Delicious
Digg
StumbleUpon
Newsvine
Facebook
Google
Yahoo
TechnoratiMany American citizens are concerned about the growing disparities in wealth and income. Even middle-class Americans feel extraordinarily insecure. They are a doctor's visit or a pink slip away from descending into the abyss of poverty. Economic insecurity fosters and in turn is fostered by other social and psychological anxieties. Immigrants and new ideas can become more fearful in a nation that has always had a rather robust sense of its own superiority and more than its fair share of religious and constitutional fundamentalisms.
Economic insecurity, especially middle-class woes, is soil on which both xenophobic fascist movements and more egalitarian progressive or social democratic politics might build. But for the latter to take root, it must deal not only with racism and suspicion of immigrants but also with another deeply rooted concern, hostility to taxes.
When progressives of any stripe talk about vast disparities and demand fair taxes on the wealthy, they are routinely accused of class warfare by their conservative opponents. And such attacks, though far from universally accepted, resonate with a core of even middle- and working-class voters.
The case for tax reform should begin by showing how our current tax system isn't fair. And the unfairness lies not in overtaxing the rich.
When all levels of government are considered, poor and lower middle-class citizens often pay a higher percentage of their income in taxes than do the wealthy. Once Social Security tax (the employer's part really comes out of the paycheck of the worker) and state and local sales and income taxes plus assorted fees are considered, even lower middle-class workers are paying a startling percentage of their incomes to government.
Warren Buffet has commented on the inequity of his secretary's paying a larger percentage of her income in taxes than he did. Buffet's admission should inspire one rallying cry for progressives. End the unfair tax burden on the working class. In addition, all forms of income should be treated the same. A lawyer's or a plumber's billable hours shouldn't be taxed any higher than the capital gains an investor makes on the sale of stocks or real estate.
To those who argue that such a reform would end the "incentive" to invest in new businesses, progressives need only cite Ronald Reagan. In 1984 Reagan and then-U.S. Sen. Bill Bradley agreed on one of the best reforms of his presidency: tax law that treated all forms of income equally. Government should not be picking winners or manipulating the market. Lawyers and plumbers are as entitled to the incentive to work as plutocrats are entitled to incentives to invest.
Nonetheless, although tax policy under President George W. Bush has been one element in escalating inequality it is far less significant than many progressives acknowledge. Americans generally believe that if I earned it I should be able to keep it. Progressives should respond with a simple and demonstrable claim. Much of the great wealth accumulated during the last two decades is not reminiscent of the Smith Barney commercial: "They make money the old fashioned way, they earn it." Far from being an agent taking money from the productive and innovative and handing it to slackers, government has increasingly granted favors and special privileges to firms and individuals who have either established a market toehold or who are politically well connected.
Consider what would happen if our most popular national sport, professional football, were to implement a draft system in which there was no salary cap and the winner of the Super Bowl received the first pick in the college player draft every year. Can you spell dynasty.
Our modern political economy is built on this perverse model. Congress talks about the scandal of earmarks, but the entire military budget is filled with no bid contracts and deals that vastly outnumber earmarks. The special supplementary funding for the Iraq occupation includes billions in other contracts for favored security contractors.
The Medicare prescription program might be the poster child for the new economy. Government is not allowed to negotiate a low price with the drug firms because such a practice would supposedly violate the principles of a free market. But government opens its piggy bank to subsidize whatever price the corporate drug dealers can extort from multiple consumers. It is almost a license to print money - paid for by the taxpayers.
My late senior colleague at The Progressive, Erwin Knoll, used to argue that local TV stations, with their long-term monopoly control of a spot on the finite electromagnetic spectrum enjoyed virtual licenses to print money. Today, large media conglomerates have been rewarded with free space for HD transmission. Further media consolidation has severely constrained the range of views and ratcheted up their economic power. Not surprisingly, these same media seldom tell stories of the real routes to modern wealth in America. They make money by another told fashioned way, extortion and connections.
Progressives need to talk not only about taxes but also about leveling the playing field.
John Buell is a political economist who lives in Southwest Harbor. Readers may contact him at jbuell@acadia.net.
© 2008 Bangor Daily News
18 Comments so far
Show Alljclientelle - Why penalize folks for making money? It makes more sense to charge for consumption. When you make money you are taking an IOU for some future chance to trade the cash (with no intrinsic value) for goods or services. Why not just tax this consumption with a federal sales tax? This policy will need to come along with a federal spending policy that adjusts government services to meet govermnment income. When personal consumption goes down, so should government spending. Yes - I know this is wishfull thinking.
When I saw the title of the article my reaction was
DUH.
Our income taxes are taken out up front, so we must pay. We pay into social security on every penny we earn, while high earners get a pass after they earn a certain amount.
At one time I realized that if my children were racehorses, I could deduct all their food, housing and medical bills from my taxes. Where was my magic wand? Also, if the family were turned into a corporation dedicated to "growing" future Americans, we could show a loss (loans for nursery, college etc.) every year and pay no taxes.
Every time they pass a tax break either it doesn't apply to us or our local taxes go up and wipe out any savings.
I still believe in progressive taxation - where a certain base level per person is shielded from tax. Income above that is taxed at higher rates. That was the original idea, but the per person exemption did not keep pace with inflation.
How about a flat federal sales tax? Tax based on consumption rather than earning. If you consume, then you pay.
Even God didn't require more then 10% under the old Judaic laws governing the Jews. How perverse is our system that we let the wealthy pay a less amount because tax codes favor the rich. I have advocated all along a flat tax. But who the hell is listening.
@johnycanuck
The tax rate you propose is a good one...EVERYONE pays a flat 10% except those with incomes of less than $10K for an individual. Your math is wrong, tho. Make $100K and pay $10K.
"Our modern political economy is built on this perverse model."
How true!
What could be more perverse and "unconstitutional" than our Secretary of the Treasury, Henry Paulson, asking Congress to "force" average taxpaying citizens to bail-out the super-wealthy and greedy speculators on Wall Street?
Where is it written in the United States Constitution that Congress has the "authority" to "force" average citizens to bail-out wealthy Wall Street speculators after they have destroyed our economy with their f-king greed?
Is Henry Paulson trying to convince Congress that these greedy perverts who prospered on taxpayer's personal money deposits shouldn't be held responsible for the risks they have taken to make themselves wealthy?
What is more perverse than a win-win situation for the super-wealthy while 28 million jobless and poor Americans are standing in line waiting for food stamps or experiencing a home foreclosure?
Has anyone in Congress every considered that these frauds and perpretrators could survive very comfortably in this world if they had to REDUCE their returns expectations?
Did Congress "force" them to risk our money or theirs in fraudulent investment vehicles? NO? Then why are "we the taxpayers" being forced to pay for their egregious mistakes?
Bottom line: The system is perverse and could get worse, believe it or not!
A simple solution , but no one even will look at it
A: eliminate all tax "breaks"
B: exemption for those below the official poverty line
C: tax rate of ..oh say 10% for every one and big business, small business, just as an example.
Some say this is unfair.
please tell me how it is unfair..
you earn $10 ya pay 1$
you earn 100,000 ya pay 1000$
I always hear, middle class this, middle class that--just WHERE is the line of demarcation when one is STRUGGLING to makes ends meet? Now as to immigration (as the author mentioned), what is the truth? IS the enormous influx of undocumented workers causing wages to fall or not? IS it taxing health care and educational resources or NOT? What is the TRUTH of the matter? If the answer is yes to these difficult questions, then the concerns are real and practical, and does not mean those concerned are necessarily xenophobic.
I think such labels keep us from addressing real problems honestly, and distract us from finding workable solutions. Those who are poor and already in desperation need help the most and that's where we should start. If we help those in need, perhaps those close to it won't feel so anxious and insecure.
And one way or another, if the present growth rate is maintained, immigration will become a major issue whether we like it or not. SOMEONE will have to pay for their housing, health care, etc. As a nation, we'd better quit throwing stones at each other and confront this issue, or it will confront us in ways we would not have chosen.
If you support amnesty for 'illegals,' then you must refund the fees and/or end the processing for legal immigrants, and be willing to pay MUCH more in taxes for their support. Perhaps, we can create a 'sponsorship' program, where undocumented workers must find a sponsor to become naturalized. The sponsor is responsible for assisting in the support of such a family or individual until he/she/they gain citizenship. The most logical sponsor would be the business that employs them, but it can be anyone.
This would show how many are really pro-immigration, and how many are just paying it lip service to it.
jerrys: quit paying taxes
BINGO!!! But we all know how sheep huddle together to be safe, don't we?
Greg R,
You probably know more about this than I do, especially for your own situation and plan. But I guess I would question why there was a 15% rate at the "small" corporate profit level for you to take advantage of over some other form of doing business.
..."a quote I heard from Norm Solomon: "the truly well-trained dog no longer requires the whip"."
That's a cruel way to train a dog! Where's the humane society....
I think you are referring to Orwell's quote:
"Circus dogs jump when the trainer cracks his whip, but the really
well-trained dog is the one that turns his somersault when there is no whip."
Who doesn't agree that the tax system, along with the rest of the system has been "unfair" to the working class? There is something else seriously wrong that's going on. Everytime you hear or read something similar to this the situation is always described as something that's "concerning, wrong, or unfair". It's like trying describe a gruesome bloody aftermath of a car bomb in Baghdad as "a little disturbing".
What our government and corpirate America is doing to the working class is: "disgusting, frightening, fascists, treasonous, sickening, criminal, insane, ......" It's pretty obvious many of the journalists and talking heads on tv are trying to describe something they know very little about. Sometimes a sledge hammer is needed drive the point home.
Daniel David-Until recently I was the president of a small/medium sized family farm corporation. Our plan was to have the corporation make a small profit (to take advantage of the 15% tax rate), while corporate officers took bonuses on the remaining profit. So in our case, raising taxes on corporations would not have made any difference to us. Personally I think any entity, whether individual or corporate, should pay reasonable taxes on higher incomes. End income taxes on incomes of less than $100,000, and increase energy taxes to make up the difference. We desparately need tax policy to stop the growing rich/poor divide and to decrease our use of carbon-emitting fuels.
Get rid of the IRS. They are nothing but a criminal thug rogue agency.
Corporations make money the old fashioned way:
They STEAL it!
quit paying taxes
Everyone knows these things, but there is no widespread outrage. It's like we're all afraid of losing what little security we have if we speak up against the collusion of government and big money. It's curious for a supposedly-free people to behave this way. Reminds me of a quote I heard from Norm Solomon: "the truly well-trained dog no longer requires the whip".
I can't prove it, but I have a feeling that we have committed grave error by creating a lower rate for capital gains than that for all other earned income. I also think that we should perhaps end the double taxation of corporate income by RAISING the corporate tax rate to AT LEAST 50%-60% (yes, for all those little S-Corps too) and lowering the tax on dividends to -0-. I'm not talking about net tax cuts here, I'm talking about taxing corporate income once--but very highly.
A disturbing trend we have in our country is family net worth flowing out of individuals' hands and into corporate hands--for everything from food, to fuel, to health care, to education, to housing. When corporate profits are taxed very highly, there is less incentive to gouge customers and less incentive to lay off workers. Make a fast buck off the people? Okay, but you don't get to keep more than maybe 40% of it.