Taxing the Wealthy Gerry OShea
Capitalism has lost its appeal for many young people. In a recent poll, 51% of Americans aged from 18 to 29 stated that they feel more positive about socialism with just 45% affirming the capitalist system. This represents a hefty 12% decline in just two years.
What has caused this dramatic change? A few statistics that indicate serious dissatisfaction with the status quo may give some indication of the issues involved. Since 1989 the working class share of total income in America has declined from 45% to 27%. Four out of ten citizens complain that they don't have the means to pay an emergency bill of just $400. Only 14% of private sector workers have access to paid family leave.
Meanwhile the rich have done very well. There are more millionaires and billionaires than ever before in the United States. The stock market is flying, benefiting mainly the richest 10% who own 80% of the shares. Sales of luxury boats and cars have never been more ebullient.
With big money in America comes an accretion of political power. Nobody claims that the worker living from week to week has the same political clout as the millionaire. Relatively small groups with deep pockets like the National Rifle Association get their way in Washington even when a clear majority opposes their agenda.
There is an important moral dimension to how the wealth of a country is distributed. Reinhold Niebuhr, the great New York Protestant theologian of the last century, argued that Christians have a clear moral obligation to pursue justice and "to prevent the strong from consuming the weak."
With, for example, a recent study revealing that 25% of children in Texas live in demeaning poverty, Niebuhr's admonition surely applies in modern America.
The Catholic tradition going back to Thomas Aquinas always asks about "the common good" as distinct from individual profit or private gain in assessing any political or economic situation. Francis, the pope of the poor, has spoken repeatedly in the strongest terms against a capitalist system that he sees as blind to the plight of people at the bottom of the economic ladder.
Moralists led by Pope Francis condemn the heightened inequality and crass treatment of the poor and refugees. The poet William Wordsworth's words come to mind when the American Government approves of the separation of young children from their parents and closes our ports to strangers in dire need: "We have given our hearts away - a sordid boon."
A few years ago the billionaire Warren Buffett urged the lawmakers in Washington to stop coddling the super rich, pointing out that his secretary is compelled to pay a higher percentage of her taxable income to the IRS than he does. Young people trying to deal with their monthly bills as well as paying their taxes are angered by unfair situations like this, and in the midterm elections when Republicans lost a massive forty seats in the House their voices were clearly heard.
The top 1% of earners and the big corporations hire teams of accountants to tease out every dubious deduction to reduce their payments to the local and federal treasuries.
The last Trump budget gave massive tax breaks to the super rich and big corporations. Steve Mnuchin, the Treasury Secretary, assured people that these giveaways wouldn't impact the national debt, but economists now tell us that it has added about two trillion to the bill that future generations will have to pay.
Meanwhile the Internal Revenue Service enforcement division was reduced by a third over the last eight years. One IRS estimate claims that businesses skip paying their tab to Washington to the tune of about 125 billion dollars annually - enough to finance the departments of State, Energy and Homeland Security. Audits of people in the top 1%, the most likely group to misreport income, have dropped from 8% in 2011 to 2.5% last year.
Congresswoman Alexandria Ocasio-Cortez proposes a Wealth Tax on big earners. She suggests a top rate of 70% on taxable income over 10 million dollars. The current marginal rate is fixed at 37%. Predictably this proposed new high rate has drawn harsh criticism from conservatives who conveniently forget that under President Eisenhower, the Republican president in the 1950's, the top marginal rate hovered around 90%.
Bill Gates, until recently the richest man in the world, endorses the supposedly socialist proposition of levying higher taxes on wealthy people, but he disagrees with Cortez on how to achieve this. Instead of new taxes on income, he argues convincingly that the focus should be on upping the contributions from levies on Estates and Capital and Social Security.
Liability for Estate or Inheritance Taxes was greatly reduced in recent years thanks to a masterful propaganda assault on what the so-called reformers successfully labeled a "death tax." The amount exempted has now been raised to 5.6 million dollars for individuals who die and double that figure for couples. Very few would argue against excluding the first few hundred thousand dollars from liability for this Estate tax, but the changes in recent times are a major boon for the children of millionaires and a serious loss to the treasury.
The Social Security Trust Fund is heading for insolvency in sixteen years. At present the 6.2% levy on all income ends at $132,900. If this limit was eliminated and all income was subject to this tax, the Trust Fund would be clear until the next century. There are hearings currently scheduled for a Bill in Congress that would extend the Social Security levy to all income in excess of $400,000.
The Wealth Tax issue has come very much to the fore in France where President Macron rescinded this tax on the wealthy when he took over as president a few years ago. He also reduced some benefits that especially hurt low-paid workers and retirees. The Yellow Vest movement is seen as a response to these changes, and one of their main demands continues to be a restoration of the Wealth Tax.
After the sad burning of Notre Dame Cathedral Macron promised it would be rebuilt within five years. Billionaire Francois Pinault pledged 100 million euros to the renewal project, only to have Bernard Arnault, France's richest man, double that amount as his contribution to the restoration.
The workers wearing yellow vests continued their protests proclaiming that the generosity of the big contributors only strengthened their case for a Wealth Tax. One of the leaders mocking the Trickle Down Theory, which underpins Macron's economic policies, wondered if any of the Arnault or Pinault billions would find their way to citizens in need.
Another memorable protest sign in Paris recalled Victor Hugo's famous novel: "Everything for Notre Dame but nothing for Les Miserabiles."
Back to the United States where many young people especially are questioning the economic system that has spawned grossly unequal policies leading to the disgraceful situation where many people do not even have health insurance. Some are calling themselves socialists but this movement is better understood as a loud call for radical changes in the present capitalist system.
These young people made a big statement in the midterm elections and they are likely to do so even more forcibly in November 2020.
Gerry OShea blogs at wemustbetalking.com