SYNDICATED COLUMN: Want More Wars? Raise Taxes on the Rich

Tax Fairness Won’t Reduce Inequality

Reacting to and attempting to co-opt the Occupy Wall Street movement, President Obama used his 2012 State of the Union address to discuss what he now calls “the defining issue of our time”—the growing gap between rich and poor.

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by,” Obama said. “Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

No doubt, the long-term trend toward income inequality is a major flaw of the capitalist system. From 1980 to 2005 more than 80 percent in the gain in Americans’ incomes went to the top one percent. This staggering disparity between the haves and have-nots has created a permanent underclass of underemployed, undereducated and alienated people who often turn to crime for survival and social status. Aggregation of wealth into fewer hands has shrunk the size of the U.S. market for consumer goods, prolonging and deepening the depression.

How can we make the system fairer?

Liberals are calling for a more progressive income tax: i.e., raise taxes on the rich. Obama says he’d like to slap a minimum federal income tax of 30 percent on individuals earning more than $1 million a year.

Soaking the rich would obviously be fair. GOP frontrunner/corporate layoff sleazebag Mitt Romney earned $59,500 a day in 2010—and paid half the effective tax rate (13.9 percent) of that paid by a family of four earning $59,500 a year.

Fair, sure. But would it work? Would increasing taxes on the wealthy do much to close the gap between rich and poor—to level the economic playing field?

Probably not.

From FDR through Jimmy Carter it was an article of faith among liberals that higher taxes on the rich would result in lower taxes on the poor and working class. This was because the Republican Party consistently pushed for a balanced budget. Tax income was tied to expenditures, which were more or less fixed—and thus a zero-sum game.

That period from 1933 to 1980 was also the era of the New Deal, Fair Deal and Great Society social and anti-poverty programs, such as Social Security, the G.I. Bill, college grants and welfare. These government handouts helped mitigate hard times, gave life-changing educational opportunities that allowed class mobility, closing the gap between despair and hope for tens of millions of Americans. As the list of social programs grew, so did the tax rate—mostly on the rich. The practical effect was to redistribute income from top to bottom.

Democrats think it still works that way. It doesn’t.

The political landscape has shifted dramatically under Reagan, Clinton and the two Bushes. Budget cuts slashed spending on student financial aid, food stamps, Medicaid, school lunch programs, veterans hospitals, aid to single mothers. The social safety net is shredded. Most federal tax dollars flow directly into the Pentagon and defense contractors such as Halliburton.

As the economy continues to tank, there’s only one category to cut: social programs. “Eugene Steuerle worked on tax and budget issues in the Reagan Treasury Department and is now with the Urban Institute,” NPR reported a year ago. “He says one reason no one talks about preserving the social safety net today is that lawmakers have given themselves little choice but to cut it. They’ve taken taxes and entitlements, such as Social Security and Medicare, off the budget-cutting table, so there’s not much left.”

Meanwhile, effective tax rates on the wealthy have been greatly reduced. Which isn’t fair—but not in the way you might think.

Taxes on middle-class families are at their lowest level in 50 years, according to the Center on Budget and Policy Priorities, a liberal thinktank.

What’s going on?

On the revenue side of the budget equation, the poor and middle-class have received tiny tax cuts. The rich and super rich have gotten huge tax cuts. Everyone is paying less.

On the expense side, social programs have been pretty much destroyed. If you grow up poor there’s no way to attend college without going into debt. If you lose your job you’ll get 99 weeks of tiny, taxable (thanks to Reagan) unemployment checks before burning through your savings and winding up on the street.

Military spending, on the other hand, has soared, accounting for 54 percent of federal spending.

In short, we’re running up massive deficits in order to finance wars in Afghanistan, Iraq, and so on, and so rich job-killers can pay the lowest tax rates in the developed world.

I’m all for higher taxes on the rich. I’m for abolishing the right to be wealthy.

But liberals who think progressive taxation will mitigate or reverse income inequality are trapped in the 1960s, fighting the last (budget) war in a reality that no longer exists. The U.S. government’s top priority is invading Muslim countries and bombing their citizens. Without big social programs, invading Muslim countries and bombing their citizens is exactly where every extra taxdollar collected from the likes of Mitt Romney would go.

The only way progressive taxation can address income inequality is if higher taxes on the rich are coupled with an array of new anti-poverty and other social programs designed to put money and new job skills directly into the pockets of the 99 percent of Americans who have seen no improvement in their lives since 1980.

You have to rebuild the safety net. Otherwise higher taxes will swirl down the Pentagon’s $800 toilets.

If you’re serious about inequality, income redistribution through the tax system is only a start. Whether through stronger unions or worker advocacy through federal agencies, government must require higher minimum wages. It should set a maximum wage, too. A nation that allows its richest citizen to earn ten times more than its poorest would still be horribly unfair—yet it would be a big improvement over today. Shipping jobs overseas must be banned. Most free trade agreements should be torn up. Companies must no longer be allowed to layoff employees before eliminating salaries and benefits for their top-paid managers—CEOs, etc.

And a layoff should mean just that—a layoff. First fired should be first rehired—at equal or greater pay—if and when business improves.

Once a battery of spending programs targeted to the 99 percent is in place—permanent unemployment benefits, subsidized public housing, full college grants, etc.—the tax code ought to be radically revamped. For example, nothing gives the lie to the myth of America as a land of equal opportunity than inheritance. Aristocratic societies pass wealth and status from generation to generation. In a democracy, no one has the right to be born into wealth.

Because everyone deserves an equal chance, the national inheritance tax should be 100 percent. While we’re at it, why should people who inherited wealth but have low incomes get off scot-free? Slap the bastards with a European-style tax on wealth as well as the appearance of wealth.

Now you’re probably laughing. Even Obama’s lame call for taxing the rich—so the U.S. can buy more drone planes—stands no chance of passing the Republican Congress. They’re empty words meant for election-year consumption. Taking income inequality seriously? That’s so off the table it isn’t even funny.

Which is why we shouldn’t be looking to corporate machine politicians like Obama for answers.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2012 TED RALL

17 thoughts on “SYNDICATED COLUMN: Want More Wars? Raise Taxes on the Rich

  1. I didn’t bring up cancer. You did. You are undermining your own analogy.

    And some cancers can be treated, just as some mental illnesses can be treated.

    I have no idea what prison has to do with this. I think you have thoroughly confused yourself.

  2. Cancer isn’t mental illness in that it is not curable, and often treatment is limited to ensuring the individual doesn’t put themselves at severe risk, however treatment is fairly rare for severe mental illness, in most cases individuals with severe mental illness fall through the cracks, rich or otherwise. Now, if your talking about prison, the poor mentally ill are much more likely to be put into prison as opposed to short term treatment.

  3. “Obama is not your ally who’s been co-opted; he’s your enemy who is co-opting you.”
    –John Caruso (“State of the Illusion” – Jan 25, 2012 – A Tiny Revolution)

    I find this amazingly insightful, and invaluably brilliant. And I had never been exposed to this quote before. Thanks for including it in your comment.

    **And a shout-out to Ted himself, who repaired a buggy login to get me here! **

  4. This:

    “its the sad truth Americans do not understand mental illness”

    offers neither support nor criteria for this:

    “The problem is that distribution of wealth is not the problem, our treatment of the mentally ill and sick is the problem.”

    The above sentence is patently wrong. It’s ludicrously wrong. It’s stupid enough that I honestly thought this was parody and expected to have a good laugh once I scrolled up.

    “that is like saying a kid with cancer will be okay because his rich dad will send him to a cancer doctor”

    YES HE WILL. That’s exactly right. The rich kid with cancer has a much better chance at survival and will statistically be more comfortable and happy than the poor kid with cancer. The quoted passage is sheer, unadulterated perversity. The greatest asset of wealth is that it’s self-reinforcing: that is, wealth itself makes it easy to maintain wealth.

    This balls-to-the-wall foolishness actually does lead me to a more interesting point: I don’t think there technically is a middle class and there hasn’t been since the 80’s. This is pure semantics, but consider this: an aspect of a class, like with wealth as I just mentioned, is stability. If I inherit a large sum of money but have crap income and a social stigma preventing my income from increasing, I can’t be said to have jumped social classes. I’m an anomaly at best. If a strong breeze can transform you from middle class to poor and there is literally nothing conventional that you can do about that, I’d claim you’re poor. The rich remain rich even in a bad economy, sometimes because of a bad economy: that’s how rich works. If a person is truly middle class, they are stable as such even when the context changes. I think, when it comes to wealth, the majority of Americans are poor with delusions of mediocrity.

  5. Ted, nothing crazy about it, its the sad truth Americans do not understand mental illness. Most mentally ill are viewed as making the choice to be jobless and homeless, labeled as lazy, when it is possible that medication or therapy could possibly mitigate some of those factors. You can certainly be poor and sane, but very large % of the homeless are absolutely the mentally ill. Being born to poor parents is a good way to be poor but not homeless, two different sets of folks. There are of course homeless people without mental illness, and that number has increased with the economic downturn and housing crisis. Still the vast majority of our homeless are mentally or physically ill and poorly taken care of. Ted as for your rich people will get their kid a shrink, that just demonstrates your poor grasp of mental illness, that is like saying a kid with cancer will be okay because his rich dad will send him to a cancer doctor, better odds for the rich guy for sure, but certainly not a magic cure all.

  6. “if you have access to the internet I don’t consider you poor”

    Really, “patron”? Would that include the folks using the computers at the library?

    In this country if you are poor and don’t have internet access you are effectively crippled as far as finding a job or a place to live goes.

  7. The problem is that distribution of wealth is not the problem, our treatment of the mentally ill and sick is the problem. Most people that end up poor are those with mental health issues, or whom are sick, and if you have access to the internet I don’t consider you poor.

  8. Right, Alex… reminds me of some old song lyrics.

    “Tax the rich, feed the poor… ’til there are no… rich no more.”

    Never made much sense to me. Tax the rich until everyone has food, clothing, shelter, health care… after that if the rich are still rich, who cares?

  9. Ted,

    I’m gonna call you on this one. “A nation that allows its richest citizen to earn ten times more than its poorest would still be horribly unfair.”

    I don’t care that there are people who make 10 times, 100 times, even 1,000 times what I do. What I mind is that I (or anyone else for that matter), come to work, put in a solid 40 hours (or more!), and end up scratching and scrapping. If I (or anyone else) work (or am looking for a job), I shouldn’t have to go around begging like a leper for things like medical care. I should not be made to feel like a criminal if I apply for food stamps because I cannot make enough to live on.

    Look at Stephen King. He writes some pretty good books. By his own admission, he isn’t Shakespeare, but for the most part, his books are entertaining diversions. Does he deserve all the money he’s made? Absolutely. Does some poor sunovabitch who cleans toilets at the subway station deserve to make enough to live on without constantly hovering at suicidal depression levels of penury? Yes to that, too. I don’t mind the wild excess; I mind that some people are starving to death and instead of handing them some groceries, we have leaders who lecture them.

    And … off my soapbox.

  10. Ted Rall: “we shouldn’t be looking to corporate machine politicians like Obama for answers.”

    “Obama is not your ally who’s been co-opted; he’s your enemy who is co-opting you.”
    –John Caruso (“State of the Illusion” – Jan 25, 2012 – A Tiny Revolution)

  11. American’s are too isolated and selfish for any true reform to ever occur. American’s all want what would help improve their lives, not what would help improve our lives, or if you prefer, everyone’s situation. Why do talks about improving the lives of the poor inevitably devolve into ways to hurt the wealthy? Why do the wealthy talk about the poor getting welfare as if the poor are stealing their money? Don’t even get me started on the absurdity of the people that consider themselves middle class, those people want the rich to suffer, the poor to suffer, and everybody that makes one dollar less or one dollar more than them is rich or poor.

  12. I’m not all that concerned with putting a cap on what people can earn. Even if it came to pass, it would be such a high cap that it wouldn’t matter. The real problem is not solved by putting a cap on earnings. That’s because the real problem is what the uber-wealthy spend their money on: co-opting Democracy. I don’t give a shit if some Wall St. asshole wants to buy a private jet. What I do care about is that same Wall Street asshole can spend his money to control domestic and foreign policy, all from an unelected and permanent seat. That’s what needs to stop, and until then we are all just bystanders. As everyone knows though, that problem is only getting worse (Citizens United).

    Ted makes good points. The real issue is, what kind of country do you want? I hate to quote Rummy, but at some point you go with the economy you have, not the economy you wish you had. It appears America has made it’s choice, and it’s going to go one of three ways.

    1. A healthy economy.
    2. A permanent welfare state.
    3. Social unrest.

    We are clearly heading toward somewhere in between 2 and 3.

  13. Michael,

    “Reagan was elected when the rich wanted to take their country back from the proletariat, and he made a start by crushing the air traffic controllers union.”

    Reagan crushed the ATC’s union, yes, but he was only successful because other unions did not support the ATC’s strike. If Reagan’s strike-busting had been met with an equally vigorous response, Reagan would have lost. But once you start acting like a lackey, it gets easier and easier to keep acting like a lackey.

  14. I’ve always wondered what would happen if, instead of sending in a tax return and check every year, people were sent itemized bills instead:

    “Hello. IRS? I’ve got my bill here. I’m on the ‘My Fair Share’ Plan. HOW MUCH for a war in Iraq? May I speak to your supervisor? … Yes, I didn’t want the war. I never authorized it. No, I don’t want to transfer the money from Social Security or Medicaid. No, I don’t want to transfer the money from the schools budget. I never wanted the war; I’m not going to pay for it. Look, I’m not interested in an argument over this: Look at the NASA item. I’m paying something like $15 a year for that. At least I can feel good about Americans walking on the moon and the Voyager spacecraft.”

  15. “A nation that allows its richest citizen to earn ten times more than its poorest would still be horribly unfair.”

    300x is unfair… 100x would be unfair… but 10x? Do you think everyone should make exactly the same? Would the unemployment check be the same too? Why would anybody work?

  16. FDR was elected when the rich saw what Stalin was doing to the bourgeoisie in the USSR. They were terrified that a similar revolution could take place in the US if they didn’t mollify the proletariat with titbits. (NB: Keynes proved that the economy runs much smoother for everyone with a progressive income tax, while what we have now is highly regressive, since all right-wing economists agree that Keynes’ tautologies are false, which is difficult for a tautology, but that’s what all right-wing economists claim).

    Reagan was elected when the rich wanted to take their country back from the proletariat, and he made a start by crushing the air traffic controllers union. But Reagan still had a declining USSR as a threat in the background, so he didn’t go far enough.

    Bush, Sr. saw the final collapse of the USSR.

    Clinton then abolished the FDR financial regulations and AFDC. After TANF runs out, a single mother can only name the imputed father(s) who are responsible for the full amount she was awarded by the judge. If the father(s) earn less than what the judge awards her, they must be incarcerated in a Workhouse where they must work at hard labour, and the single mother gets whatever they can earn and no more (NB: Congresspersons are exempt, and so, presumable, are Presidents and Federal judges; many have ex-wives awarded a large fraction of their salary, but, for members of Congress, child support is strictly optional–they can neither have their wages garnished nor can they be incarcerated, so many have massive support debts, but as Congresspersons, no legal obligation to pay such debts, unlike the rest of us who will be jailed if we earn less than the awarded amount, and will have 100% garnished if we earn more).

    And, under Bush, Jr., we saw predatory lending that got tens of millions of unsophisticated families out of their homes, transferring those assets to the banks, and from thence to the wealthy.

    Obama announced that anyone who lost a home to a predatory lender, and who then complains, can be prosecuted for fraud, and a few have been selected as examples. So few dare complain.

    And Obama has shown that, if he sees a threat, he is willing to use the full force of the military to eliminate it, and the NYT will cheer loudly.

    When Ron Paul said he would never send the US military to fight a nation that never attacked the US, he was booed by the entire audience.

    I wish I could believe that Rall’s revolution were possible, but I see only two chances for its success: slim and none.

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