|
|
| Home About Us Contact Us Submissions Archives Contributors Links | |
A Culture of Inequality |
|
|
|
|
"No one person is so much more talented than everyone else that he should make in one afternoon what a $50,000 per year laborer would make in fifty years."
|
|
|
People generally don't like to talk about the rich paying more taxes. We accept the notion that they deserve what they earn, and that any of us can aspire to such high levels with the right amount of talent and ambition. But they should be paying back to society, and paying a lot. The richest Americans – Bill Gates and Sergey Brin and the Waltons – all have special qualities that earned them lofty positions in business and society, and perhaps they deserve to be rich. But they all benefited from a system put in place by the millions of teachers, technicians, inventors, and businesspeople who have contributed to American productivity over the years. No one person is extraordinary enough to make enough money, as one hedge fund manager did in 2007, to pay the salaries of every police officer, firefighter, and public school teacher in the City of Chicago. No one person is so much more talented than everyone else that he should make in one afternoon what a $50,000 per year laborer would make in fifty years. The extreme disparities in income and wealth the US country have become indefensible. Every day we read about local budget problems and the need to find new sources of money. On a national level we'll need more – much more - as President Obama fashions a massive public works program for infrastructure repair. Very rich people, studies show, have little incentive to support the common good in this way. Where in the world do we get this money? Close to home, it may be a higher sales tax, new property taxes, sin taxes, utility fees, or parking meter rates. States may announce cutbacks in 'non-essential' programs such as park services. At the national level, the federal budget will reduce allocations for social programs and education. All these approaches have their greatest impact on low-income people. Way back in time, 100 years ago, good sense prevailed over the excesses of the first Gilded Age, as progressive income taxes were imposed on the beneficiaries of industrialism. Then, like now, the gap between rich and poor had grown out of control. The very rich prospered because government support for business made conditions favorable for them. In the early 20th century our farsighted leaders agreed that such people should give back to the society that made them rich. Of course, very rich people have lost a lot of money in the stock market, but their position relative to the rest of the country has remained the same. About 1/3 of U.S. wealth is owned by the richest 1%. Another 1/3 is owned by the next richest 9%. The last 1/3 is owned by the remaining 90% of the people. Before the economic downturn the richest 1% of America held almost $17 trillion in assets, compared to $15 trillion for the bottom 90%. If anything's changing, it's changing for the worse. Income has been DROPPING for 90% of American households over the past 30 years. America's overall productivity has continued to rise since 1980, but compensation for average workers has remained stagnant. The average two-income family today has less disposable income than one-income families had 30 years ago. Yet the bottom 90% don't even get a break in taxes. When income taxes, social security taxes, sales taxes, transportation fees, and utility costs are included, the typical wage earner pays about a 40% overall tax. Many wealthy Americans pay much less than 40%, because the greater portion of their income is not even considered income. It is in the form of capital gains, derived from financial assets, such as property and stocks, which are subject to only a 15% tax. The top 400 U.S. taxpayers, with an average income of $151 million, pay about 18% in income taxes, 27% in total taxes. In 2003 almost 3,400 people with earnings of $200,000 or more paid NO income tax. Wealthy Americans inordinately benefit not only from the capital gains tax, but also from deferred taxes on retirement savings, mortgage interest deductions, and, of course, the 'economy-stimulating' additional tax breaks between 2001 and 2008. Every U.S. taxpayer contributes about $600 a year to pay for the tax cuts that give $34,000 a year to each of the wealthiest 1% of Americans. It is reasonable to expect the very wealthy to return a fair share of their incomes, through progressive taxes, to the system that made their extraordinary wealth possible. But some of them have taken extreme measures to avoid taxes altogether. About 500 people a year actually renounce their U.S. citizenships and repatriate themselves to tax-friendly countries such as Belize to avoid the IRS entirely. Many hundreds of corporations have their main offices in these countries. There are some practical reasons why we need to address economic inequality. Perhaps the greatest danger is that political power concentrated among the wealthy threatens the democratic process, as money becomes a greater factor in the election process. Wealth concentrated in the hands of a few also reduces the incentive to support the common good through funding for health, education, and infrastructure. Under the Bush Administration, Medicaid and food stamps were cut, and the minimum wage, adjusted for inflation, is 30% less than in 1979. Around the country proposals are being made for privatizing highways because of a lack of public funds. This, of course, means higher costs for the users. Inequality has furthermore been shown to impact the health of, and incite violence among, those who don't fit into the elite group at the top. Supporting society with tax money makes the country safer and more liveable for all of us. If we are to address the growing inequities in our country, it will almost certainly require a more progressive tax structure. Some people believe that taxes are already too high in the US. But a 2007 OECD survey placed the US 29th out of 30 countries in taxes (national and local) as a share of GDP. Progressive taxes do not "take from the rich." They ensure that people removing wealth from society return a part of it to the system that made them rich and supports their lifestyle. The very wealthy benefit the most from national security and property rights. They benefit the most from a system that supports growth at the top. Bill Gates, Sr., a prominent advocate of the estate tax, explains, “The reason the estate tax makes so much sense is that there is a direct relationship between the net worth people have when they pass on and where they live. The government that protects their business activities, the traditions that enable them to rely on certain things happening, that’s what creates capital and enables net worth to increase.” Over the first half of the twentieth century, after the industrialists and financiers of the first Gilded Age rose to the same levels of wealth and power as today's hedge fund managers, labor unions and populist social movements helped to curtail the effects of extreme inequality. Something similar is in the making now. The Working Group on Extreme Inequality proposes (1) an increase in the top marginal federal income tax rate on ultra-high incomes; (2) a cap on the tax deductibility of executive pay at no more than 25 times worker pay; (3) the elimination of inflated tax deductions for executive stock options; (4) a cap on tax-free deferred pay; and (5) a reforming of the estate tax to include a progressive rate structure. Other measures might include a revision of the capital gains tax to a level approaching the tax on regular income, and the overhauling of a system that allows individuals and corporations to avoid income taxes in the very country responsible for their success. Paul Buchheit is a professor with the Chicago City Colleges, co-founder of Global Initiative Chicago (GIChicago.org), and the founder of fightingpoverty.org.
Sources |
|
