the suspect opened the door and pointed a firearm at the driver.

"Did you hear about the Boston explosion?'' the suspect told the driver. "I did that.'' The suspect then allegedly removed the magazine from his gun to display a bullet and re-inserted it, saying: "I am serious.''

The gunman allegedly forced the owner to drive to a second location where the second suspect was picked up, jumping into the backseat. The gunman allegedly then took the wheel, moving the owner to the front passenger side of the car. While they were driving, the gunman demanded money, and the owner provided $45.

One of the suspects, according to owner, also demanded the victim to surrender his ATM card and password. When they stopped at a gas station and the two men left the vehicle, the "victim managed to escape.''

"Although our investigation is ongoing, today's charges bring a successful end to a tragic week for the city of Boston, and for our country," said Attorney General Eric Holder. "Our thoughts and prayers remain with each of the bombing victims and brave law enforcement professionals who lost their lives or suffered serious injuries as a result of this week's senseless violence ... We will hold those who are responsible for these heinous acts accountable to the fullest extent of the law."

Tsarnaev, suffering gunshot wounds to the head, neck, legs and hand, was unable to speak and was answering some of the investigators' questions in writing from his hospital bed at Beth Israel Deaconess Medical Center.

Tsarnaev, who became a naturalized U.S. citizen in 2012, was arrested Friday night after an intense five-day manhunt that kept Boston-area residents in a tense lockdown.

The other suspect in last Monday's attacks, Dzhokhar's 26-year- brother Tamerlan, was killed during a confrontation with police Thursday evening as the pair of suspects were stopped while driving through Watertown in separate cars.

Tamerlan, a legal U.S. resident, suffered gunshot wounds and injuries from detonating a suicide-bomb vest, but may have succumbed to injuries received when Dzhohkar ran over his body as he fled the scene in a carjacked SUV.

If convicted of the most serious terrorist-related charges, Tsarnaev could face the death penalty under federal statutes, although his age could be a mitigating factor in final sentencing.

Investigators initially chose not to read Tsarnaev his Miranda rights against self-incrimination, opting instead for a rare public safety exception in questioning him. Such exceptions are permitted if there is a need to protect the public from immediate danger.

ACLU Executive Director Anthony Romero says the exception applies only when there's a continued threat to public safety and is "not an open-ended exception" to the Miranda rule.

Otherwise, White House Press Secretary Jay Carney said on Monday Boston bombing suspect Dzokhar Tsarnaev will not be tried as an enemy combatant.

"He will not be treated as an enemy combatant," Carney said. "We will prosecute this terrorist through civilian system of justice. Under U.S. law, United States citizens cannot be tried in military commissions. It is important to remember since 9/11, we have used the federal court system to convict and incarcerate hundreds of terrorists."

Carney noted that the federal courts have been used as the venues for the prosecution of Faisal Shahzad, the Pakistani-American citizen for the failed May 2010 Times Square car bombing and Umar Farouk Abdulmutallab, the Nigerian man known as the "underwear bomber" who tried to blow up a Detroit-bound flight on Christmas Day 2009.

He added, "The system has repeatedly proven it can successfully handle the threat we continue to face."

The latest turn in this case comes on a day when U.S. lawmakers raised questions about whether authorities missed warning signs about the immigrant brothers — and as Boston regained a semblance of normalcy nearly a week after the horrific attack.

Reps. Michael McCaul, R-Texas, chairman of the House Homeland Security Committee, and Pete King, R-N.Y., said Sunday that they want federal officials to explain why the elder brother was not pursued further after he was questioned by authorities in 2011.

The Russian government had asked for an investigation of Tamerlan Tsarnaev, who died in a shootout Friday, out of concern that he had ties to militant separatist groups in southern Russia.

McCaul and King noted in a letter to the heads of the FBI, Department of Homeland Security and the Office of the Director National Intelligence that the Boston bombings marks the fifth time in recent years that someone under FBI investigation has gone on to be involved in a terrorist attack. Other suspects that the FBI have questioned — but not detained — that have gone on to take part in violence include U.S.-born cleric Anwar al-Awlaki, who would become al-Qaeda in the Arabian Peninsula's chief propagandist, and Nidal Hasan, the U.S. Army major charged with killing 13 people in 2009 at Fort Hood in Texas.

"They raise the most serious questions about the efficacy of federal counterterrorism efforts," McCaul and King wrote.

In addition, Sen. Lindsey Graham, Republican of South Carolina, said Monday that a misspelling of Tamerlan Tsarnaev's name allowed his 2012 trip to Russia to go undetected by the FBI.

Graham said the suspect's six-month trip to Russia "never went into the system," despite warnings from Russia to the United that about Tsarnaev's radical Islamic leanings.

"He went over to Russia, but apparently when he got on the airplane, they misspelled his name, so it never went into the system that he actually went to Russia," Graham said during an appearance on Fox News, as quoted by Politico. Graham indicated that he got the information after speaking with FBI's assistant director.

Rep. Mike Rogers, R-Mich., chairman of the House Intelligence Committee and a former FBI agent, defended the bureau's work.

"They had information from a foreign intelligence service that they were concerned about his possible radicalization," he said on the NBC's Meet the Press. "The FBI did their due diligence and did a very thorough job of trying to run that down, and then asked for some more help from that intelligence service to try to get further clarification, and unfortunately that intelligence service stopped cooperating." Rogers did not identify the intelligence agency.

At no time prior to the bombing were Tamerlan Tsarnaev and his brother, Dzhokhar — among the thousands contained on government watch lists — seen as potential terror suspects.

Philip Mudd, a former FBI and CIA counterterrorism official, said the Boston attacks more closely resemble "Columbine than any connection to al-Qaeda."

Referring to the 1999 Colorado high school shooting that involved two young attackers, Mudd said the Boston case similarly involves attackers armed with commonly available weapons and explosives who worked in a "closed cluster" that is most difficult for law enforcement to penetrate in advance.

Though authorities continue to search for possible broader international connections, Mudd said key aspects of the operation — the acquisition of widely available materials, the absence of an apparent escape plan, little attempt to conceal themselves and the apparent lack of major funding — all point to a more self-contained plot.

"These guys didn't even bother to obscure their faces," Mudd said.

Authorities are also trying to figure how and when the suspects may have been radicalized. While family members have said Tamerlan Tsarnaev had trouble adjusting to life in the USA, his brother, by all accounts, was popular and acclimated in Boston.

The suspect's uncle, Ruslan Tsarni, recalled in an interview with WUSA-TV in Washington that he had a falling out with Tamerlan Tsarnaev in 2009 after the young man spoke about "not ... having a sense in life" and that he believed his actions should be dictated by "God's will."
The two brother's activity on the Internet also suggest they had developed an interest in radical Islamist figures some time ago.

In August 2012, soon after authorities believe he returned from a six-month visit to Russia, the elder Tsarnaev created a YouTube channel with links to a number of videos with ties to radical Islamist causes. One features the firebrand Australian cleric Feiz Mohammed.

A militant group in war-torn Chechnya — Mujahideen of the Caucasus Emirate Province of Dagestan — took the step of issuing a statement on Sunday to disassociate itself with the Boston bombing suspects.

Dzhokhar Tsarnaev was active on Twitter, where most of his postings appeared to be innocent messages to friends. But the SITE Intelligence group, which monitors Islamist websites, notes that he followed someone with the account "Al_firdausiA," which translates to "the highest level of Paradise, Allah willing." Among that user's tweets was a message encouraging readers to listen to an audio series by the late radical terrorist Awlaki.

Contributing: Donna Leinwand Leger, USA TODAY, in Boston

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