Friday, December 10, 2010

The Case for Taxing the Rich

(See the Economic Policy Institute for the above images and more facts/figures).

As the first graph makes clear, the fifth of earners in the US have made staggering gains between 1979-2005. The disparities only get more extreme when you climb up the ladder within the top 1/5: the top 0.1% experienced an average $6 million increase in annual income whereas the bottom 1/5 of Americans experienced a mere $200 average increase. Make no mistake, this trend of increasing inequality amidst increasing growth represents a relentless class project of redistributing wealth from the bottom up to the top. By relentlessly pushing for cuts and privatization coupled with massive tax gifts for the super-rich, the ruling class has managed to redistribute wealth embodied in public goods to private coffers. The last 40 years have been a testament to their success.

Now, as the second graph makes clear, the Bush tax breaks for the rich only served to further increase this trend. These tax breaks were basically just decorative icing on the cake. Bush's cuts dropped the top marginal rate from 40% to 35%, but it had been 70% under Nixon and Carter's presidencies before Reagan dropped it to 30% in the early 80s. It's worth recalling that during Eisenhower's presidency in the 1950s the top marginal rate was 91%. This makes it clear that it's just plain false that a high top marginal rate of taxation is incompatible with capitalist expansion: the "long boom" from the 1945-1973 was probably the most stable, prosperous period in the history of US capitalism. The talk about an obvious connection between growth and top marginal rates, however, is almost always a red herring. The real issue is political and grounded in class interest: those in the top brackets have a strong interest in lowering their marginal rate and they'll marshal any rationalization (even obvious bullshit-on-stilts like the "laffer curve"... see image here) they believe is effective in order to do so.

They can't just say, baldly, "hey I want to get even richer so stop taxing me to pay for bridges and schools!". As I've noted elsewhere, the ruling class knows that it cannot address the population in the language of petty interests. In order to be effective it must speak the language of universality and rationality.

So to recap: the top marginal rate of taxation has dropped all the way from 91% in the 1950s to 35% today. Do the math: that's quite a gift, especially when you add in the fact that the majority of Americans have seen their real wages decline or stagnate during the same period (despite vastly increased productivity from 1980 to the present).

All of this, we should note, is just background. The real question we're supposed to be addressing is whether to let the Bush tax cuts expire for the rich. Once we have the facts on the table, however, the choice should be obvious unless your a self-serving, ruling class tool: we should repeal the gratuitous gifts given to the wealthy and bring the top marginal rate back to realistic rates. Why, when the Federal budget is such bad shape, should we give them $67 billion in gifts over the next two years when they're already rolling in more cash than they'll ever know what to do with?

To hear the ruling class and their political mouthpieces speak of "shared sacrifice" right now is laughable. They've been sacrificing the majority of us for 40 years as they've reaped more and more each decade. Last quarter, for instance, corporations posted the highest profits on record, even though the majority of us are still suffering the effects of the recession. On top of what they've been able to accumulate themselves, the ruling class has also pushed down our standard of living considerably during the last 40 years by breaking unions, cutting social services, privatizing and so on.

Now, after they've been punching us in the stomach for 40 years straight, they have the chutzpah to ask us to entertain the idea of "shared sacrifice". The only proper response to their suggestion is "fuck off". The ruling class loves the language of "we" and "us" when we're talking about risk and losses. But when it comes to profits and gains, they aren't so keen on including "us" in the equation, are they? When it's about money to be gained, it's all first-personal language about getting the "government off their backs".

If "shared sacrifice" has any meaning at all, it must mean that all parties share a burden according to their means to do so. So let the rich, who've amassed surpluses for themselves larger than the world has ever seen, do a bit of sacrificing. Let them at least pay the top marginal rates they paid under that "radical leftist" Richard Nixon for godsake. It's the least they can do, considering they've waged a one-sided class war against us for the last 40 years while wrecking the global economy with their reckless pursuit of short-term profits.

In fact, if we just eschewed the language of "sacrifice" entirely and simply asked the ruling class to clean up the mess they've made of the economy, they'd be paying much, much higher rates than they would under a regime of "shared sacrifice". A simple cost-benefit analysis, something the ruling class is fond of, quite clearly suggests the rich cost that the majority of us a lot more grief than they bring us in benefits. The entirely reasonable socialist intuition here is this: why, then, do we need to have a ruling class at all? They need us but we don't need them.

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