It's a Mugging: Our National Wealth Is Getting Handed Over to the Bloated Rich
Tax responsibilities have shifted off of large wealth holders and onto wage earners, off corporations and onto individuals, off the progressive federal tax system and onto state and local tax systems, which tend to be more regressive. Tax cuts for the rich have shrunk federal services -- and shifted responsibilities to states for health, anti-poverty, transportation and more. That's the shaft part. …
We're in America's "Second Gilded Age."
-- Chuck Collins, senior scholar at the Institute for Policy Studies and director of the Program on Inequality and the Common Good.
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On April 15, the Mad Hatters of the Teabagging Party protested that the extreme income redistribution over the last 30 years continue unabated so that the super-rich become even richer as America's middle class sinks into oblivion.
There's been a class war going on since Ronald Reagan was elected, and it's been a war on the working class as the average wage earner got mugged by the largest shift of wealth to the rich in American history. BuzzFlash interviewed Chuck Collins on the income redistribution scam that has been pulled off in full view of the American public, fattening the wallets of the already financially engorged fat cats.
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Mark Karlin: Can you explain what the Working Group on Extreme Inequality is and its relationship to the Institute for Policy Studies?
Chuck Collins: The Working Group was formed by a group of labor, religious and civic leaders with the goal of advancing the discussion about the dangers of extreme inequality to our economy, health, democracy and civic life. The institute helps staff the Working Group through the Program on Inequality and the Common Good. Our original work was to dramatize that "inequality matters" -- that these inequalities have undermined the quality of life for everyone.
With the economic meltdown, we've all gotten a "crash course" in how extreme inequality is bad for the economy. With wages stagnant for three decades, most working families have survived by working more hours and borrowing on credit cards and against home values, if they are fortunate enough to own one. The consumption of the bottom 70 percent of U.S. households has been based on debt -- not on real wage growth.
Meanwhile, wealth has dramatically concentrated at the top of the pyramid. The super rich in the top 1 percent put massive amounts of this wealth into the speculative casino economy -- which helped wreck the economy. In our view, extreme inequalities contributed to the economic collapse.
MK: You have a section on your Web site Extreme Inequality titled "How Unequal are We?" Well, how economically unequal have we become?
CC:We've become dangerously unequal as wealth has concentrated in very few hands. The top 1 percent has over 34 percent of all private wealth -- more than the bottom 95 percent of the population combined. In the mid-1970s, this wealthiest 1 percent had less than 20 percent of private wealth. This is a dramatic shift in a short time. We're in America's "Second Gilded Age."
This matters because wealth is power -- the power to shape the culture, to distort elections and shape government policy. A plutocracy is a rule by wealth -- and more and more, the priorities of the society are shaped by the interests of organized wealth.
We have a downloadable chart pack that has very up-to-date materials on income, wage and wealth inequality.
MK: Does your blood boil when the right-wing corporatists use "redistribution of income" as a pejorative associated with "socialism" when they have been redistributing income to the wealthy for decades?
CC: It is boiling, especially around April 15 tax day. It is a fantastic deflection. For 30 years, right-wingers have pushed for policy rule changes in the economy (trade, taxes, government spending, deregulation) that have fueled a radical redistribution of wealth from the bottom and middle of society -- to the tippy top. It's been a Robin Hood in reverse.
When President [Barack] Obama proposes to raise the top income tax rate from 35 percent to 39.6 percent, they call him a "socialist." Imagine, a 4.6 percent hike in taxes could tip us into a totalitarian socialist state.
What would these right-wing extremists call Republican President Dwight Eisenhower, who presided over a top tax rate of 91 percent on the ultra rich?The forces of organized selfishness will reflexively object to any tax, but most of the population recognizes that the price of a healthy and good society is a fair tax system and healthy communities without grotesque inequality.
MK: Your Web site discusses some of the racial dimensions of economic inequality. Can you give us a summary?
CC: If we examine these wealth disparities through the lens of race, we get another important part of the story. The legacy of racial discrimination is imprinted on today's wealth and assets ownership patterns. This historical legacy is different for each racial group, but the basic story is about systematic barriers to homeownership and wealth accumulation for people of color.
How else can we explain that the percentage of blacks, Latinos and whites who own their home is 47, 49.7 and 75 percent, respectively? And that the median net worth for an African American household ($20,600) is only 14.6 percent of the median wealth for a white household ($140,700)?
Racial discrimination in housing loans after World War II means that, two generations later, we still have very uneven wealth and asset ownership. Even before the economic crisis blew open in September 2008, tens of billions of wealth owned by people of color had vanished in the subprime [mortgage] scam.
My co-worker Dedrick Muhammad is an expert on this. You can learn a lot from being a fan of his "Bridging the Racial Wealth Divide" work on Facebook.
MK: What about hidden taxes for people who aren't rich? When we cut taxes for the rich, all of us end up paying higher fees for what were formerly free public services. For example, in Chicago, the parking meters were just privatized, and the costs for drivers skyrocketed. While we keep reducing taxes for the wealthy, the public services are still needed, so we end up paying for them through privatization and increased fees.
CC: Great example of the parking meters. I recently was asked to pitch in to buy a new chair for my daughter's public school. And here I thought that's what my taxes were for!
When you get nickel-and-dimed for services that used to be public -- or watch public services get slashed -- or have to wait longer in line or on telephone hold -- I want you to repeat this mantra: "Stop the Shrink, Shift and Shaft."
It is important to step back and see the dramatic tax shifts that have taken place over the last several decades. The neo-cons worked to shrink certain parts of government -- the parts that help non-wealthy people have decent lives and economic opportunity.
Remember anti-tax activist Grover Norquist's stated goal: "I want to shrink government to the size where we can drown it in a bathtub."
Tax responsibilities have shifted off of large wealth holders and onto wage earners, off corporations and onto individuals, off the progressive federal tax system and onto state and local tax systems, which tend to be more regressive.
Tax cuts for the rich have shrunk federal services -- and shifted responsibilities to states for health, anti-poverty, transportation and more. That's the shaft part.
The result is a weakened regulatory state -- which, by the way, was the goal of the neo-con anti-tax, anti-government activists. So speculators boost up housing or oil prices -- and we all pay more. It's a form of taxation -- although the money goes to speculators. With the lack of strong government oversight, we all end up paying more to private corporations and speculators.
One challenge is this happens in slow motion, and we adjust our expectations. But there was a time when working-class students used to get grants to help with college expenses. There was a time when there were homebuyer assistance programs that didn't require you to work through a predatory lender.
MK: Your group just released a report, "Reversing the Great Tax Shift: Seven Steps to Finance Our Economic Recovery Fairly." Can you share some of the highlights?
CC: We offer some very concrete examples of the tax shifts I just mentioned. For instance:
In 1955, when the U.S. first instituted tax day, America's top 400 taxpayers paid three times more of their income in taxes than the top 400 of 2006, the most recent year with IRS data available. If these 400 ultra-rich folks had paid 1955 tax rates, the federal treasury would have collected $35.9 billion more in revenue in 2006.
Our report found that the 139,000 U.S. taxpayers who made over $2 million in 2006 averaged $5.9 million in income. They paid an effective tax rate of 23.21 percent, compared to 49 percent effective rate that those of equivalent income paid in 1955.
If these individuals had paid taxes at the same rate as their 1955 counterparts, the federal treasury would have collected, in 2006, an additional $202 billion. That's enough money to send massive aid to the states and make more overdue investments in transforming our economy to be more sustainable.
The main part of our report identifies seven tax proposals to reverse the tax shift and raise $450 billion in revenue from the wealthy and global corporations that are playing games with the tax system.
For instance, we propose that income from wealth (capital gains and dividends) should be taxed the same as income from work and wages. That reform would generate $80 billion in revenue.When someone asks "where will the money come from," this is our answer.
MK: Can you compare the U.S. tax policy toward the rich to some other nations?
CC: The U.S. has among the lowest tax rates for an advanced industrial economy.
MK: How come so many salaries and bonuses for CEOs have grown to such enormous amounts, regardless -- in many cases -- of their performance on the job?
CC: The problem of runaway CEO pay has been alarming for 20 years. In 1980, the gap between highest and average paid workers in a company was about 42 to 1. Today, it is over 300 to 1.
Excessive pay to top managers promotes a very short-term outlook, encouraging CEOs to do whatever it takes to boost their share price for the next quarter. It provides a disincentive for long-term company health and growth.
Wall Street's culture of greed has wrecked our economy. Most ordinary taxpayers don't know we subsidize excessive pay by allowing corporations to deduct bloated pay packages.
Our group supports legislation to limit the deductibility of excessive CEO pay, such as the Income Equity Act introduced by Rep. Barbara Lee, D-Calif.
MK: How can individual Americans concerned about economic justice take action?
CC:In the next two years, there will be many opportunities to push back against the economic policies that worsened inequality. We have a president who understands the corrosive impact of inequality on people and communities.
Folks should sign up for action alerts at extremeinequality.org. We send out a monthly roundup of timely actions and activities.
MK: Are you optimistic that we will be moving toward economic justice in the coming years?
CC:Yes. There is a growing mobilized sector of society that wants a healthy and fair economy. We've seen the disaster of an economy organized around funneling wealth to the top. We all have a stake in an economy that works for everyone, not just the wealthy.
Some positive signs of the times: Some wealthy folks and business leaders agree that things are out of balance. Business for Shared Prosperity was formed to mobilize business leaders to support increases in the minimum wage.
The newly formed Wealth for the Common Good brings together wealthy individuals and business leaders to support rebalancing the tax system.
Also, please visit Chuck's tremendous site,Extreme Inequality.The truth about economic injustice will set you free from propaganda, bought and paid for by the wealthy, on taxes.