The Grand Delusion: Higher Taxes “Soak” The Rich
Squeezing, gouging, soaking, it’s all the same, and it’s all wrong. The richest Americans, we hear it said, pay most of the federal income taxes. That’s true. But since 1980 their AFTER-TAX SHARE of America’s income has TRIPLED. That’s a trillion dollars a year in extra income for the wealthiest 1%.
A trillion dollars is seven times more than the budget deficits of all 50 states combined.
A trillion dollars, if it hadn’t been redistributed to the rich, would provide an extra $10,000 a year for every family that has contributed to American productivity since 1980.
The defenders of unlimited wealth insist that the very rich have earned their money. But what does EARN mean? Does it mean that the million richest families worked harder than the other 99 million families for thirty years? Does it mean that one man can bet against the mortgage industry and make enough money to pay the salaries of 100,000 health care workers? Does it mean using American research and infrastructure and national security to build a corporation that pays zero federal income taxes?
Most of the fortunate 1% benefited from tax cuts, financial system de-regulation, ownership of 50% of the stock market, and a 15% capital gains tax. According to a study by the University of California, in 2008 only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries.
The very rich claim that their income growth stimulates the economy. But it hasn’t happened. Low-income earners spend a greater percentage of their overall income on consumption, but they have less purchasing power than they had thirty years ago.
What the very rich won’t admit is that they benefit the most from government-funded research, national security, infrastructure, property rights, and a financial industry tailored to their pleasure and profit.
Instead, they claim that anyone can be rich if only they work hard. Much of America wouldn’t know if this is true. They haven’t had a chance to work lately.
By: Paul Buchheit, CommonDreams.org, May 10, 2011
Our Irresponsible American Ruling Class Is Failing
The American ruling class is failing us — and itself.
At other moments in our history, the informal networks of the wealthy and powerful who often wield at least as much influence as our elected politicians accepted that their good fortune imposed an obligation: to reform and thus preserve the system that allowed them to do so well. They advocated social decency out of self-interest (reasonably fair societies are more stable) but also from an old-fashioned sense of civic duty. “Noblesse oblige” sounds bad until it doesn’t exist anymore.
An enlightened ruling class understands that it can get richer and its riches will be more secure if prosperity is broadly shared, if government is investing in productive projects that lift the whole society and if social mobility allows some circulation of the elites. A ruling class closed to new talent doesn’t remain a ruling class for long.
But a funny thing happened to the American ruling class: It stopped being concerned with the health of society as a whole and became almost entirely obsessed with money.
Oh yes, there are bighearted rich people when it comes to private charity. Heck, David Koch, the now famous libertarian-conservative donor, has been extremely generous to the arts, notably to New York’s Lincoln Center.
Yet when it comes to governing, the ruling class now devotes itself in large part to utterly self-involved lobbying. Its main passion has been to slash taxation on the wealthy, particularly on the financial class that has gained the most over the past 20 years. By winning much lower tax rates on capital gains and dividends, it’s done a heck of a job.
Listen to David Cay Johnston, the author of “Free Lunch” and a columnist for Tax Notes. “The effective rate for the top 400 taxpayers has gone from 30 cents on the dollar in 1993 to 22 cents at the end of the Clinton years to 16.6 cents under Bush,” he said in a telephone interview. “So their effective rate has gone down more than 40 percent.”
He added: “The overarching drive right now is to push the burden of government, of taxes, down the income ladder.”
And you wonder where the deficit came from.
If the ruling class were as worried about the deficit as it claims to be, it would accept that the wealthiest people in society have a duty to pony up more for the very government whose police power and military protect them, their property and their wealth.
The influence of the ruling class comes from its position in the economy and its ability to pay for the politicians’ campaigns. There are not a lot of working-class people at those fundraisers President Obama has been attending lately. And I’d underscore that I am not using the term to argue for a Marxist economy. We need the market. We need incentives. We don’t need our current levels of inequality.
Those at the top of the heap are falling far short of the standards set by American ruling classes of the past. As John Judis, a senior editor at the New Republic, put it in his indispensable 2000 book, “The Paradox of American Democracy,” the American establishment has at crucial moments had “an understanding that individual happiness is inextricably linked to social well-being.” What’s most striking now, by contrast, is “the irresponsibility of the nation’s elites.”
Those elites will have no moral standing to argue for higher taxes on middle-income people or cuts in government programs until they acknowledge how much wealthier they have become than the rest of us and how much pressure they have brought over the years to cut their own taxes. Resolving the deficit problem requires the very rich to recognize their obligation to contribute more to a government that, measured against other wealthy nations, is neither investing enough in the future nor doing a very good job of improving the lives and opportunities of the less affluent.
“A blind and ignorant resistance to every effort for the reform of abuses and for the readjustment of society to modern industrial conditions represents not true conservatism, but an incitement to the wildest radicalism.” With those words in 1908, President Theodore Roosevelt showed he understood what a responsible ruling class needed to do. Where are those who would now take up his banner?
By: E. J. Dionne, Opinion Writer, The Washington Post, April 17, 2011
“An Inherent Relationship”: A Primer on Class Struggle
When we study Marx in my graduate social theory course, it never fails that at least one student will say (approximately), “Class struggle didn’t escalate in the way Marx expected. In modern capitalist societies class struggle has disappeared. So isn’t it clear that Marx was wrong and his ideas are of little value today?”
I respond by challenging the premise that class struggle has disappeared. On the contrary, I say that class struggle is going on all the time in every major institution of society. One just has to learn how to recognize it.
One needn’t embrace the labor theory of value to understand that employers try to increase profits by keeping wages down and getting as much work as possible out of their employees. As the saying goes, every successful capitalist knows what a Marxist knows; they just apply the knowledge differently.
Workers’ desire for better pay and benefits, safe working conditions, and control over their own time puts them at odds with employers. Class struggle in this sense hasn’t gone away. In fact, it’s inherent in the relationship between capitalist employer and employee. What varies is how aggressively and overtly each side fights for its interests.
Where else does class struggle occur? We can find class struggle wherever three things are at stake: the balance of power between capitalists and workers, the legitimacy of capitalism, and profits.
The most important arena outside the workplace is government, because it’s here that the rules of the game are made, interpreted, and enforced. When we look at how capitalists try to use government to protect and advance their interests — and at how other groups resist — we are looking at class struggle.
Capitalists want laws that weaken and cheapen labor. This means laws that make it harder for workers to organize unions; laws that make it easier to export production to other countries; laws that make it easier to import workers from other countries; laws and fiscal policies that keep unemployment high, so that workers will feel lucky just to have jobs, even with low pay and poor benefits.
Capitalists want tax codes that allow them to pay as little tax as possible; laws that allow them to externalize the costs of production (e.g., the health damage caused by pollution); laws that allow them to swallow competitors and grow huge and more powerful; and laws that allow them to use their wealth to dominate the political process. Workers, when guided by their economic interests, generally want the opposite.
I should note that by “workers,” I mean everyone who earns a wage or a salary and does not derive wealth from controlling the labor of others. By this definition, most of us are workers, though some are more privileged than others. This definition also implies that whenever we resist the creation and enforcement of laws that give capitalists more power to exploit people and the environment, we are engaged in class struggle, whether we call it that or not.
There are many other things capitalists want from government. They want public subsidy of the infrastructure on which profitability depends; they want wealth transferred to them via military spending; they want militarily-enforced access to foreign markets, raw materials, and labor; and they want suppression of dissent when it becomes economically disruptive. So we can include popular resistance to corporate welfare, military spending, imperialist wars, and government authoritarianism as further instances of class struggle.
Class struggle goes on in other realms. In goes on in K-12 education, for example, when business tries to influence what students are taught about everything from nutrition to the virtues of free enterprise; when U.S. labor history is excluded from the required curriculum; and when teachers’ unions are blamed for problems of student achievement that are in fact consequences of the maldistribution of income and wealth in U.S. society.
It goes on in higher education when corporations lavish funds on commercially viable research; when capitalist-backed pundits attack professors for teaching students to think critically about capitalism; and when they give money in exchange for putting their names on buildings and schools. Class struggle also goes on in higher education when pro-capitalist business schools are exempted from criticism for being ideological and free-market economists are lauded as objective scientists.
In media discourse, class struggle goes on when we’re told that the criminal behavior of capitalist firms is a bad-apple problem rather than a rotten-barrel problem. It goes on when we’re told that the economy is improving when wages are stagnant, unemployment is high, and jobs continue to be moved overseas. It goes on when we’re told that U.S. wars and occupations are motivated by humanitarian rather than economic and geopolitical concerns.
Class struggle goes on in the cultural realm when books, films, and songs vaunt the myth that economic inequality is a result of natural differences in talent and motivation. It goes on when books, films, and songs celebrate militarism and violence. It also goes on when writers, filmmakers, songwriters, and other artists challenge these myths and celebrations.
It goes on, too, in the realm of religion. When economic exploitation is justified as divinely ordained, when the oppressed are appeased by promises of justice in an afterlife, and when human capacities for rational thought are stunted by superstition, capitalism is reinforced. Class struggle is also evident when religious teachings are used, antithetically to capitalism, to affirm values of equality, compassion, and cooperation.
I began with the claim that Marx’s contemporary relevance becomes clear once one learns to see the pervasiveness of class struggle. But apart from courses in social theory, reading Marx is optional. In the real world, the important thing is learning to see the myriad ways that capitalists try to advance their interests at the expense of everyone else. This doesn’t mean that everything in social life can be reduced to class struggle, but that everything in social life should be examined to see if and how it involves a playing-out of class interests.
There is fierce resistance to thinking along these lines, precisely because class analysis threatens to unite the great majority of working people who are otherwise divided in a fight over crumbs. Class analysis also threatens to break down the nationalism upon which capitalists depend to raise armies to help exploit the people and resources of other countries. Even unions, supposed agents of workers, often resist class analysis because it exposes the limits of accommodationism.
Resistance to thinking about class struggle is powerful, but the power of class analysis is hard to resist, once one grasps it. Suddenly, seemingly odd or unrelated capitalist stratagems begin to make sense. To take a current example, why would capitalists bankroll candidates and politicians to destroy public sector unions? Why do capitalists care so much about the public sector?
It’s not because they want to balance budgets, create jobs, improve government efficiency, or achieve any of the goals publicly touted by governors like Scott Walker, Chris Christie, Rick Snyder, or John Kasich. It’s because of the profit and power they can gain by destroying the last remaining organizations that fight for the interests of working people in the political sphere, and by making sure that private-sector workers can’t look to the public sector for examples of how to win better pay and benefits.
Other parts of the agenda being pursued by corporate-backed governors and other elected officials also make sense as elements of class struggle.
Selling off utilities, forests, and roads is not about saving taxpayers money. It’s about giving capitalists control of these assets so they can be used to generate profits. Cutting social services is about ensuring that workers depend on low-wage jobs for survival. Capitalists’ goal, as always, is a greater share of wealth for them and a smaller share for the rest of us. Clear away the befogging rhetoric, the rhetoric that masks class struggle, and it becomes clear that the bottom line is the bottom line.
If class struggle is hard to see, it’s not only because of mystifying ideology. It’s because the struggle has been a rout for the last thirty years. But a more visible class struggle could be at hand. The side that’s been losing has begun to fight back more aggressively, as we’ve seen most notably in Wisconsin. To see what’s at stake in this fight and what a real victory might look like, it will help to call the fight by its proper name.
By: Michael Schwalbe, Professor of Sociology, North Carolina State University, Originally Published March 31, 2011, CommonDreams.org
The Rich Are Different: They’re Luckier
This long attack on the unfairness of progressive taxation from the Hoover Institution by Kip Hagopian usefully embodies a lot of right-wing delusions about income inequality. It argues that a person’s income is determined by three things:
America’s free enterprise system provides an environment in which the substantial majority of its citizens can realize their fullest earnings potential. Within that environment, individual economic outcomes are the product of a combination of three elements: aptitude, work effort, and choice of occupation.
Aptitude. For the purposes of this essay, aptitude is broadly defined as the capacity to produce, or to earn income. For the most part, it comes from circumstances of birth and is distributed unequally. Aptitude may be derived from innate talents (cognitive, musical, artistic, athletic, etc.) or physical attributes (appearance, dexterity, possession of senses, etc.). Or it may be acquired from lessons learned from parents and other life experiences. Aptitude emanating from circumstances of birth (either innate or acquired) can be significantly enhanced by individual effort applied to strengthening one’s skills (see “Work Effort” below). Aptitude is measured from low to high in accordance with the monetary value placed on it in the marketplace. This is a measure of earning power and is not in any way an indication of an individual’s intrinsic worth as a human being. For most people aptitude is the most significant determinant of income. But it has to be understood as capacity; aptitude does not produce income until it is combined with individual effort.
Work effort. For any given level of aptitude and occupation, work effort plays the decisive role in determining income, and in many cases may result in persons with lower aptitudes earning more than their higher-aptitude peers. For the purposes of this essay, the term “work effort” includes not only the number of hours worked, but also the intensity of the effort applied during those hours. As noted above, it also includes work effort applied to strengthening one’s skills.
At every level of aptitude and in every profession, whether the pay is in salary or hourly wages, there are workers who outperform their peers in each hour worked. They do this by performing tasks more quickly; focusing on the tasks more intently; finding and completing additional tasks that need to be done; and using some of their leisure time practicing or training to become more skilled. These people get more raises, larger bonuses, and more promotions than their peers. Thus, greater work effort can produce higher income whether the person is paid by the hour or earns a salary.
In addition to producing higher income in its own right, work effort applied to strengthening one’s skill — resulting in “learned” or “enhanced” aptitude — can make a substantial contribution toward increasing income. The “rough” carpenter who spends nights and weekends developing the skills necessary to qualify as a more highly valued “finish” carpenter will move up the wage scale by doing so. Professional athletes, musicians, singers, and other performers can enhance their innate aptitudes substantially through extensive practice, and a great many are renowned for having done so. A classic example is Hall-of-Famer Jerry Rice, who is generally recognized as the best wide receiver in NFL history. He was one of the highest paid players in pro football for twenty years, an achievement largely credited to his intense practice and workout regimen. Perhaps the most effective way of enhancing aptitude is through increased study in school. Whether it is grade school, high school, vocational school or college, for any particular tier of aptitude, those who study the most almost always get the best grades, matriculate to the best colleges, and secure the best jobs.
Choice of occupation. Choice of occupation is also important in determining income. Had Bill Gates decided to finish Harvard and become a high school math teacher, he almost certainly would have been successful, but he would not have become a multi-billionaire.
Earned income is determined by a mix of the three factors described above, and the relative contribution of each varies by individual.
This is obviously written to minimize the role of luck. It acknowledges that Bill Gates made more money by choosing to become a software mogul than by choosing t be a high school math teacher. But, of course, Gates (as he has acknowledged) benefited enormously not just from his family situation but from the timing of his birth, which put him in the work force at a moment when computing technology was set to explode. If he had been born a decade or two earlier, he probably would have been an anonymous lab geek if he had followed his mathematical inclinations, or perhaps the owner of a successful grocery store chain if he had pursued his entrepreneurial instincts.
What’s more, it is demonstrably not the case that income levels simply reflect aptitude and effort. Now, obviously being from a richer family affords all sorts of advantages, including physical, emotional, and cultural development. But factor all that out of the equation and assume that it’s just fair for all those things to translate into higher academic performance and higher earnings.
Even assuming that, there are massive advantages inherent simply in being born rich (and disadvantages in being poor.) My favorite example, simply because it’s so dramatic, is that a child born into the lowest-earning quintile who manages to attain a college degree is less likely to be in the highest-earning quintile than a child born into the top quintile who does not attain a college degree. This is all the more remarkable when you consider that making it to, and through, college is far harder for poor kids than rich kids even at a given level of aptitude. (Two thirds of the kids with average math scores and low-income parents do not attend college, while almost two-thirds of high-income kids with average math scores do.)
How would Hagopian explain this? The lower-income kids managed to beat the odds by graduating from college, yet they make less money than the rich kids who beat the odds in the other direction by not going to college. By any measure, the former group has more aptitude and greater work ethic. Now, clearly right-wingers in general, and wealthy right-wingers in particular, like to think aptitude and effort and choices determine how much money you make. (Hagopian is the co-founder of a venture capital and private equity firm.) You see this from Greg Mankiw, Arthur Brooks, and on and on. The right-wing worldview is based on a moral premise about the relationship between merit and wealth that is demonstrably false.
By: Jonathan Chait, The New Republic, April 1, 2011
A Minimum Wage Increase Will Not Kill Jobs
As the nation grapples with a jobs crisis and unemployment hovers near 9 percent, it is easy for policy makers to forget the plight of those who work but earn very little. There are about 4.4 million workers earning the minimum wage or less, according to government statistics. This amounts to about 6 percent of workers paid by the hour. They need a raise.
Today, a worker laboring 40 hours a week nonstop throughout the year for the federal minimum wage could barely keep a family of two above the federal poverty line. Though it rose to $7.25 an hour in 2009, up $2.10 since 2006, the minimum wage is still lower than it was 30 years ago, after accounting for inflation. It amounts to about $1.50 an hour less, in today’s money, than it did in 1968, when Martin Luther King Jr. and Robert Kennedy were killed, Richard Nixon was elected president and the economy was less than a third of its present size.
The minimum wage has many opponents among big business and Congressional Republicans. In Nevada, the Las Vegas Chamber of Commerce is pushing to repeal the state’s minimum wage, a whopping $8.25 an hour. Representative Darrell Issa, the California Republican, has proposed a bill in the House that would effectively cut the minimum wage in states where it was higher than the federal threshold by allowing employers to count health benefits toward wages.
Opponents argue that raising the minimum wage would inevitably lead to higher unemployment, prompting companies to cut jobs and decamp to cheaper labor markets. It is particularly bad, the argument goes, to raise it in a weak labor market. Yet with unemployment likely to remain painfully high for years to come, this argument amounts to a promise that the working poor will remain poor for a long time.
What’s more, we know now that the argument is grossly overstated. Over the past 15 years, states and cities around the country have rushed ahead of the federal government to impose higher minimum wages. Economists analyzing the impact of the increases on jobs have concluded that moderate increases have no discernible impact on joblessness. Employers did not rush off to cheaper labor markets in the suburbs or across state lines for a simple reason: that costs money too.
The most recent research, by John Schmitt and David Rosnick at the Center for Economic and Policy Research, found that San Francisco’s minimum wage jump to $8.50 in 2004 — well above the state minimum of $6.75 — improved low-wage workers’ incomes and did not kill jobs. An even bigger jump in Santa Fe, N.M., the same year — from $5.15 to $8.50 — had a similar effect.
Despite evidence to the contrary, businesses and Republicans may keep pushing against the minimum wage — using the jobs crisis now to clinch their argument. They should be disregarded, because their argument is wrong and the United States is too rich to tolerate such an underclass.
By: Editorial, The New York Times, March 25, 2011
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