Barack Obama’s campaign promise to reverse the Bush tax cuts for the wealthy, in order to help reduce our national budget deficit and provide money for much needed social programs, was met this election season with the typical GOP game plan.
The first step of their strategy was to loudly and repeatedly complain that Obama plans to “raise taxes”, or that he plans to raise “
your taxes”. That was a highly disingenuous statement – though perhaps with a big stretch of the imagination one could argue that it wasn’t a lie. Obama did in fact plan to raise taxes on about 2-5% of the U.S. population, while reducing taxes for about 95% of Americans. So perhaps it could be argued that saying that he plans to “raise taxes” is not quite a lie.
But here’s the clever part of the plan: By repeatedly claiming that he planned to raise taxes, they forced him to be very clear about the fact that his tax plan targets only the wealthy for increased taxes.
Once he did that, the trap was sprung: John McCain and his allies had their excuse for crying “class warfare”, “wealth redistribution”, “socialism”, “soak the rich”, etc. etc. And they did that repeatedly. All of these labels were meant to imply a specific narrative, which they often spelled out more explicitly when it seemed that the labels themselves weren’t working as well as expected.
Their narrative goes something like this: The wealthy are the productive members of society. Any tax plan that disproportionately taxes the wealthy, or raises taxes on the wealthy while lowering taxes for other people, is tantamount to stealing money from the productive members of society and redistributing it to the less productive. That is a bad thing to do because it is unfair to productive people and provides breaks for people who don’t deserve it. Furthermore, it hurts not just the wealthy but most other people as well. Increasing taxes on the wealthy diminishes their incentives to be productive. Consequently it causes the wealthy to produce less, so that everyone suffers. Alternatively, decreasing taxes on the wealthy gives them incentive to create more wealth, which then eventually trickles down to everyone else. So everyone gains. And most important of all, increasing taxes in the midst of a recession is the very worst thing we can do, as it will only tend to deepen the recession. John McCain repeatedly summed all this up by saying: My opponent wants to
redistribute wealth – I want to
create wealth.
Obama did a great job of responding to the GOP attacks – perhaps about as well as it is possible for a Democratic candidate to respond to accusations of “class warfare”, etc. Of course, he was also helped out by the fact that our economy is in a shambles following eight long years of Republican rule.
Here are what I see as some of the major arguments against the Republican efforts to attack progressive tax plans or any other progressive policies and frame them as described above.
FairnessThe claim that disproportionately taxing the wealthy is
unfair would be a reasonable argument if it really was unfair. But who’s to say that it’s unfair? Does Ken Lay deserve hundreds of times more money for the work
he did than the workers who worked for him deserved for the work
they did? Is it accurate to say that wealth accumulation is a good measure of what a person has “produced” or what a person has done for society, and therefore of what a person deserves? These are all legitimate questions when one tries to argue the issue of fairness.
What needs to be kept in mind is that wealth accumulation in any society takes place under a system of rules – otherwise chaos would reign, and it is unlikely that much would get accomplished. Rules tend to benefit some people more than others. Tax policy is just one aspect of the rules that help an economy run. If some rules benefit the wealthy, then how can they legitimately complain if other rules benefit other people? In other words, it is not a simple matter to judge what is fair and what is not. There are different ways of looking at the situation. Here is one way to look at this situation,
written by Philip Green for
The Nation, describing how capitalism works:
A successful capitalist regime creates a surplus in the form of profit, and this surplus, though it is created by workers, is totally appropriated by owners and either saved or expended according to their desires. Some of that surplus is clawed back from them by the government in the form of taxes, but a good deal of those tax revenues further the activities of private enterprise and the owners in the form of necessary improvements to infrastructure, subsidies to troubled but valued enterprises, and funding for armies and police forces to protect their property. So capitalism goes about its business, creating a surplus that enriches the coffers of those who accumulate wealth while providing enough of a living to those who work for the accumulators to keep them from throwing sand in the engine's gears.
Using “socialism” as a term of derisionThe word “socialism” has long been demonized in our country, the implication being that it is a first step along the road to totalitarian Communism. I believe that the reason for the demonization of socialism by the wealthy and powerful is obvious. Money is needed to pay for social programs, and that requires tax revenues. The wealthy would like to keep their taxes as low as possible.
One can easily get tied up in semantic arguments regarding what constitutes socialism. Since we have government sponsored social programs in our country – such as Social Security, Medicare, and educational grants – I think it’s fair to say that our economy contains some elements of socialism. But should that be considered a criticism? Philip Green explains what a more highly socialized economy would look like:
Only if the great surplus of accumulated wealth were disposed of democratically for "the general welfare" would we be living in a socialist society….
The sine qua non for any social order that puts human needs first is a genuinely progressive tax structure, one that taxes not only incomes but… accumulated wealth. This is not about "spreading the wealth around," though there's nothing wrong with that…, but rather about controlling wealth's spiraling and unmitigated power over the lives of everyone who doesn't have it.
Finally, "control" here means using the power of democratically elected and constituted governments, central or local or even within workplaces and industries, to confront the sometimes horrendous spillover costs of production that orthodox economists, in their disdain for human life, consider mere "externalities" – like the wastelands created by uncontrolled pollution.
So, what’s wrong with all that? I’m not an economist, but I certainly don’t see anything wrong with an economic system that is meant to work for everyone, rather than just the privileged few.
The progressive income tax in the context of U.S. historyWhen Senator Obama said that he intended to reverse the Bush tax cuts on the wealthy while
decreasing taxes for everyone else, he was simply announcing his plans to make use of the progressive income tax. The progressive income tax has been with us since 1913, when Congress ratified the
16th Amendment to our Constitution, which specifically established the right of Congress to enact a progressive income tax. Yet John McCain and his cohorts implied that Obama’s plan was some sort of radical, anti-American idea, never before seen in our country.
Following ratification of the 16th Amendment, Congress soon passed the first federal progressive income tax law. It’s been with us ever since. The top marginal tax rate that Obama has proposed is quite a bit
lower than the top marginal tax rate used in our country from early in FDR’s first presidency in the early 1930s until Ronald Reagan took office in 1981 – a time period of nearly half a century. Obama is merely proposing that the rate be elevated back to where it was during the Clinton administration.
Compassion for the less fortunateThe American Declaration of Independence declares that all people have the inalienable right to life, liberty and the pursuit of happiness. Yet many Americans are denied these rights because they lack access to such things as adequate health care, education, shelter or food. It is the purpose of our social welfare programs, which the conservative elites constantly rail against, to serve as a “social safety net” to ease the lot of people who find themselves in desperate circumstances.
I find it very ironic that our conservative leaders, who so disparage social welfare programs, are precisely the people who tend to make such a big deal over their “patriotism” and their worship of God. But what is the use of patriotism or religion if it produces a people who are dead set against lending a helping hand to those who most need it? What does it say about us as a nation if we believe that our government has no responsibility to lend a helping hand to our fellow citizens who are in dire need of medical care, jobs, food or shelter?
Tax increases for the wealthy during a recessionMcCain and his allies repeatedly warned us against the folly of “increasing taxes” during a recession – as if it is common knowledge that increasing taxes on the wealthy during a recession is dangerous to our economy. From these warnings you would think that the very high rates of taxation on the wealthy, starting with FDR’s presidency and lasting for half a century, would have resulted in catastrophic economic consequences.
But much higher top marginal tax rates than what Obama is proposing were enacted during FDR’s first term, right in the midst of the worst depression in U.S. history. And that worked out so well that he was re-elected three times.
This chart shows median family income levels, beginning in 1947, when accurate statistics on this issue first became available. With the top marginal tax rate approaching 90% at this time, median family income rose steadily (in 2005 dollars) from $22,499 in 1947 to more than double that, $47,173 in 1980. Then, for the next 25 years, except for some moderate growth during the Clinton years, there was almost no growth in median income at all, which rose only to $56,194 by 2005 (85% of that growth accounted for during the Clinton years). However one wants to interpret those numbers, nobody could possibly conclude that they indicate overall bad financial consequences accruing from high tax rates on the wealthy. To the contrary,
as Pulitzer Prize winning economist Paul Krugman notes, this period coincides with “the greatest sustained economic boom in U.S. history”.
ConclusionWhy is it that when the wealthy use their wealth and influence to lobby for laws that favor themselves, that’s to be expected – but when the rest of us propose laws that favor the great majority of Americans we’re accused of “class warfare”? The truth is that there is a class war going on in our country, and the wealthy are winning it. That’s one reason why they’re so wealthy, and that’s why
income disparity in our country has risen to
Gilded Age proportions.
In the United States in 2001, 1% of the population controlled 38% of the wealth, whereas the bottom 40% owned just 1%. That means that, on average, individuals in the top 1% owned about 1,500 times more wealth than individuals in the bottom 40%. The
Bush tax cuts for the wealthy and other Bush administration policies have widened economic inequality much further. Those are the tax cuts that President-Elect Obama wants to reverse.
A major reason for all this has to do with holes in our democracy. We have been in a vicious cycle whereby the wealthy, with their money and power, exercise a
disproportionate role over our political process. Consequently it should not be surprising that the rules generally favor the wealthy more than other people. In other words, the type of economic system described above by Philip Green is not likely to come to pass in a society where the wealthy have highly disproportionate political influence.
The fact that Senator Obama was able to raise record amounts of campaign cash mainly through small donations could be a harbinger that we might escape from this vicious cycle before too long.
Another harbinger of impending success is that we now stand poised to enact the first
national universal health care program in U.S. history that will entitle all Americans to decent health care. I’ll end this post with a discussion from Paul Krugman, from his book “
The Conscience of a Liberal”, explaining why universal national health care is so crucial in the fight for equality of opportunity in our country:
The principal reason to reform American health care is simply that it would improve the quality of life for most Americans…
There is, however, another important reason for health care reform. It’s the same reason movement conservatives were so anxious to kill Clinton’s plan. That plan’s success, said William Kristol, “would signal the rebirth of centralized welfare-state policy” – by which he really meant that universal health care would give new life to the New Deal idea that society should help its less fortunate members. Indeed it would – and that’s a big argument in its favor…
Getting universal care should be the key domestic priority for modern liberals. Once they succeed there, they can turn to the broader, more difficult task of reining in American inequality.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
