(I tweaked and reposted this essay for Income Tax Week)
I’m no fan of taxes. I think everyone should pay less, even some who others consider rich, “rich” being a loaded and somewhat relative term. Still, an overhaul to our tax system that doesn’t favor the rich at the expense of the working class is sorely needed.
Getting class terminology right would go a long way toward ending the unproductive bickering between the very-poor, the just-getting-by and the doing-OK: We’re all working class, or for you unemployeds out there at least the I-want-to-be-working class. Obama thinks any family earning over $250K/year is “rich.” It would be a joke if it weren’t so insulting: $250K/year is barely “middle class” in some parts of the country where it takes two six-figure incomes to live well. Any supposedly “middle class” family that has to work to make ends meet from month to month is more appropriately referred to as working class.
Rich is a word we should only used to describe the mind-boggingly wealthy: People who don’t actually work for a living but who live off the interest from their investments without ever touching the principal. The “rich” guy isn’t the guy wheeling down the street in a Mercedes: He probably worked hard for it. Really rich people have drivers, and you rarely, if ever, see them.
No, the playing field is not, never was, and never will be even, but it doesn’t have to be THIS bad.
The insatiable State (capital S) takes too much from everyone. Well, almost everyone: Those shadowy hyper-rich for whom the Wall Street bankster class keeps rich, living off corporate welfare at our (tax) expense, are doing quite well, thank you. Things really have gotten out of control.
I’m appalled by our growing wealth gaps because in my travels I see what happens in dysfunctional countries where the rich just don’t care about those below the decks. The result is nations without a social fabric or sense of national unity. Huge concentrations of wealth corrode the soul of any nation.
And then I see members of Congress in my own country who argue that it would be financially reckless to extend unemployment benefits during a terrible recession, yet they insist on granting $370,000 tax breaks to the richest Americans. I don’t know if that makes us a banana republic or a hedge fund republic, but it’s not healthy in any republic.
Mr. Kristof is right: Allowing this truly awful – and getting worse – disparity between the rich and poor in the US to continue will end the American experience. There comes a point where the whole rigged-up edifice just falls apart. Grandma said “You can’t bleed a turnip.” Grandma, may God rest her soul, was right.
Supply side economics, AKA “trickle down” theory, only worked in theory. What happened instead was “trickle up” and now the US is (seriously) worse than a banana republic in that the top 1% own 34% of the country’s private net worth. Supply-side turned out to be a Reverse Robin Hood: Steal from the poor, give to the rich. So about those Bush tax cuts the Republicans are so intent on extending to perpetuity: The data does NOT support the contention that tax breaks for the rich increase employment enough to offset the loss in tax revenue. Being fact-averse and wishing won’t make it so.
Socialism for the rich and capitalism for the poor is a classical political-economic argument, stating that in the advanced capitalist societies state policies assure that more resources flow to the rich than to the poor, for example in form of transfer payments. The term corporate welfare is widely used to describe the bestowal of favorable treatment to particular corporations by the government. One of the most commonly raised forms of criticism are statements that the capitalist political economy toward large corporations allows them to “privatize profits and socialize losses.” The argument has been raised and cited on many occasions. (Wikipedia)
Here’s what typically happens: When the hyper-rich are given tax breaks during a bad economy they generally don’t hire, but rather sit on the money until the economy improves. The financial commentariat calls this “money waiting on the sidelines.” The rich DON’T say “Hey I think I’ll take this money and hire an American.” Maybe they’ll another illegal alien, or open another plant overseas, so to those who are still deluded/argumentative enough to defend Reganomics: Why didn’t these alleged “job creators” create jobs in the U.S. when they’ve already HAD these supposedly job-creating tax cuts all these years? Probably because they didn’t, don’t, and won’t. It’s been 30 years since the so called Reagan Revolution, and where are the jobs? Overseas, where the hyper-rich profit from wage arbitrage.
Image: Anse Intendance
Tax cuts for the majority – the middle class and the poor – are more likely to be spent in the economy, stimulating consumption, because the rest of us are broke and need stuff like food, clothes, transportation, etc. This is why tax cuts for the rich are all well and good (everyone loves a tax cut) but extending them at the SAME TIME as cutting unemployment benefits, denying Social Security COLAs to seniors, cutting veterans medical benefits, and raising taxes on the middle class is counterproductive, stupid, malicious and insulting. And then to add even more insult to injury they use taxpayer dollars to bail out the rich, repeatedly and against the noisy, angry wishes of the American people.
Actually I think 40% is still too high for pretty much everyone.
The government should be able to operate on a 10% flat tax. Unfortunately our debt-based banking system requires ever-increasing tax revenues to the point of collapse. It is not sustainable. In fact, America is collapsing under its debt burden right now. The law of diminishing marginal utility is a very basic economic concept. Unfortunately Congress has it backwards: It taxes people’s labor but goes easy on those whose incomes are based upon interest and profit from other peoples’ labor. Sigh: Let’s just call ourselves what we have become: A high-tech feudal society in which there are only serfs, warriors and a tiny clique of lords. When the fortunes of the lords are threatened with a reduced standard of living, usually from going into debt for their wars, they take it out of the hides of the serfs via another tax collection. Socialism for the rich, libertarianism for the poor. The reality of our situation exposes the Big Lie: Congress couldn’t give two shits about working toward a sustainable American economy.
I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. … You are a den of vipers and thieves.
Think of the marginal rate of return chart: Plutocracy also follows the curve. Meaning as the wealthy take a greater share of the economy, the rest of the economy becomes starved for cash and is able to produce less output, resulting in an actual decline in the income of the wealthy. Greed is ultimately self-defeating, but some of these guys don’t know when to stop. They can’t relate to the people they’re harming, and they’re utterly blind to their own privilege. Eventually things get so bad that it’s impossible for the poor to lift themselves up. Result: Neo-feudalism, the modern banana republic.
The modern high-tech feudalism of the new millennium is also taking hold in “communist” China
One of the best comments on Mr. Kristof’s op-ed came from a guy in Pennsylvania:
One day the richest 1% will realize that accumulating more wealth is not in their best interests. What good is all that wealth if you have to spend it on things like security guards, armored limousines, private schools, etc., because you cannot go out in public because all the desperate people trying to make a living have given up trying to live by a legal system that only keeps them impoverished. Some argue that it is unethical to take more tax revenue from the rich, because after all, they earned it. But even in the best case scenarios (where the rich really do add value to the economy), they do not create wealth by themselves. They rely on a legal system that makes business efficient, a transportation and communication system that enhances the exchange of goods, employees educated largely by public schools, and the advances in science and technology largely funded by taxes. So if the wealthy want to preserve a system that has allowed them to rise to the top, they’d better wake up soon and realize that tolerating a slightly higher tax bill is a small price to pay to preserve the lifestyle they’ve come to enjoy. Because once the majority of society realizes they have no chance at advancement in a system rigged against them, all bets are off.
And that, my friends, will be the day things really get ugly.