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Old 03-31-2011, 11:04 PM   #61
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Originally Posted by Hamlet View Post
Why do the super rich feel entitled to pay a lower percentage in taxes than the upper-middle class?
We've bantered this about and I have to wonder how this statement can be true. The simple truth is one can only pay less tax if one shows less income.

So the question is how are the 1% showing less income.? There are many ways...to include:

- They own companies...so they create jobs. In owning those companies they invest back in the company and take depreciation, expense benefits for their employees including health care.....etc.

- They probably have multiple charitable trusts..so they give their money away reducing their income.

- They deduct lots of expenses...for all the companies they own...
- Possibly huge mortgage deductions...but hey...they are helping the financial system, the home building industry ..etc.

In short...I bet a lot of their money...circulates...back into other industries, into other segments of society...etc.

So...rather than taking a statement...and "going ...that's not fair!"...shouldn't we all look at what those top 1% contribute to society...in ways that bring their taxable income down?

I would love to see Buffets federal return...to be able to fully understand.
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Old 03-31-2011, 11:10 PM   #62
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What is the benefit of that? Are you really suggesting we need to increase taxes on the richest Americans to create extended benefits for a new class of permanently unemployed people to live off, thus gaming the statistics to make employment numbers seem better. I don't see why you would want that, let alone why money for it has to come from a particular new kind of tax.
That's already been happening. We already have a class of permanently unemployed ...and it's growing. So I get his point. They aren't counted in the unemployment figures.
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Old 03-31-2011, 11:53 PM   #63
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We've bantered this about and I have to wonder how this statement can be true. The simple truth is one can only pay less tax if one shows less income.

So the question is how are the 1% showing less income.? There are many ways...to include:

- They own companies...so they create jobs. In owning those companies they invest back in the company and take depreciation, expense benefits for their employees including health care.....etc.

- They probably have multiple charitable trusts..so they give their money away reducing their income.

- They deduct lots of expenses...for all the companies they own...
- Possibly huge mortgage deductions...but hey...they are helping the financial system, the home building industry ..etc.

In short...I bet a lot of their money...circulates...back into other industries, into other segments of society...etc.

So...rather than taking a statement...and "going ...that's not fair!"...shouldn't we all look at what those top 1% contribute to society...in ways that bring their taxable income down?

I would love to see Buffets federal return...to be able to fully understand.
he didnt say they paid less in taxes he said they "pay a lower percentage in taxes than the upper-middle class" which is a different thing. and since IRS numbers are being used the percentages paid in taxes are probably being compared to AGI which has already been been adjusted for business expenses (sch C comes in on the front side of the 1040) and if they truely have a large income then sch A deductions will be reduced by the phase out. therefore the only ways they pay a lower percentage than the middle class is 1) their income is mainly dividends/cap gains and/or 2) they are no longer paying FICA. take a look at this post "Tax the Super Rich Now or Face a Revolution"
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Old 04-01-2011, 01:58 AM   #64
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That's already been happening. We already have a class of permanently unemployed ...and it's growing. So I get his point. They aren't counted in the unemployment figures.
So, perhaps that means a public program to employ them might be useful. Some people have suggested building and repairing infrastructure. I don't see how a public program to pay them to remain unemployed indefinitely would be helpful. Certainly establishing incentives to make it rewarding to remain unemployed indefinitely will likely lead to reinforcing the need to have ever more such incentives and ever more actual unemployment, regardless of how it is measured.

This is an Early Retirement forum. Does anyone doubt that escape from the world of work is a much desired goal of many people.
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Old 04-01-2011, 08:27 AM   #65
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he didnt say they paid less in taxes he said they "pay a lower percentage in taxes than the upper-middle class" which is a different thing. and since IRS numbers are being used the percentages paid in taxes are probably being compared to AGI which has already been been adjusted for business expenses (sch C comes in on the front side of the 1040) and if they truely have a large income then sch A deductions will be reduced by the phase out. therefore the only ways they pay a lower percentage than the middle class is 1) their income is mainly dividends/cap gains and/or 2) they are no longer paying FICA. take a look at this post "Tax the Super Rich Now or Face a Revolution"
I know it said they pay a lower percentage..and I see where if their income came only from investments that their percentage would be lower. I just find it hard to believe in all cases. That requires that those taxpayers own nothing (no companies)......and have "only investments with no ownership". Does that really sound reasonable for the top 1%? What they do own is being moved over seas (if it is not there already)...specifically due to tax rates.

If they own C corporations and receive bonuses which are technically "dividends", that money is supposed to be taxed twice....at 35% inside the corporation and at 15% if distributed to the owner for a total tax of 50% on that money (unless there is some way around that ...that I am not aware of ...other than stock options). If it is an S corp, the money is taxed as ordinary income rates. If tax rates go up ....to ordinary income rates on all income regardless of source....in some cases that money will be taxed at 70%.

Does anyone see....where the current percentages for cap gains and dividends are an incentive "to invest"...and in some ways is very similar to what should be done for the corporate tax rate to bring our companies and jobs back?? It keeps the investment income in the U.S. (maybe for the most part). That investment income fuels...so many other things.

I suppose what I am saying...is taking the statement of the "top 1% paying only 17%"....doesn't tell the whole story. Maybe they should track the taxes....paid...on that money ..from start to finish and as it flows thru....rather than what happens to the tax when it ends up the taxpayers hands....only to be taxed again.
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Old 04-01-2011, 08:34 AM   #66
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So, perhaps that means a public program to employ them might be useful. Some people have suggested building and repairing infrastructure. I don't see how a public program to pay them to remain unemployed indefinitely would be helpful. Certainly establishing incentives to make it rewarding to remain unemployed indefinitely will likely lead to reinforcing the need to have ever more such incentives and ever more actual unemployment, regardless of how it is measured.

This is an Early Retirement forum. Does anyone doubt that escape from the world of work is a much desired goal of many people.
I agree....and have often thought if a person is getting government assistance of any type ...and if they are able....there should be a program where "they are required to give back" or "work" for what they receive. How can this be a bad thing...right
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Old 04-01-2011, 08:43 AM   #67
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So, perhaps that means a public program to employ them might be useful. Some people have suggested building and repairing infrastructure. I don't see how a public program to pay them to remain unemployed indefinitely would be helpful. Certainly establishing incentives to make it rewarding to remain unemployed indefinitely will likely lead to reinforcing the need to have ever more such incentives and ever more actual unemployment, regardless of how it is measured...
Growing Older, you've made a very valid point.


"In 1932 the United States was at an economic standstill, the country faced an environmental catastrophe, and the nation was crisscrossed with hunger marches. Within months after he was elected, Franklin Delano Roosevelt started the jobs program called “The Civilian Conservation Corps” (CCC) to both create jobs and deal with the environmental disaster. The CCC gave jobs to 3 million men and lasted until 1940. In this period, FDR in a radio broadcast asked his radio audience, “Give me your help in this crusade to restore America to its people.” Reviving the CCC for this new year and new decade would help now to restore America to its people and heal the land, just as the program did in the 1930′s..."

" The Obama administration could quickly revive this marvelous program, helping to give employment to those who most need it and helping the country deal with global warming. Imagine if again we had 3 million young men and women planting trees, putting in solar panels, installing wind mills in north Texas and Oklahoma to generate electricity and helping to install new electricity lines to bring this windmill-generated electricity to the rest of the nation. This new CCC would be integrated and would include women, of course..."

Julia Stein for truthout: Restore America to Its People: Revive the Civilian Conservation Corps « California Studies BLOG
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Old 04-01-2011, 08:50 AM   #68
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Buffett has talked about his Federal taxes. He agrees with me.

Setting aside his neglible salary, his income is almost all long-term capital gains. He is getting taxed at 15%. This money is double taxed at the corporate level, but the number of loopholes and exemptions that companies have bought from our Congress critters has made corporate taxes a lower and lower burden over the years. Remember, GE just managed to have a negative tax rate on $14+ Billion in income.

The highest marginal rates in this country are not paid by the wealthy, but by the single renter making $100k. They are paying 14% for FICA and 28% for income taxes, while at the same time facing a none-neglible burden from sales taxes, property taxes, sin taxes, etc.

The person making millions in earned income is paying 35%, plus the percent burden of all of those other taxes is generally much lower than it is for the person making $100k (that's the nature of regressive taxes).

The real injustice is the group of hedge fund managers that got Congress to reclassify their earned income as capital gains via the carried interest loophole. They are simply paying 15% instead of the 35% that people who haven't bought Congressmen are paying.


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Originally Posted by sheehs1 View Post
We've bantered this about and I have to wonder how this statement can be true. The simple truth is one can only pay less tax if one shows less income.

So the question is how are the 1% showing less income.? There are many ways...to include:

- They own companies...so they create jobs. In owning those companies they invest back in the company and take depreciation, expense benefits for their employees including health care.....etc.

- They probably have multiple charitable trusts..so they give their money away reducing their income.

- They deduct lots of expenses...for all the companies they own...
- Possibly huge mortgage deductions...but hey...they are helping the financial system, the home building industry ..etc.

In short...I bet a lot of their money...circulates...back into other industries, into other segments of society...etc.

So...rather than taking a statement...and "going ...that's not fair!"...shouldn't we all look at what those top 1% contribute to society...in ways that bring their taxable income down?

I would love to see Buffets federal return...to be able to fully understand.
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Old 04-01-2011, 09:04 AM   #69
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Originally Posted by Hamlet View Post
Buffett has talked about his Federal taxes. He agrees with me.

Setting aside his neglible salary, his income is almost all long-term capital gains. He is getting taxed at 15%. This money is double taxed at the corporate level, but the number of loopholes and exemptions that companies have bought from our Congress critters has made corporate taxes a lower and lower burden over the years. Remember, GE just managed to have a negative tax rate on $14+ Billion in income.

The highest marginal rates in this country are not paid by the wealthy, but by the single renter making $100k. They are paying 14% for FICA and 28% for income taxes, while at the same time facing a none-neglible burden from sales taxes, property taxes, sin taxes, etc.

The person making millions in earned income is paying 35%, plus the percent burden of all of those other taxes is generally much lower than it is for the person making $100k (that's the nature of regressive taxes).

The real injustice is the group of hedge fund managers that got Congress to reclassify their earned income as capital gains via the carried interest loophole. They are simply paying 15% instead of the 35% that people who haven't bought Congressmen are paying.
So, the rich are taking advantage of LEGAL tax rules passed by Congress, and now everyone is amd about it?

Last Sunday there was a fascinating segment about how all the American companies are moving paper assets to place like Ireland, to take advantage of lower corproate tax rates. Apparently there are 100,000 companies who claim Ireland as their home. However, its not like there are moving whole factories there, just mail boxes and small offices. John Chambers from CISCO was interviewed about it. The USA has the HIGHEST corporate tax rate in the world. And we wonder WHY companies are moving jobs and assets overseas? Regulation elsewhere is nowhere near as restrictive as the USA. IMHO this is a big problem that noone talks about.......
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Old 04-01-2011, 09:23 AM   #70
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I know it said they pay a lower percentage..and I see where if their income came only from investments that their percentage would be lower.
(1) I just find it hard to believe in all cases. That requires that those taxpayers own nothing (no companies)......and have "only investments with no ownership". Does that really sound reasonable for the top 1%? (2) What they do own is being moved over seas (if it is not there already)...specifically due to tax rates.

(3) If they own C corporations and receive bonuses which are technically "dividends", that money is supposed to be taxed twice....at 35% inside the corporation and at 15% if distributed to the owner for a total tax of 50% on that money (unless there is some way around that ...that I am not aware of ...other than stock options). If it is an S corp, the money is taxed as ordinary income rates. If tax rates go up ....to ordinary income rates on all income regardless of source....(4)in some cases that money will be taxed at 70%.

(5) Does anyone see....where the current percentages for cap gains and dividends are an incentive "to invest"... (6) and in some ways is very similar to what should be done for the corporate tax rate to bring our companies and jobs back?? It keeps the investment income in the U.S. (maybe for the most part). That investment income fuels...so many other things.

I suppose what I am saying...is taking the statement of the "top 1% paying only 17%"....doesn't tell the whole story. Maybe they should track the taxes....paid...on that money ..from start to finish and as it flows thru....rather than what happens to the tax when it ends up the taxpayers hands....only to be taxed again.
So many things here. I'll try.

1) It's not true in "all cases", just the overwhelming majority of the very richest (the top 400). So much that when the IRS compared FIT paid to reported income they got 17%.

2) The IRS numbers include only income reported to the US tax people. If they have more unreported income, it's being taxed at 0%.

3) "Supposed" is an interesting word. Have you seen the news stories about GE?
More important, the effective incidence of a tax is not the same as the legal incidence (refiners write the checks for gasoline taxes, but you don't believe that tax reduces their earnings, do you?).
Like Hamlet, I'd be glad to give US corps a tax deduction for dividends paid to US taxpayers if those taxpayers paid the normal schedule of tax rates.

4) The 70% requires an explanation. Maybe you're counting all taxes for the rich, but assuming the rest us don't pay any taxes except FIT?

5) I've seen that they've been sold to the public as an incentive, but I don't see any evidence that they really add to the amount of US investments. Or that those investments actually help anyone except the investors.

6) See 3) above. Yes, if we tax corporate income, that makes it more likely that investors will invest overseas. The result of this is that American workers are already paying much of the corporate income tax, the shareholders are not paying the tax today.

7) Sure, we can track all the taxes, but we should track all the taxes for everybody. I've never seen any evidence that the very wealthy pay a higher percent of their incomes in other taxes than other people, so I think it's reasonable to expect them to pay at least the same FIT rates as high income working people.

[Just as an aside, note that hedge fund managers classify their bonuses as "capital gains". This is the type of abuse that occurs when we have different rates for cap gains and ordinary income.]
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Old 04-01-2011, 09:35 AM   #71
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So, the rich are taking advantage of LEGAL tax rules passed by Congress, and now everyone is amd about it?
..
I guess the point of political discussions is that we talk about the rules that we think Congress should make, which are often different from the rules we have today.

Having said that, I'd be happy to reduce our corporate income tax if shareholders paid the same individual rates on their income that workers pay on their income.
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Old 04-01-2011, 09:47 AM   #72
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The real injustice is the group of hedge fund managers that got Congress to reclassify their earned income as capital gains via the carried interest loophole. They are simply paying 15% instead of the 35% that people who haven't bought Congressmen are paying.
This is the kind of stuff that makes my blood boil!
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Old 04-01-2011, 10:43 AM   #73
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What is the benefit of that? Are you really suggesting we need to increase taxes on the richest Americans to create extended benefits for a new class of permanently unemployed people to live off, thus gaming the statistics to make employment numbers seem better. I don't see why you would want that, let alone why money for it has to come from a particular new kind of tax.

Did you read the post I quoted I think it explains my post...
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Old 04-01-2011, 12:30 PM   #74
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I'm mad about the rules. I'm mad that our Congress critters are constantly carving out special deals for the people that finance their campaigns. I want the rules to reflect a level playing field.

Right now companies (and the extremely wealthy) are competing more on their abilty to get special deals from politicians than they are in the marketplace.

I don't blame a hedgefund manager for paying his artificially low legal rate of tax. I blame the lobbyists and Congress and the foolish voters who have allowed it to be legal.

We could have a much lower rate of corporate income tax if we removed all of the loopholes that have crept into the system. It's a rare company these days that really pays 35% on their real income.



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So, the rich are taking advantage of LEGAL tax rules passed by Congress, and now everyone is amd about it?

Last Sunday there was a fascinating segment about how all the American companies are moving paper assets to place like Ireland, to take advantage of lower corproate tax rates. Apparently there are 100,000 companies who claim Ireland as their home. However, its not like there are moving whole factories there, just mail boxes and small offices. John Chambers from CISCO was interviewed about it. The USA has the HIGHEST corporate tax rate in the world. And we wonder WHY companies are moving jobs and assets overseas? Regulation elsewhere is nowhere near as restrictive as the USA. IMHO this is a big problem that noone talks about.......
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Old 04-01-2011, 02:47 PM   #75
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The taxing rate should be fair and consistent at what ever rate it is. it shouldn't be determined by GE having a better battery of tax lawyers. I would suggest most people believe they are breaking the spirit of the law. Not that I'm a big tax increase guy, but wasn't the whole purpose of the Bush tax cuts having a 10 year sunset provision to help make sure they revert back to prior rates if needed?
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Old 04-01-2011, 03:09 PM   #76
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The taxing rate should be fair and consistent at what ever rate it is. it shouldn't be determined by GE having a better battery of tax lawyers. I would suggest most people believe they are breaking the spirit of the law. Not that I'm a big tax increase guy, but wasn't the whole purpose of the Bush tax cuts having a 10 year sunset provision to help make sure they revert back to prior rates if needed?
GE got a bad rap here.

GE made a lot of money but it was all overseas. They lost gobs of money money in the US mainly due to their mortgage lending operation.

So please tell me why they should pay anything at all to the US ?

Funny how you don't hear that vital little tidbit when the soundbites come out.
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Old 04-01-2011, 03:14 PM   #77
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Not that I'm a big tax increase guy, but wasn't the whole purpose of the Bush tax cuts having a 10 year sunset provision to help make sure they revert back to prior rates if needed?
Actually, it was the only way to get Congress to go along with it. In recent history, the Republican majority House tried to make the tax cuts permanent, but the Senate agreed to 2 years only.
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Old 04-01-2011, 03:27 PM   #78
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GE got a bad rap here.

GE made a lot of money but it was all overseas. They lost gobs of money money in the US mainly due to their mortgage lending operation.

So please tell me why they should pay anything at all to the US ?

Funny how you don't hear that vital little tidbit when the soundbites come out.
Just me personally, that is why I said at whatever rate it should be because GE isn't the only one not bringing their money back home because of the high corporate tax rate. If rate wasn't as high, more might be brought back, maybe not. Concerning profits,I remember in a graduate accounting class I took, the professor gave us the finances and spreadsheet of 2 companies. One made a million dollars, the other lost a million, and of course he asked which one do we want to own. We like sheep all said the one that actually made a million. He then went on to show it was the exact same company just using 2 different, but both legally correct, accounting practices.
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Old 04-01-2011, 03:36 PM   #79
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Everyone has more than valid points. I saw someone on CNBC...that said..."the problem is regardless of what tax law Congress passes, the corporate tax gurus get around it. He said "you can't make a law they won't find a way around."

I suppose part of my point is that instead of carte blanche...increasing tax rates....we should tweak what we have to get rid of the major loop holes. Hamlet...I agree re-characterizing bonuses is ridiculous. It is THIS type of detail that needs to be changed. I also agree the corporate tax rate needs to be reduced so our companies will stay here and move back. FinanceDude...I saw the 60 minutes segment on CSCO too...with so many companies denouncing their US citizenship and moving to Ireland and Zug and Geneva.. Switzerland.

I think my problem with increasing taxes....is that much of the rhetoric..seems to be on how it will affect the working citizen....and not so much about the ones that sham the system and the larger fish...like the investment Wall Street people.

Or put another way....if Congress actually does change the tax laws....trying to snag...the ones that are shaming the system.....everyone gets caught up in it...and only those with the tax lawyers and accountants will manueuver their way out of it. The rest have to pay up. I don't think it is right for a couple making say 100K or $250K to have to pay the price...if those making the millions can continue to find a way around it. I'm afraid that is what will happen if any change is simply carte blanche. I'd rather the tax code be specific....

On a side note: The current code is very complex...and I just got caught short...and am teed off about it. I paid my daughters tuition for spring of 2010. It was due by Jan 2nd 2010, the bill came in November 2009...and being the avid bill payer that I am..I paid it Dec 27th, 2009 (never late Nellie) . Because I was not specifically thinking ...we have lost the education credit for 2010..since I paid the bill 3 days early. I'm still trying to find a way to get the credit...even calling the school asking them if they could repost it. (of course they said no). My point is...we all have to think about everything we do. Sorry...just rambling about it because I am teed off. It shouldn't be so darn difficult.
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Old 04-01-2011, 03:50 PM   #80
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I think its disingenuous to portray taxes as "wealth transfer". Taxes exist as a means to fund the government. The government exists to keep our society safe, free, and lawful, and to provide a safety net for it citizens for events beyond their control. (hurricanes, terrorist attacks, financial crises, economic dislocation). (Although at times this safety net seems to be applied more to our corporate citizens, than individual citizens.). Those citizens who say "I've never taken a dime from the government" are wrong. Arguably, every citizen benefits every day from the physical, legal, and economic infrastructure maintained by our government.

You can argue all you want about whether the government does a particularly good job at providing this societal framework at a reasonable cost, but the essentialness of the role of government to provide a stable society should not be questioned IMHO.

I think the most dangerous threat to a stable society is when the citizens believe that 1) the government cannot be trusted and/or is ineffective (these days, this sentiment seems pretty mainstream, universally shared by the left and right), and 2) the government is only effective ( or perhaps intentionally ineffective) when dealing with the wealthiest members of society. This perception is growing. There are definitely strains of it both in the tea party rhetoric, as well as the left's criticism of the current administration.

On the left, here is an interesting article by Stiglitz in Vanity Fair:

Of the 1%, by the 1%, for the 1%


On the right we have these sentiments in the New American:

Ron Paul: Obama Is Another Corporatist, Not a Socialist
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