Aug 28, 2021
In the summer of 2014, in the wake of the Occupy movement that targeted concentrated wealth, tech entrepreneur Nick Hanauer issued a warning to his fellow billionaires: "The pitchforks are coming." At the time, Hanauer noted, the super-rich such as himself were rapidly growing their bank accounts while poverty swelled and the social safety net continued to be shredded. And, he concluded, "No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn't eventually come out."
The rich have proven that, even in the face of mass death, their only priority is to increase profits at any expense.
Five years earlier, then-President Barack Obama had made a similar point, infamously telling a group of powerful bankers who had helped cause the 2008 financial collapse, "My administration is the only thing between you and the pitchforks." Obama did indeed guard the economic elite from facing any accountability for their behavior, as no major banking figures faced jail time and a series of government bailouts kept the private financialized economic system intact.
But by the mid 2010s, as inequality soared, public ire only grew toward the wealthy. A 2014 Gallup poll showed that two thirds of Americans were dissatisfied with the level of income distribution, at a time when the share of income going to the wealthiest one percent of Americans had doubled from less than 10 percent in 1980 to nearly 20 percent. Today, that gap is only continuing to grow. And a new report, which shows just how much U.S. billionaires have profited off of the Covid-19 pandemic, should give plenty of new reasons for Hanauer and his super-rich cohort to fear the pitchforks.
A pandemic gold mine
As fall 2021 approaches, the pandemic is again spreading like wildfire across the United States, due to a combination of the highly-transmissible Delta variant, resistance to vaccines and a rise in breakthrough infections. Covid-19 cases are growing in nearly every state in the nation, and the South is being hit the hardest, with Florida seeing more deaths than at the height of the pandemic last year. Cases among children have also surged to one of the highest rates during the crisis. Amid this precipitous rise in infections, the Centers for Disease Control and Prevention (CDC) and many states have issued new more stringent guidelines on behavior, just as schools are set to reopen nationwide. And more virulent strains of the disease are likely on the way.
Already, over 630,000 Americans have died from the novel coronavirus, and more than 38 million have contracted it. Vaccines have helped to lower levels of deaths and hospitalization since the worst of the pandemic, but both are back on the rise in the United States. And throughout the crisis, the U.S. economy has been battered, contracting at a record rate of 19.2 percent from the fourth quarter of 2019 through the second quarter of 2020--making this the worst recession ever. Tens of millions of Americans lost their jobs. And the pain from this downturn has been felt most acutely by those in lower-income brackets--especially African Americans and other communities of color.
But while the pandemic has wreaked economic chaos on working people, the super-rich have done phenomenally well. A report out this week from Americans for Tax Fairness and the Institute for Policy Studies Program on Inequality spells it out: U.S. billionaires became 62 percent richer during the pandemic, growing their wealth by a cool $1.8 trillion. As their fortunes skyrocketed by nearly two thirds, it's estimated that 25 of the top billionaires paid, on average, just 3.4 percent of their wealth-growth in federal income taxes, far lower than the rate paid by most Americans. And several of these members of the tycoon class, such as Amazon CEO Jeff Bezos and Tesla CEO Elon Musk, paid essentially zero in federal income tax. Musk, for his part, increased his wealth by $150 billion during the pandemic--a 600 percent increase.
Lacking an effective taxation regime, the report illustrates, the super rich have made a killing off of the Covid crisis.
Realigning public policy
There's nothing natural about this lopsided dynamic, it's the result of decades of efforts carried out by the wealthiest Americans--and their allies in the corporate sector and the U.S. Right--to slash taxes on rich. Between 1980 and 2018, taxes paid by billionaires fell by 79 percent, at the same time that corporate taxes were dramatically cut. This included former President Trump's $1.9 trillion Tax Cuts and Jobs Act, signed in 2017, which sent over 80 percent of gains to the top one percent.
But just as public policy has been used to pad the pockets of the economic elite, it can also be a tool for reducing inequality and helping the working class. The past year and half was evidence of this, as programs to provide Americans cash and fortify the social safety net helped massively reduce poverty. Despite the havoc of the pandemic, 2021 is actually on track to see the lowest U.S. poverty rate on record. This stunning development is the result of direct payments, increases in food stamps, expanded unemployment insurance, the monthly child tax credit to parents, and other stimulus programs that have been passed in the midst of the Covid-19 crisis.
Of course, while the poorest Americans are doing slightly better this year, they still earn just a tiny fraction of what the rich take in, and rampant inequality still defines the U.S. economy. It's clear that the levels of poverty typical in the United States are a choice decided by policymakers, and could be effectively eliminated, if there's political will to do so. The same is true for inequality, and the current proposals being pushed by President Biden and Democrats in Congress would start to close the yawning gaps in income and wealth in America.
The blueprint of the budget reconciliation bill, authored by Senate Budget Committee Chair Bernie Sanders (I-Vt.) and approved by the U.S. House this week, would make massive investments in the working class and go a long way toward shifting resources away from the rich and toward the poor. Among many redistributive provisions, the legislation would make healthcare, childcare and eldercare more affordable; expand Medicare to cover dental, hearing and vision; make historic investments in clean energy and affordable housing; extend the expanded child tax credit; and provide 12 weeks of paid family and medical leave. And it would be paid for by raising taxes on the wealthy and corporations.
Making the rich pay
These tax policies are critical to peeling away at the extreme wealth made by billionaires during the pandemic. The budget plan would close loopholes that allow the rich to avoid paying taxes on investment gains and require millionaires to pay a top tax rate on the sale of stocks and other assets that's the same as the top rate workers pay on wages. The bill would also crack down on tax evasion by the rich, raise the corporate tax rate from 21 percent to 28 percent and restore the top individual tax rate to 39.6 percent. Plus, it would end tax avoidance by large business owners and curb offshore corporate tax dodging. In total, the policies would collect about $2 trillion from the wealthy over the next 10 years, while putting those funds into programs that make life better for most Americans.
Which is why powerful forces like the U.S. Chamber of Commerce, corporate America, the pro-business lobby and the entire Republican Party are all aligned against these reforms. But rather than compromise on these plans in the face of such opposition, Democrats in Congress can--and should--go much further.
Sen. Sanders has introduced a plan to target dynastic wealth by restoring top marginal tax rates on inheritances to 77 percent for estates over $1 billion, roughly the rate in the 1970s, which would help redistribute the fortunes of the super-rich like Bezos and Musk once they leave this earthly plane. Rep. Alexandria Ocasio-Cortez (D-N.Y.) has proposed raising the top marginal tax rate up to 70 percent, in part to help pay for the Green New Deal and climate mitigation efforts. And a plan from Sen. Elizabeth Warren (D-Mass.) would tax households worth over $50 million and up to $1 billion at a rate of 2 percent, and anything over that at 3 percent, which would pay out an estimated combined total of $1.4 trillion over 10 years. To truly tackle endemic inequality, we should enact them all.
Embracing such a progressive tax system would also help revive American democracy, using economic policy to ward off an oligarchic system that has for decades granted the well-heeled the power to make decisions that affect the vast majority. By stemming inequality, more Americans will have the ability to access the mechanisms of government, and can use this influence to demand a different economic order--one that puts the interests of working people over the extreme opulence of the billionaire class.
The pandemic has revealed deep fissures at the heart of the U.S. economy, and the rich have proven that, even in the face of mass death, their only priority is to increase profits at any expense. Yet, for the first time in 40 years, policy solutions are on the table that would begin to build a more equitable economic foundation. Financial elites can either get on board with this new redistributive program, or, as Hanauer warned, they should expect the pitchforks to come out.
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