10 Steps to Break Up the Wealth of the Super Rich
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Implement Fair Trade Rules. Most international free trade treaties have boosted the wealth of the 1 percent, whose members are the largest shareholders of global companies. Free trade rules often pit countries against one another in a race to lower standards addressing child labor, environmental protection, workers’ rights to organize, and corporate regulation. Countries with the weakest standards are rewarded in this system. Fair trade rules would raise environmental and labor standards, so companies compete on the basis of other efficiencies.
Rule Changes That Break Up Wealth and Power
We can raise the floor and work toward a level playing field, but we cannot stop the perverse effects of extreme inequality without boldly advocating for policies that break up excessive concentrations of wealth and corporate power.
For example, we cannot pass campaign finance laws that seek clever ways to limit the influence of the 1 percent, as they will always find ways to subvert the law. Concentrated wealth is like water flowing downhill: it cannot stop itself from influencing the political system. The only way to fix the system is to not have such high levels of concentrated wealth. We need to level the hill!
This section examines several far-reaching policy initiatives, the tough changes that have to be considered if we’re going to reverse extreme inequality. Some of these proposals have been off the public agenda for decades or have never been seriously considered.
Tax the 1 Percent. Historically, taxing the 1 percent is one of the most important rule changes that have reduced the concentration of wealth. In 1915, Congress passed laws instituting federal income taxes and inheritance taxes (estate taxes). Over the subsequent decades, these taxes helped reduce the concentrations of income and wealth and even encouraged Gilded Age mansions to be turned over to civic groups and charities.
Taxes on higher income and wealth reached their zenith in the mid-1950s. At the time, the incomes of millionaires were taxed at rates over 91 percent. Today, the percentage of income paid by millionaires in taxes has plummeted to 21 percent. Back then, corporations contributed a third of the nation’s revenue. Today, corporations pay less than one-tenth of the nation’s revenue. The corporate 1 percent pays an average of 11.1 percent of income in taxes, down from 47.4 percent in 1961.
Taxes on the wealthy have steadily declined over the last fifty years. If the 1 percent paid taxes at the same actual effective rate as they did in 1961, the U.S. Treasury would receive an additional $231 billion a year. In 2009, the most recent year for which data are available, 1,500 millionaires paid no income taxes, largely because they dodged taxes through offshore tax schemes, according to the IRS.
As with inequality, the higher up the income ladder people are, the lower the percentage of income they pay in taxes. This is why Warren Buffett’s disclosure about his own low taxes was so important. Buffett revealed that in 2010, he paid only 14 percent of his income in federal taxes, lower than the 25 or 30 percent rate that his co-workers paid. Buffett wrote:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.