By John Buell
There is surprisingly widespread support for higher taxes on the rich — among Republicans, Democrats and Independents. Americans have typically felt that one should keep what one earns. Many are also convinced that they are temporarily embarrassed billionaires, hence the popularity of lotteries, which reflect and help sustain that belief.
Dean Baker, co-founder of the Center for Economic Policy and Research, has argued repeatedly that the best egalitarian strategy is to remove the elements of monopoly power in the so-called free market so that incomes might be fairly distributed. I believe this argument is sound, but ending such practices as patent monopolies for drugs might be an even harder reach now than enacting a more just tax structure.
The degree of inequality in both wealth and income is the most extreme in our history. Nomi Prins, former Goldman Sachs executive and long-time critic of big finance, puts it thus: “The U.S. leads the pack when it comes to the growth of inequality. As Inequality.org notes, ‘America has “much greater shares of national wealth and income going to the richest one percent than any other country.'”
The behavior of those at the top contradicts many of the ideological defenses of the obscenity that is capitalism. Reductions in the corporate income tax have been followed by stock buybacks rather than new investments. These enrich shareholders but fail to create jobs, and often lead to layoffs. Nonetheless, Donald Trump’s class warfare has had the inadvertent effect of stirring closer examination of the distributional impact of federal taxes. The recent tax cut has been so unpopular that Republicans chose not to run on it.
The quest for a just tax system is aided by the clarity and care with which it has been presented. Alexandria Ocasio-Cortez has explained that the top “marginal rate” applies only to income above a certain threshold, one far beyond any year-round resident of Hancock County.
Most progressive tax proposals apply the top rate only to annual incomes above ten million dollars. This tax would have no effect on even relatively affluent attorneys or physicians, and would affect the bank accounts of only a few hundred Mainers, at most — and these Mainers would still be millionaires and billionaires after the taxes altered the inconceivably vast sums in their bank accounts.
There is so much wealth and income parked among a few at the top that sums in the neighborhood of $100 billion a year can be raised quite easily. And nearly all of this money sits in these billionaires’ bank accounts, unused, if the government doesn’t utilize it to provide universal health care, for example, or repair roads. Even a famous philanthropist like Bill Gates saw his net worth grow by ten million dollars per day between 2017 and 2018. How much did your net worth grow during this time?
Still, we have to be careful in how we make these arguments. Even constructive policy agendas are supported in part by misleading or inaccurate assertions.
Defenders have pointed out that the US economy enjoyed sound and rapid growth over many decades with top marginal rates far higher than today — rates which paid for America’s defeat of fascism in the second World War, the creation of highways and the Apollo Program (which produced the microchips in your phone, among many other miraculous technologies). But during those years, the tax code had innumerable deductions and credits. Any executive paying anywhere near the tope marginal rate should have fired his accountant.
Marginal rates surely can safely be increased well beyond today’s, but attempts to reach Eisenhower administration levels would invite a stampede to open up new deductions. But this is exactly why we need thousands of people like Alexandria Ocasio-Cortez running for all levels of government office, and especially against corporate Democrats: to make sure that billionaires pay their fair share.
Progressives must also avoid attributing too much causal significance to tax policy. The relative success of capitalism from 1945 to 1970 depended heavily on a complex, hard-to-predict mixture of strong unions, infrastructure development, Cold War fears and cheap natural resources. Equally important was the willingness of some segments of capital to accept limits to its wealth and power; high tax rates on wealthy business owners at the time forced them to invest in their workers, rather than in more private jets, mega yachts and unoccupied mansions here on Mount Desert Island.
This last investment, which makes it almost impossible for anyone else to live here, is one we could particularly do without. In addition, fiscal policy — including the willingness to engage in deficit spending on behalf of those infrastructure investments — both enhanced productivity and stimulated employment, at least among white male US citizens.
There are, in addition, some outright bad arguments being used on behalf of this tax reform.
Government does not necessarily need to raise taxes in order to finance a Green New Deal or other worthy projects. For one thing, the evidence is that green energy increasingly pays for itself. It is now cheaper to build and operate a new solar or wind farm in some states than to continue to operate a coal-fired electricity plant. Moreover, the US government prints its own currency and cannot go bankrupt. It does face constraints, those being the workers, resources and technologies available.
Despite all the talk of recovery, the economy has seen virtually no growth beyond the coffers of the one percent. Poverty is never more than five minutes driving’ distance from wherever you happen to be, even in a relatively affluent place like MDI, and half of American workers are one paycheck from destitution.
This is in part because the money from the Trump tax cut went into financial market speculation and stock buybacks. Had these funds gone to new factories, worker training, new technologies and even basic income (look up “Alaska for America”), we might be experiencing faster growth but more significant inflation.
If the money spent on a Green New Deal does lead to some inflation (a fate far better than unemployment), then taxation of those at the top — in effect, a maximum wage — would be in order all the more. Nonetheless, activists should not wait for progressive taxes to fund badly needed priorities. I can imagine a scenario in which Republicans and centrist Democrats claim that these badly needed initiatives are good ideas, “but we can’t afford them.”
The planet and poor and working class citizens worldwide are already paying too high a price for such procrastination. Climate change killed more American citizens in Puerto Rico during Hurricane Maria than were lost on 9/11.
Perhaps the most compelling argument for serious tax reform is political. The vast accumulation of wealth at the top is matched by inordinate concentrations of political power. Even before Citizens United, money was speech. A fairer and more equitable distribution of money might also re- energize and re-legitimize our democracy.
John Buell is a columnist for the Progressive Populist. He lives in Southwest Harbor.