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How to Make Inequality Obsolete
Only a couple of centuries ago, owning another person — slavery, that is — was considered a normal thing to do.
But, starting in the late 18th century, slavery was abolished throughout Europe and the Americas (in 1793 in Upper Canada) after the rise of an abolition movement based on Enlightenment ideas about human rights and freedoms.
Once considered acceptable, slavery came to be seen as repugnant. As U.S. political scientist John Mueller puts it: “Slavery became controversial, then peculiar and then obsolete.”
The power of social movements to sweep away ideas solidly embraced by the established order seems to be intuitively grasped by the Occupy Wall Street crowd, even if it’s lost on commentators who dismiss the movement as leaderless, unfocused and short on perfect sound bites.
Already, the occupiers have made an economic system that has dominated for the past 30 years — based on unbridled greed at the top and indifference to the well-being of the bottom 99 per cent — suddenly the focus of attention.
Last week, Brian Topp, a leading NDP leadership contender, actually raised out loud the idea of taxing the rich — a cause the NDP has backed off in recent years as business and conservative commentators have dominated public discourse with an ideology insisting that we must provide ever bigger “incentives” for those at the top.
Finance Minister Jim Flaherty was quick to try to shut down Topp’s “dreamy ideas,” arguing that taxing the rich “doesn’t produce the volume of revenue that you need in order to run a country.”
Perhaps not enough to run a whole country, but it could sure make a hefty contribution.
Adding a new marginal tax rate of 60 per cent to those earning over $500,000 a year, and a 70 per cent rate to those earning over $2.5 million a year — rates that would simply restore the progressivity that existed during Canada’s booming postwar decades — would raise almost $8 billion a year, according to Osgoode Hall tax professor Neil Brooks.
Yet this $8 billion interests Flaherty so little that he can’t be bothered to collect it.
Compare this to Flaherty’s relentless pursuit of spending cuts, no matter how tiny the saving. He’s refused to back down for instance on closing the St. John’s maritime rescue centre — which answers hundreds of distress calls annually — even though its closure will save less than $56 million, a pittance compared to $8 billion.
Flaherty has assured us that, while Americans have legitimate concerns about inequality, Canada has a “very progressive tax system.”
But it’s Flaherty who’s got the dreamy ideas here. Our tax system as a whole — including sales, excise and property taxes as well as income taxes — isn’t actually progressive. A study by Marc Lee of the Canadian Centre for Policy Alternatives showed that when all taxes are included, the poorest 10 per cent of Canadians — those earning less than $13,500 a year — paid fully 30.7 per cent of their tiny incomes in tax, while the top 1 per cent — with incomes above $300,000 — had a slightly lighter burden, paying 30.5 per cent of their incomes in tax.
While Flaherty seems determined to shelter the rich from progressive taxation, there was no such catering to them on the part of Henry Simons, a founder of the conservative Chicago School of Economics.
Simons considered excessive inequality “unlovely” and supported progressive taxation, arguing that capitalism would never survive in a democracy if the general public didn’t benefit from it.
Even Adam Smith, considered the father of capitalism, favoured higher taxes on the rich, and seemed to have people like Flaherty in mind when he warned that the “disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect persons of poor and mean condition . . . is . . . the great and most universal cause of the corruption of our moral sentiments.”
The Occupy Wall Street movement has made unbridled greed — so distasteful to Adam Smith and Henry Simons — suddenly controversial.
No wonder the established order is rattled. A system it has benefited from handsomely could soon be considered peculiar, and then — dare we dream? — obsolete.