US oligarchs don't care what the majority of Americans thinks about taxing the rich -- here's why
14 February 2022
Planet's 500 richest people added $1.8 trillion to combined wealth in 2020
With one political party entirely committed to expanding inequality, and the other divided on the issue, overwhelming public support and commonsense ethical commitments don’t carry much weight.
That’s how oligarchies consolidate. The wealthy horde power and wealth, then that power and wealth gives them the ability to shape institutions to further increase their power and wealth.
Yellen has had some successes in restraining wealthy and corporate power. She negotiated an international agreement with 136 countries to implement a global corporate minimum tax of 15 percent.
At some point, corruption stops being a bug in democracy and starts becoming a feature of oligarchy.
Has the US passed that threshold?
Based on the sweeping and effective resistance to commonsense solutions to reign in wealthy tax scofflaws, the answer is not encouraging.
Since the 1970s, the United States has become steadily and inexorably more economically unequal. According to Pew, upper income families have brought in a larger and larger share of total income.
US income inequality is the highest of all G7 nations. Its Gini coefficient is .434, well above second highest UK at .392.
In 1968, the top 20 percent of households earned 43 percent of national income. By 2018, the top 20 percent of households earned 52 percent.
In 1989, the richest 5 percent of families had 114 times as much wealth as families in the second poorest income tier. In 2016, they had 248 times as much wealth.
In 2020, the 50 richest Americans had almost as much wealth as the poorest half of the US population.
This massive concentration of wealth is also a massive concentration of power. The wealthiest people have access to the best lawyers, the best tax attorneys and the most powerful politicians.
That means that it is very difficult for the government to restrain them, or to create a more equitable economy and society against their wishes.
That’s how oligarchies consolidate. The wealthy horde power and wealth, then that power and wealth gives them the ability to shape institutions to further increase their power and wealth.
An example of oligarchical power is billionaire tax evasion. A recent IRS study found that wealthy Americans conceal more than 20 percent of their earnings. They are able to do this because of complex accounting scams involving offshore tax shelters.
The lost tax costs the government at least $175 billion a year in revenue. The top 1 percent of earners are responsible for a third of unpaid federal taxes.
In addition to these straightforwardly illegal accounting tricks, the very wealthy also benefit from at least nominally legal loopholes.
For instance, wealthy people have many assets that increase in value over time, but they do not pay taxes on those assets until they sell them.
They can borrow against those assets without paying taxes, since again the assets aren’t considered income. Then, if they die before selling the assets, they can pass them on to their heirs using trusts and other accounting shenanigans to avoid the estate tax.
ProPublica called this strategy Buy, Borrow, Die. It’s a key method for hoarding generational wealth, and entrenching oligarchy.
The Biden administration, led by Secretary of the Treasury Janet Yellen, have proposed strong measures to rein in billionaire corruption. In part, they want to restrain inequality. In part, they hope to fund other priorities like climate mitigation and anti-poverty measures in the administration’s Build Back Better infrastructure plan.
To address billionaire tax evasion, BBB included $80 billion to boost capacity and staff at the IRS. That would help make up for the steady budget-cuts under Republican administrations. Those have led to a 60 percent decrease in audits of taxpayers who earn more than $1 million. Biden said the investment would allow the IRS to collect $400 billion in taxes.
Biden, Yellen and Senate Finance Chair Ron Wyden have also been pushing for a billionaire tax to force the very wealthy to pay taxes on the increased value of their assets.
This would strike at the heart of the oligarchic “Buy, Borrow, Die” lifestyle. It would force the ultra-wealthy to pay their fair share, like everyone else, every year, year after year.
Policies that prevent the rich from escaping a tax burden everyone has to pay should be easy to pass in a democracy. You’d think preventing billionaires from cheating on their taxes would be a popular policy.
And you’d be correct.
A 2019 poll, for example, showed that 76 percent of Americans agreed that the wealthiest should pay more in taxes. Proposals to tax income over $10 million at 70 percent — a huge increase over current rates — obtained more than 50 percent support.
In an oligarchy, though, public support doesn’t necessarily count for all that much.
A notorious 2015 study found that politicians were much more likely to listen to and follow the political preferences of economic elites than those of the less affluent.
You can see that playing out in the politics of billionaire taxation.
Build Back Better, which included the beefed-up IRS funding, was scuttled by millionaire West Virginia Senator Joe Manchin, in large part, reportedly, because he was worried that poor parents would spend money on drugs.
A wealthy politician refused to enforce the law against billionaires because he was worried that poor people are natural criminals.
That is what you call class consciousness.
Wyden’s proposal to end “Buy, Borrow, Die” also failed after opposition from Manchin. It was of course opposed by Senate Republicans, whose main goal is to shovel as much money as possible to the rich in as short a time as possible.
Yellen has had some successes in restraining wealthy and corporate power. She negotiated an international agreement with 136 countries to implement a global corporate minimum tax of 15 percent. This would make it harder for businesses to escape tax burdens by moving their corporate offices. Congress still has to pass the treaty, but Yellen said she was confident they would do so.
The corporate minimum tax is a substantial achievement. But it’s also a small dam erected against the tsunami of inequality in the US.
With one political party entirely committed to expanding inequality, and the other divided on the issue, overwhelming public support and commonsense ethical commitments don’t carry much weight.
The wealthy have been expanding their power and influence for decades in the US. The result is that the US regularly chooses to make the rich richer rather than helping the poorest feed their children.
The outlook for change is likely to be even bleaker if Republicans recapture one or both legislative chambers in November.
Yellen and Biden are to be commended for fighting an ongoing rearguard action against corruption. But if government inability to restrain corruption is a feature of oligarchy, then the US is already well down a path that it is very difficult to retrace.