Some of the more abusive responses to my recent blog items about fairness in the current tax debate have accused me of being hostile to the production and enjoyment of private wealth and cavalier about the way our government wastes our tax money -- or else spends it on the “undeserving” masses who are free loaders and do not contribute to our economy or our tax coffers. Some of these angry critics sound likes migrants from Fox News.
As the old saying goes (first coined by the great Senator Patrick Moynihan), you are entitled to your own opinions but not to your own facts, and some of the ideological diatribes that are circulating these days need to be better grounded in the facts.
Equally important, judging by the comments I have received, we need to get a better fix on the concept of fairness. Fairness is (most likely) not whatever you say it is. It means taking into account and trying to strike a balance among the different opinions, interests, and needs of various “stakeholders”. Only in a dictatorship does any one person (or one side) have a monopoly on defining what’s fair. Fairness in a democracy very often has two (or more) sides. That’s why Republicans and Democrats are so often at odds, and why a society that works well for everyone requires us to make compromises.
So let’s start with some of the basic facts here. For the past 40 years in this country, the rich have been getting far, far richer and the middle class and the poor have been getting much, much poorer. Today the top 1 percent of our people take home one-quarter of our total national income, while the top 10 percent take home almost half (49 percent). The bottom 90 percent get to share the other half! Our top CEOs got an average raise of 23 percent last year (to $10.8 million apiece), on top of 12 percent the year before. They now average more than 300 times the income of their workers, compared with some 25 times as much in 1960. And the CEO of Walmart, who pays the minimum wage to his new hires, got 900 times as much income as his average worker. (Our CEOs also enjoy a much lower marginal tax rate today, at about 35 percent versus 70 percent in 1960.)
Meanwhile, wages for the working poor have dropped by 27 percent in the past 40 years, while (you may have noticed) prices have more than doubled. Wages edged up only imperceptibly last year. We now have 46 million people living in poverty, the highest number in 50 years. In 2008, 47.3 percent of our earners had less than $25,000 in income, including 25 million who are unemployed (many for a year or more). As a result, we have the highest income inequality among all the 30 advanced OECD democracies, except for Mexico and Turkey!
The negative consequences of this rising income inequality and increased poverty are well understood. It affects infant and child nutrition and health, school performance, crime and incarceration statistics, drug problems, teenage pregnancies, mental health, and even life expectancy. (The rich live some 4.5 years longer than the poor, on average.) More egalitarian societies, as British researchers Gerald Wilkinson and Kate Pickett show in their book, The Spirit Level, do much better on all of these and many other statistics.
To make matters worse, our fragile economy is being supported in part by huge Federal deficits that were primarily caused by (a) the Bush-era tax cuts, (b) two costly, unfunded wars, (c) the unfunded Medicare drug program enacted in the Bush years, and (d) a sharp drop in tax revenues due to the financial meltdown and the recession. The Obama emergency “stimulus” package (40 percent in tax cuts) only added to the deficit.
The political argument about what to do about these problems, and how to fix our anemic economy, involves conflicting visions of fairness, as well as a dispute about the underlying causes and what will work. Many (most?) Republicans see government as a chief source of the problem – too many regulations, high taxes that hamper the “job creators” (i.e., business owners), coupled with wasteful government spending of all that borrowed money. Their answer is to cut taxes, cut regulations, and drastically cut government spending. True, it would mean that many more government workers would lose their jobs than the 500,000 so far in this recession. And it would also mean deep cuts in government safety net programs – unemployment benefits, Medicaid, food stamps, child nutrition, heating oil subsidies, even FEMA. But presumably then everyone would be motivated to go out and get a job and become taxpayers (as if they don’t have any incentives now), while our “free market” will be free to create many new jobs. Besides, some Republicans claim, taxes are fundamentally unfair; they take money from those who earned it and who deserve to keep it.
The Democratic response begins, perhaps, with some comments the other day by Elizabeth Warren, a Harvard Law professor, a consumer advocate (that includes most of us) and now a candidate for the U.S. Senate in Massachusetts:
"There is nobody in this country who got rich on his own. Nobody. You built a factory out there—good for you.” [Of course, somebody else had the talent and skills to design it, and somebody else had the skills and materials to build it, and a great many somebodies invented all the technologies you employ there.]… “But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers that the rest of us paid to educate...Part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along."
Indeed, like every other modern nation, our society is fundamentally a “collective survival enterprise,” a vast interdependent system of reciprocities and collective undertakings to meet our fourteen distinct categories of biological survival and reproductive needs. These are imperatives that we all share more or less equally. So the first “pillar” in the temple of fairness consists of a mutual obligation to ensure that all of our basic needs are provided for, including especially those among us who are the victims of various circumstances beyond their control. If we abandon this obligation we betray our heritage and we put our society in grave peril.
Beyond providing for all of our basic needs, the extensive, multidisciplinary research associated with the emergent science of human nature has identified two other important fairness principles – two other pillars – that are required to support the temple of a fair society. One is the principle of “equity”, or rewards for merit (or punishments, as appropriate). Here the Republican arguments have resonance, so long as those rewards are truly earned (Steve Jobs versus Bernie Madoff). And most Democrats would strongly agree. Rewards for merit are the incentives that fuel our ambitions, our exertions and, ultimately, the contributions we make to our society.
The third pillar of fairness – reciprocity -- is also a deeply ingrained element of human nature and a well-documented aspect of every human society – indeed, of most human relationships. It means compensation for a service, paying back a favor, doing your fair share and, in a broader sense, respecting the interests and rights of others and adhering to the Golden Rule (“Do unto others…”). And, of course, paying a fair share of the tax burden in return for the benefits you and your family and children receive from society. Reciprocity is what Elizabeth Warren was alluding to in her remarks.
All three of these basic pillars of fairness are necessary to support a fair society, though Republicans and Democrats will give different weights to each of them. So a fair solution to our current political debate will require both sides to make compromises.
Friday, September 30, 2011
Wednesday, September 21, 2011
What if the Tea Party Wins?
This appeared in the daily "Progress Report" for the Center for American Progress. It is a good brief summary of what the Tea Party stands for.
Sep 19, 2011 | By Ian Millhiser
This weekend, the Constitution celebrated its 224th birthday. Yet, despite the fact that our founding document has served America well for more than two centuries, the Tea Party now wants to cast its principles aside and replace them with a radical anti-government manifesto. Despite the fact that the Constitution has been amended many times to make America more democratic and more responsive to We the People, the Tea Party believes that we have an authoritarian constitution that prohibits everything they disdain and requires nearly everything that they support.
THE END OF SOCIAL SECURITY AND MEDICARE: Last April, the House GOP voted almost unanimously to phase out Medicare and shift crippling medical costs onto seniors and their families. Yet this slow death of Medicare appears downright moderate compared to the Tea Party agenda of simply declaring our entire safety net for America’s seniors unconstitutional. Texas Gov. Rick Perry (R) claims Medicare and Social Security “contradict the principles of limited, constitutional government that our founders established to protect us.” Sen. Mike Lee (R-UT) mocked President Franklin Delano Roosevelt for calling upon the federal government to provide “a decent retirement plan” and “health care” because “the Constitution doesn’t give Congress any of those powers.” Rep. Bob Goodlatte (R-VA), who engineered the House of Representatives’ dramatic reading of the Constitution earlier this year, claimed that Medicare and Social Security are “not in the Constitution” and are only allowed to exist because “the courts have stretched the Constitution to say it’s in the general welfare clause.” And Sen. Tom Coburn (R-OK) believes that Medicare is “a family responsibility, not a government responsibility.”
THE WAR ON WORKERS: The Tea Party’s vision of the Constitution wouldn’t just leave America’s seniors out in the cold, it would force American workers to compete with their adolescent children for sub-minimum wage jobs. Lee believes that we should return to a misguided era when federal child labor laws were considered unconstitutional because the Constitution “was designed to be a little bit harsh.” Perry believes all “national labor laws” including child labor laws, the minimum wage, overtime laws, and laws protecting workers’ right to organize, are unconstitutional. And Justice Clarence Thomas embraces a vision of the Constitution that would eliminate all these laws and take out workplace discrimination laws in the process.
JUST THE TIP OF THE ICEBERG: Sadly, this wholesale assault on workers and the elderly is merely one small part of the Tea Party’s vision of the Constitution. It’s difficult to count how many laws would simply cease to exist if the Tea Party wins its fight to re-imagine our founding document, but a recent Center for American Progress white paper lists not just Social Security, Medicare, and basic workplace protections, but also all federal health care, education and antipoverty programs, federal disaster relief and food safety programs, and most national civil rights laws. In other words, the Tea Party’s agenda is nothing short of a wholesale repeal of the 20th Century, and a return to the era when families mortgaged their home to pay for their mother’s end-of-life care, higher education was a luxury reserved almost exclusively to the very rich, and rotten meat shipped to supermarkets nationwide without a national agency to inspect it.
Sep 19, 2011 | By Ian Millhiser
This weekend, the Constitution celebrated its 224th birthday. Yet, despite the fact that our founding document has served America well for more than two centuries, the Tea Party now wants to cast its principles aside and replace them with a radical anti-government manifesto. Despite the fact that the Constitution has been amended many times to make America more democratic and more responsive to We the People, the Tea Party believes that we have an authoritarian constitution that prohibits everything they disdain and requires nearly everything that they support.
THE END OF SOCIAL SECURITY AND MEDICARE: Last April, the House GOP voted almost unanimously to phase out Medicare and shift crippling medical costs onto seniors and their families. Yet this slow death of Medicare appears downright moderate compared to the Tea Party agenda of simply declaring our entire safety net for America’s seniors unconstitutional. Texas Gov. Rick Perry (R) claims Medicare and Social Security “contradict the principles of limited, constitutional government that our founders established to protect us.” Sen. Mike Lee (R-UT) mocked President Franklin Delano Roosevelt for calling upon the federal government to provide “a decent retirement plan” and “health care” because “the Constitution doesn’t give Congress any of those powers.” Rep. Bob Goodlatte (R-VA), who engineered the House of Representatives’ dramatic reading of the Constitution earlier this year, claimed that Medicare and Social Security are “not in the Constitution” and are only allowed to exist because “the courts have stretched the Constitution to say it’s in the general welfare clause.” And Sen. Tom Coburn (R-OK) believes that Medicare is “a family responsibility, not a government responsibility.”
THE WAR ON WORKERS: The Tea Party’s vision of the Constitution wouldn’t just leave America’s seniors out in the cold, it would force American workers to compete with their adolescent children for sub-minimum wage jobs. Lee believes that we should return to a misguided era when federal child labor laws were considered unconstitutional because the Constitution “was designed to be a little bit harsh.” Perry believes all “national labor laws” including child labor laws, the minimum wage, overtime laws, and laws protecting workers’ right to organize, are unconstitutional. And Justice Clarence Thomas embraces a vision of the Constitution that would eliminate all these laws and take out workplace discrimination laws in the process.
JUST THE TIP OF THE ICEBERG: Sadly, this wholesale assault on workers and the elderly is merely one small part of the Tea Party’s vision of the Constitution. It’s difficult to count how many laws would simply cease to exist if the Tea Party wins its fight to re-imagine our founding document, but a recent Center for American Progress white paper lists not just Social Security, Medicare, and basic workplace protections, but also all federal health care, education and antipoverty programs, federal disaster relief and food safety programs, and most national civil rights laws. In other words, the Tea Party’s agenda is nothing short of a wholesale repeal of the 20th Century, and a return to the era when families mortgaged their home to pay for their mother’s end-of-life care, higher education was a luxury reserved almost exclusively to the very rich, and rotten meat shipped to supermarkets nationwide without a national agency to inspect it.
Sunday, September 18, 2011
The New Barbarians
America began life as an offspring of the Enlightenment, a time when European nations aspired to emulate the ancient Greek (Athenian) model of a “civilized society” governed by reason versus passion, and the ideals of democracy, social justice and the rule of law. For the next two centuries, we were the model for these ideals in the rest of the world. Now we are faltering.
True, there have been many lapses in this country during the past 220 plus years, and there are still many flaws and imperfections. But we have also made great progress. We approved a Bill of Rights that remains a beacon to other nations; we abolished slavery; we liberated women from a condition of near-bondage and expanded voter suffrage; we enacted sweeping civil rights legislation, and we created a social safety net to provide economic support for the involuntarily unemployed, the needy, the sick, and the elderly. We have even institutionalized disaster relief in FEMA, though it has recently been overwhelmed with emergencies in the age of global climate change and extreme weather.
But now there seems to be an ominous black cloud of social anger and even hostility toward the victims in our society. First, there are the full-scale attacks on the safety net from the political right – from Presidential candidate and Texas Governor Rick Perry’s charge that Social Security is a “Ponzi scheme” to proposals to turn Medicare and Medicaid into a “block grants” to the states to use as they wish and, most disturbing, opposition to extending unemployment benefits during the worst jobs crisis since the Great Depression. At a time when poverty has soared in this country to 46 million people, the highest number in 50 years, this national disaster has aroused antagonism in some quarters rather than compassion, as though the victims are to blame for their condition.
But perhaps most disturbing are the signs of vengefulness toward convicted criminals (the now infamous “Texas death penalty cheer” for Governor Perry’s record number of executions -- including some cases where wrongful convictions were strongly suspected), and then last week the signs of antagonism toward those who are sick. When Rep. Ron Paul in the latest GOP TV debate suggested that we should let an uninsured sick person die rather than provide free treatment, he got cheered by the audience for saying so.
As various critics have pointed out, the overwhelming majority of those without health insurance (almost 50 million and climbing) cannot afford it. They’re not free riders. But this hardly matters to some people. These incidents, and many others of a similar nature, are in fact symptoms of a severe social distress, a consequence of the deep economic hardship and insecurity in our society. The ambient anger that is out there can undermine compassion and any sense of fairness.
It is reminiscent of the guillotine era in post-revolutionary France, when an impoverished and angry populace cheered at the public executions of the nobility (and their sympathizers). In a similar fashion, many Germans in the 1930s, when their defeated and humiliated country was suffering from a ruinous economic depression, lashed out at the Jews in their society. We all know how that ended.
A warning about where this kind of social pathology can lead was suggested in the classic – and at the time shocking – study of the Ik in Uganda by anthropologist Colin Turnbull in the 1970s. The Ik were traditional hunters and gatherers who had been forced by the Uganda government to change to a settled, farming way of life in a mountainous area with poor soil fertility and frequent droughts, and they were prohibited from going back to hunting and gathering in what had been declared a national park.
Under these severe political and ecological pressures, the Ik society unraveled and became a libertarian nightmare. Every man for himself meant just that – no help even for close neighbors or relatives, incessant conflicts, wife beatings, stealing of food, hostility toward those in need, rejection of the old or infirm, and even the abandonment of children. Turnbull concluded that “It is certainly difficult…to establish any rules of conduct that could be called social, the prime maxim of all Ik being that each man should do what he wants to do, [and] that he should do anything else only if he is forced to.”
The dark lesson of the Ik story is that a philosophy of every man for himself (and every woman) is a pathway to anarchy – not the benign utopian socialist or free market kind of society but an ugly Hobbesian “war of each against all.” This is surely not what any of us want.
True, there have been many lapses in this country during the past 220 plus years, and there are still many flaws and imperfections. But we have also made great progress. We approved a Bill of Rights that remains a beacon to other nations; we abolished slavery; we liberated women from a condition of near-bondage and expanded voter suffrage; we enacted sweeping civil rights legislation, and we created a social safety net to provide economic support for the involuntarily unemployed, the needy, the sick, and the elderly. We have even institutionalized disaster relief in FEMA, though it has recently been overwhelmed with emergencies in the age of global climate change and extreme weather.
But now there seems to be an ominous black cloud of social anger and even hostility toward the victims in our society. First, there are the full-scale attacks on the safety net from the political right – from Presidential candidate and Texas Governor Rick Perry’s charge that Social Security is a “Ponzi scheme” to proposals to turn Medicare and Medicaid into a “block grants” to the states to use as they wish and, most disturbing, opposition to extending unemployment benefits during the worst jobs crisis since the Great Depression. At a time when poverty has soared in this country to 46 million people, the highest number in 50 years, this national disaster has aroused antagonism in some quarters rather than compassion, as though the victims are to blame for their condition.
But perhaps most disturbing are the signs of vengefulness toward convicted criminals (the now infamous “Texas death penalty cheer” for Governor Perry’s record number of executions -- including some cases where wrongful convictions were strongly suspected), and then last week the signs of antagonism toward those who are sick. When Rep. Ron Paul in the latest GOP TV debate suggested that we should let an uninsured sick person die rather than provide free treatment, he got cheered by the audience for saying so.
As various critics have pointed out, the overwhelming majority of those without health insurance (almost 50 million and climbing) cannot afford it. They’re not free riders. But this hardly matters to some people. These incidents, and many others of a similar nature, are in fact symptoms of a severe social distress, a consequence of the deep economic hardship and insecurity in our society. The ambient anger that is out there can undermine compassion and any sense of fairness.
It is reminiscent of the guillotine era in post-revolutionary France, when an impoverished and angry populace cheered at the public executions of the nobility (and their sympathizers). In a similar fashion, many Germans in the 1930s, when their defeated and humiliated country was suffering from a ruinous economic depression, lashed out at the Jews in their society. We all know how that ended.
A warning about where this kind of social pathology can lead was suggested in the classic – and at the time shocking – study of the Ik in Uganda by anthropologist Colin Turnbull in the 1970s. The Ik were traditional hunters and gatherers who had been forced by the Uganda government to change to a settled, farming way of life in a mountainous area with poor soil fertility and frequent droughts, and they were prohibited from going back to hunting and gathering in what had been declared a national park.
Under these severe political and ecological pressures, the Ik society unraveled and became a libertarian nightmare. Every man for himself meant just that – no help even for close neighbors or relatives, incessant conflicts, wife beatings, stealing of food, hostility toward those in need, rejection of the old or infirm, and even the abandonment of children. Turnbull concluded that “It is certainly difficult…to establish any rules of conduct that could be called social, the prime maxim of all Ik being that each man should do what he wants to do, [and] that he should do anything else only if he is forced to.”
The dark lesson of the Ik story is that a philosophy of every man for himself (and every woman) is a pathway to anarchy – not the benign utopian socialist or free market kind of society but an ugly Hobbesian “war of each against all.” This is surely not what any of us want.
Friday, September 2, 2011
Is it Fair to Soak the Poor?
In recent days some Republicans have made a remarkable – no incredible – response to the claim, supported by Warren Buffet among many others, that the rich should pay more taxes. House Majority Leader Eric Cantor, presidential candidate Michele Bachmann and several others have proposed to reverse the Robin Hood role and, like the Sheriff of Nottingham, tax the poor to protect the coffers of the rich. They claim it’s only fair.
Their reasoning is that the rich pay most of the income taxes while some 47 percent of Americans do not pay any income taxes at all. Governor Rick Perry of Texas, another Republican presidential candidate calls this an “injustice,” according to the New York Times, and Republican Senator Dan Coats says “everyone should have some skin in the game.”
Wait a minute. This is a “cruel hoax” if ever there was one. Our Federal income tax system is “progressive” by design – meaning that it is based on one’s ability to pay taxes from their earnings. According to the U.S. Census Bureau, in 2008, 47.3 percent of our earners had less than $25,000 in income, while another 28.1 percent received under $50,000 in income. Only 6.24 percent received more than $100,000. Even some 28.2 percent of households had combined incomes of less than $25,000 which is close to, or below, the official poverty line (about $22,500 for a family of four).
In fact, there has been a huge concentration of incomes and wealth at the very top of the economic pyramid over the past 30 years (the top 1 percent received 24 percent of the total national income in 2010), while real incomes at the bottom of the pyramid have declined, and this, as intended, has resulted in a shift in the burden of our income taxes. In order to “have some skin in the game,” you have to have some skin, and the fact is that tens of millions of Americans are struggling to meet their basic needs. Last year some 50 million Americans went hungry at various times, according to the USDA.
Furthermore, it is flatly untrue that the poor don’t pay taxes. They have payroll taxes (if they are working), as well as gasoline taxes and state and local income and sales taxes, which are very regressive. According to the Tax Policy Center at the Brookings Institution, in 2010 the poorest 20 percent of Americans paid 16.3 percent of their income in various taxes. The top 1 percent paid a total of 30.8 percent. I would call that more than fair.
Do you remember what happened to the evil Sheriff of Nottingham in the end? Warren Buffet is no Robin Hood, but he’s got the right idea.
Their reasoning is that the rich pay most of the income taxes while some 47 percent of Americans do not pay any income taxes at all. Governor Rick Perry of Texas, another Republican presidential candidate calls this an “injustice,” according to the New York Times, and Republican Senator Dan Coats says “everyone should have some skin in the game.”
Wait a minute. This is a “cruel hoax” if ever there was one. Our Federal income tax system is “progressive” by design – meaning that it is based on one’s ability to pay taxes from their earnings. According to the U.S. Census Bureau, in 2008, 47.3 percent of our earners had less than $25,000 in income, while another 28.1 percent received under $50,000 in income. Only 6.24 percent received more than $100,000. Even some 28.2 percent of households had combined incomes of less than $25,000 which is close to, or below, the official poverty line (about $22,500 for a family of four).
In fact, there has been a huge concentration of incomes and wealth at the very top of the economic pyramid over the past 30 years (the top 1 percent received 24 percent of the total national income in 2010), while real incomes at the bottom of the pyramid have declined, and this, as intended, has resulted in a shift in the burden of our income taxes. In order to “have some skin in the game,” you have to have some skin, and the fact is that tens of millions of Americans are struggling to meet their basic needs. Last year some 50 million Americans went hungry at various times, according to the USDA.
Furthermore, it is flatly untrue that the poor don’t pay taxes. They have payroll taxes (if they are working), as well as gasoline taxes and state and local income and sales taxes, which are very regressive. According to the Tax Policy Center at the Brookings Institution, in 2010 the poorest 20 percent of Americans paid 16.3 percent of their income in various taxes. The top 1 percent paid a total of 30.8 percent. I would call that more than fair.
Do you remember what happened to the evil Sheriff of Nottingham in the end? Warren Buffet is no Robin Hood, but he’s got the right idea.
Thursday, September 1, 2011
Is it Fair to Soak the Rich?
At the very heart of our ideological civil war – and the epic deficit/debt ceiling battle now going on in Washington – is a fundamental debate about fairness in our taxes, and in the role of government. Let’s take a look at this issue in terms of the three fairness principles that, as I argue in my book, are vital to achieving a fair society: equality with respect to our basic needs (and a mutual obligation to ensure the basic needs of all of our people); equity (or merit) with respect to our talents, efforts and achievements; and reciprocity – a strong obligation to contribute a proportionate share in return for the benefits that we enjoy in our society.
For some people, any taxes at all are unfair. The current Republican opposition to tax/revenue increases is a culmination of the determined effort spearheaded by Grover Norquist, a one-time aide to President Reagan, and his “Americans for Tax Reform” to persuade the Republicans to oppose taxes, not as a matter of sound economic policy but as a fundamental violation of our “liberty.” As Norquist himself puts it: “You are stealing money from some people and giving it to others.”
Norquist’s campaign has been hugely successful, and he has inspired the GOP to re-brand itself as the “no-tax party.” All but 6 of the 240 House Republicans and all but 7 of the GOP Senators have signed Norquist’s no-tax pledge. No wonder House Speaker Boehner is locked into an uncompromising stance, despite the extraordinary Democratic concession of offering a 3:1 ratio of spending cuts versus tax increases.
Underlying this anti-tax attitude are some truth-claims that need to be examined. One is that the wealthy pay a “disproportionate” share of our income taxes, currently at 38 percent of the total, twice their share 30 years ago, while the bottom half of income earners pay a very small portion of the taxes. Well, yes, but that is because the incomes at the top of the scale have more than doubled while the median income of the bottom half has significantly declined. (When inflation is factored in, “real incomes” among the middle class and blue-collar workers have declined even more.) Today, the top 1 percent of income earners receive 24 percent of the total and the top 10 percent take home almost half. If you use the “progressive” criterion of scaling taxes to the distribution of income, the wealthy should be paying even more than 38 percent.
But what about Norquist’s libertarian argument related to “freedom”? It is based on the claim that the income distribution in our free market capitalist is a result of “merit,” and that the rich deserve to keep the “fruits of their labor.” Of course, these “fruits” may or may not be the result of merit. Some wealth is inherited (think Paris Hilton), or maybe a matter of luck (like owning a piece of land on top of an underground pool of oil), or of shrewd gambles (like the 25 hedge fund managers who, in 2009, bet against the market and took home an average of $1 billion – yes billion – each). Or it might be the result of having a monopoly, or exploiting workers, or malfeasance, or politics. For instance, top CEO salaries today average some 320 times that of the average worker (more than $10 million apiece), versus about 20 times as much in 1950. Do they merit that much more compensation?
Then there is the “trickle down” (supply side) theory, going back to President Reagan’s time. The idea is that the wealthy are the real “job creators” in our society. So a tax reduction will stimulate more economic activity that will ultimately trickle down to the workers and will pay for itself with increased tax revenues. In other words, everyone will benefit.
This theory was actually tried out by President Reagan in the 1980s, and again by President George W. Bush in the 2000s. Both times, nothing happened except yawning budget deficits. Indeed, the theory has even been tested again (indirectly) in the current recession; corporate profits are at a record high (they increased by $528 billion last year) and average CEO compensation went up by 23 percent last year. Yet there hasn’t been any burst of job growth. Instead of a trickling down of income, we’ve seen a bubbling up.
The libertarian/Republican, anti-tax posture also runs afoul of the other two fairness principles. One has to do with reciprocity -- paying a fair share of the obligations we have undertaken collectively as a nation – from defense to road construction, education and, yes, helping the poor. In a complex interdependent society with a democratic government, the people have the collective right, through their elected representatives, to impose taxes and otherwise restrict our freedom for the common good, or general welfare. Taxes have even been legitimized in our Constitution and in the Sixteenth Amendment. It’s not “stealing.”
Finally, we have a deep collective obligation to provide for the basic needs of those who cannot do so for themselves – the roughly 25 percent of our population who are struggling (and sometimes going hungry), including the 14 million who are “officially” unemployed and the many millions more who are not counted because they have stopped looking for work, or have only low-paying part-time jobs, or have never been employed. These needs are vastly greater than the resources of our private charities.
It’s increasingly obvious that we need a national effort to create jobs and stimulate the lagging consumer “demand” for goods and services – not a trickle down of spending by the wealthy but a “full employment” program that will put people back to work. (There is a successful precedent for this that goes back to the New Deal era.) And it seems only fitting that the Wall Street bankers who were responsible for causing the financial meltdown that produced the Great Recession should underwrite our collective efforts to get out of it. You might call it “soak the rich.” I call it only fair.
For some people, any taxes at all are unfair. The current Republican opposition to tax/revenue increases is a culmination of the determined effort spearheaded by Grover Norquist, a one-time aide to President Reagan, and his “Americans for Tax Reform” to persuade the Republicans to oppose taxes, not as a matter of sound economic policy but as a fundamental violation of our “liberty.” As Norquist himself puts it: “You are stealing money from some people and giving it to others.”
Norquist’s campaign has been hugely successful, and he has inspired the GOP to re-brand itself as the “no-tax party.” All but 6 of the 240 House Republicans and all but 7 of the GOP Senators have signed Norquist’s no-tax pledge. No wonder House Speaker Boehner is locked into an uncompromising stance, despite the extraordinary Democratic concession of offering a 3:1 ratio of spending cuts versus tax increases.
Underlying this anti-tax attitude are some truth-claims that need to be examined. One is that the wealthy pay a “disproportionate” share of our income taxes, currently at 38 percent of the total, twice their share 30 years ago, while the bottom half of income earners pay a very small portion of the taxes. Well, yes, but that is because the incomes at the top of the scale have more than doubled while the median income of the bottom half has significantly declined. (When inflation is factored in, “real incomes” among the middle class and blue-collar workers have declined even more.) Today, the top 1 percent of income earners receive 24 percent of the total and the top 10 percent take home almost half. If you use the “progressive” criterion of scaling taxes to the distribution of income, the wealthy should be paying even more than 38 percent.
But what about Norquist’s libertarian argument related to “freedom”? It is based on the claim that the income distribution in our free market capitalist is a result of “merit,” and that the rich deserve to keep the “fruits of their labor.” Of course, these “fruits” may or may not be the result of merit. Some wealth is inherited (think Paris Hilton), or maybe a matter of luck (like owning a piece of land on top of an underground pool of oil), or of shrewd gambles (like the 25 hedge fund managers who, in 2009, bet against the market and took home an average of $1 billion – yes billion – each). Or it might be the result of having a monopoly, or exploiting workers, or malfeasance, or politics. For instance, top CEO salaries today average some 320 times that of the average worker (more than $10 million apiece), versus about 20 times as much in 1950. Do they merit that much more compensation?
Then there is the “trickle down” (supply side) theory, going back to President Reagan’s time. The idea is that the wealthy are the real “job creators” in our society. So a tax reduction will stimulate more economic activity that will ultimately trickle down to the workers and will pay for itself with increased tax revenues. In other words, everyone will benefit.
This theory was actually tried out by President Reagan in the 1980s, and again by President George W. Bush in the 2000s. Both times, nothing happened except yawning budget deficits. Indeed, the theory has even been tested again (indirectly) in the current recession; corporate profits are at a record high (they increased by $528 billion last year) and average CEO compensation went up by 23 percent last year. Yet there hasn’t been any burst of job growth. Instead of a trickling down of income, we’ve seen a bubbling up.
The libertarian/Republican, anti-tax posture also runs afoul of the other two fairness principles. One has to do with reciprocity -- paying a fair share of the obligations we have undertaken collectively as a nation – from defense to road construction, education and, yes, helping the poor. In a complex interdependent society with a democratic government, the people have the collective right, through their elected representatives, to impose taxes and otherwise restrict our freedom for the common good, or general welfare. Taxes have even been legitimized in our Constitution and in the Sixteenth Amendment. It’s not “stealing.”
Finally, we have a deep collective obligation to provide for the basic needs of those who cannot do so for themselves – the roughly 25 percent of our population who are struggling (and sometimes going hungry), including the 14 million who are “officially” unemployed and the many millions more who are not counted because they have stopped looking for work, or have only low-paying part-time jobs, or have never been employed. These needs are vastly greater than the resources of our private charities.
It’s increasingly obvious that we need a national effort to create jobs and stimulate the lagging consumer “demand” for goods and services – not a trickle down of spending by the wealthy but a “full employment” program that will put people back to work. (There is a successful precedent for this that goes back to the New Deal era.) And it seems only fitting that the Wall Street bankers who were responsible for causing the financial meltdown that produced the Great Recession should underwrite our collective efforts to get out of it. You might call it “soak the rich.” I call it only fair.
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