Not Taxing the Rich Is What’s Radical

David Leonhardt of The New York Times points out that not taxing the rich is the radical idea:

Imagine for a moment that a presidential candidate made this speech:

My fellow Americans, I’m here today to tell you about my economic plan. Each year, I will require every middle-class family across this great country to write a check. We will then pool the money and distribute it to the richest Americans among us — the top 1 percent of earners, who, because of their talent, virtue and success, deserve even more money.

The exact size of the checks will depend on a family’s income, but a typical middle-class household will hand over $15,000 each year. This plan, I promise all of you, will create the greatest version of America that has ever existed.

You would consider that proposal pretty radical, wouldn’t you? Politically crazy. Destructive, even. Well, I’ve just described the actual changes in the American economy since the 1970s.

Economic output — known as G.D.P. — per person has almost doubled over this period. But the bulk of the bounty has flowed to the very rich. The middle class has received relative crumbs.

If middle-class pay had increased as fast as the economic growth, the average middle-class family would today earn about $15,000 a year more than it does, after taxes and benefits. Instead, that middle-class family effectively forfeits the money to the rich, year after year after year….

The extreme redistribution of income — upward — has multiple causes. Some of them, like technological change, stem mostly from private-sector forces. But government policy plays a crucial role. Tax rates on the wealthy have fallen sharply. Labor unions have been undermined. Big companies have been allowed to grow even bigger and more powerful. The United States has lost its lead as the most educated country in the world.

More often than not over the past 40 years, our government has helped the rich at the expense of everyone else. As a result, economic inequality has reached Gilded Age levels.

In the face of these trends, the radical response is to do nothing — or to make inequality even worse, as President Trump’s policies have. It’s radical because soaring inequality is starting to threaten the basic fabric of American life. Many people have grown frustrated and cynical. Average life expectancy, amazingly, has fallen over the past few years.

Over the sweep of history, the main reason that societies have declined, as the scholars Daron Acemoglu and James Robinson have written, is domination “by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people.” The name of Acemoglu’s and Robinson’s book on this phenomenon is, “Why Nations Fail”.

It’s worth keeping all of this in mind when you hear critics (or journalists) describe the economic proposals of the Democratic presidential candidates as “radical.” They’re not radical, for the most part. The proposals are instead efforts to undo some of the extreme economic changes of recent decades and to ensure that most Americans workers — not just a narrow elite — fully benefit from economic growth.

The proposals also happen to be popular, broadly speaking. On social issues, like abortion and immigration, the country is deeply divided. But clear majorities support higher taxes on the wealthy, higher taxes on corporations, more education funding and expanded government health insurance. No wonder: Americans don’t resent success, but they do resent not receiving their fair share of economic growth.

The coming primary campaign will be a good time for the candidates to hash out which specific ideas make sense and which don’t. So far, the agenda looks pretty good. Elizabeth Warren has a plan to increase workers’ power within companies — and help them get larger pre-tax raises. Cory Booker and Kamala Harris want to lift the after-tax pay of the middle class and poor. Kirsten Gillibrand and others support reducing major living costs, like child care and education.

Perhaps most important, some Democrats have begun pushing for a wealth tax — to reverse the upward redistribution of the past 40 years. Warren has proposed an annual 2 or 3 percent tax on large fortunes. Bernie Sanders has proposed a big increase in the inheritance tax.

These wealth taxes are a classic example of policies that are less radical than their opponents claim. Do you know who already pays a wealth tax? Middle-class Americans. It’s called the property tax, as Noah Smith of Bloomberg Opinion has noted. Every year, homeowners pay a percentage of their house value in tax. A house, of course, is the biggest asset that most families own. If middle-class families can pay an annual tax on their main source of wealth, wealthy families can, too.

The United States as we have known it — optimistic, future-oriented and more powerful than any other nation — cannot survive the stagnation of mass living standards over many decades. I’m glad to see that some political leaders understand this and are trying to recapture a core feature of American life….

For these progressive taxes to be enacted, the Democrats will have to take the White House and the Senate in 2020 and hold onto the House. The Senate will be competitive, but the Republicans probably have the edge, given the particular states that will have Senate races.

Meanwhile, Republicans want to eliminate the estate tax, which they recently weakened. As of this year, it only applies to estates worth more than $5 million.

On a related note:

On Tuesday, a pair of baffled [Fox News] anchors referred to [talk about higher taxes on the rich] as a movement “against capitalism.” It is a dubious assertion, because by that definition the U.S. has only been a capitalist country since the 1980s, when Reagan knocked the top tax rate even lower and conservatives convinced enough legislators that “a rising tide lifts all boats” was a substitute for economic policy. But in their efforts to find an explanation for why so many people are turned off by unfettered, unregulated, and unaccountable capitalism, they turn to Charles Payne of Fox News Business. His explanation: Schools have brainwashed kids with lessons about “fairness.”

A Brief Note On What May Happen

Jasmin Mujanović, a political scientist, wrote the following on Twitter yesterday:

Assume for a second that the US is in the midst of a constitutional crisis (it is). Notice how the stores are still open, your bus completed its usual route and the game is still on? That’s what makes genuine crises terrifying, because they (co)exist for so long within our normal expectations of life.

They continue to do so all up until the point that they don’t. When the news is no longer something you can turn off, when it’s on your street, at your kid’s school, in your community, it’s too late for “resistance”. Then it’s largely a matter of individual survival.

That’s why both scholars of authoritarianism/sectarianism and/or survivors of such regimes have implored you to organize and inform yourself now, when it is still “normal”, when it’s still “someone else’s” child, when it’s a question of archaic rules of order.

The last two days have brought credible allegations of major dysfunction and crisis within the US government. There are fundamental questions regarding the integrity/legitimacy of the 2016 election. It’s unclear what, if any, steps have been taken to secure the mid-terms.

The fact that it is unclear who is genuinely in charge, what the civilian/military chain of command is, what would happen in event of a major security crisis, suggests the situation has already catastrophically deteriorated.

Until there is a concerted and consistent civil society and Congressional effort to restore accountability and leadership in the White House, it is difficult to see any of this ending without major instability of the sort unlike anything Americans have seen in generations and possibly ever.

Mr. Mujanović is probably too pessimistic. Somehow the federal government will continue to muddle through despite having a dangerously unfit person in charge of the Executive branch and a supine majority in charge of the Legislative. But there is no guarantee.

That’s why it is crucial that the Democrats take at least one house of Congress in the upcoming election. If that happens, at least half of Congress will once again take on its constitutional role and operate as an equal branch of the government. 

The midterm election is only 61 days away. We all need to do what we can in order to elect Democrats up and down the ballot. We need to encourage all reasonable people to register and vote. That’s how we can begin to address the current crisis,  restore some sanity to the federal government and avoid the dark future Mr. Mujanović fears.