Informed Americans understand that an economic war has been waged against the middle and lower classes.
On February 15, 2016, Paul Buchheit writes on Nation Of Change:
It came up in the Republican debate again, the curious notion that striving for less inequality is somehow a form of “class warfare.” The implication is that the richest people earned everything they have through their own initiative and hard work. But most of them have exploited an American financial system that has facilitated the transfer of our national wealth to the people who manage that wealth.
Informed Americans understand that an economic war has been waged against the middle and lower classes. As a result, there are at least five good reasons why the tax rate on the upper classes should be MUCH higher.
1. Massive Redistribution Has Occurred. Upward.
Total U.S. wealth increased by a stunning 60 percent since 2009, from $54 trillion to $86 trillion, but 3/4 of that massive increase went to the richest 10% of Americans. According to the New York Times, the wealthiest Americans have formed an “income defense industry” to shelter their riches, with, “a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.” From 2003 to 2012 the average income tax rate paid by the richest 1% went down, while for the 99% it went up.
2. Subsidies to the Rich are SIX Times Greater Than Subsidies to the Poor
The cost of the entire Safety Net is only about ONE-SIXTH of the $2.2 trillion in tax expenditures, tax underpayments, tax havens, and corporate nonpayment, the great majority of which went to the richest Americans.
3. The Super-Rich are the Main Beneficiaries of Our Nation’s Prosperity
All the technology in our phones and computers started with government research at theDefense Department, the National Science Foundation, the Census Bureau, and publicuniversities. The Internet made possible the quadrillion-dollar trading capacity of the financial industry. Google is using some of its billions to buy technologies that were built by DARPA with our tax dollars. Pharmaceutical companies wouldn’t exist without money from the taxpayers, who have provided support for decades through the National Institutes of Health, and still pay over 80 percent of the cost of basic research for new drugs and vaccines. Big firms use intellectual property law (another gift from the taxpayers) to snatch up patents on any new money-making products, no matter how much government- and university-funded research went into it.
There’s much more. The wealthiest individuals and corporations are the main beneficiaries of tax laws, tax breaks, property rights, zoning rules, patent and copyright provisions, trade pacts, antitrust legislation, and contract regulations. The largest companies benefit, despite their publicly voiced objections to regulatory agencies, from SBA and SEC guidelines that generally favor business, and from FDA and USDA quality control measures that minimize consumer complaints and product recalls. Businesses rely on roads and seaports and airports to ship their products, the FAA and TSA and Coast Guard and Department of Transportation to safeguard them, a nationwide energy grid to power their factories, communications towers and satellites to conduct online business, the Department of Commerce to promote and safeguard global markets, the U.S. Navy to monitor shipping lanes, and FEMA to clean up after them.
But instead of paying for all the taxpayer-funded benefits, S&P corporations have spent 95 percent of its profits on stock buybacks and dividend payouts to enrich their investors.
4. Progressive Taxes Actually Work
The prominent economic team of Piketty and Saez and Stantcheva determined that “the top tax rate could potentially be set as high as 83%” before the highest earners are discouraged from attempting to earn more. The National Bureau of Economic Researchgoes further, proposing a top marginal rate of 90%, and even some conservative analystsconcede that the optimal maximum may be at least 50%.
Since the 1970s libertarians and business leaders have rallied behind trickle-down theory. Thus a series of tax cuts for the rich. But evidence from numerous sources leads to the conclusion that there is no correlation between tax cuts and GDP growth, and that in fact the cuts cause governments (as common sense would dictate) to lose revenue.
5. Higher Taxes Won’t Make Rich People Leave
During the Republican debates Chris Christie claimed that higher taxes caused wealthy New Jersey residents to leave the state. It’s not true. A Stanford study found that lower-income residents left New Jersey at approximately the same rate. “Overall,” said the authors, “higher income earners show greater residential stability and geographic embeddedness than do low income earners.”
A Conclusion: The Washington Examiner referred to Bernie Sanders as an “elderly extremist.” Elderly, yes. But as Democratic debate moderators noted, over two-thirds of Americans favor increased taxes on people making over a million dollars. The desire to reduce inequality is not extreme at all.
In the short term of reforming the system, a progressive personal tax rate is necessary as an emergency measure, with the tax revenues used to upgrade government services and the nation’s infrastructure.
However, what is not discussed in this article is the tax rate on corporations, which should be significantly raised to at least 80 percent with all loopholes and subsidies eliminated.
To encourage corporations to pay out all earnings to their owners (shareholders own the corporation, and are entitled to the income generated by what they own), dividends should be tax deductible to the corporation. Thus, for those corporations fully paying out the earnings to their rightful owners, there would be no corporate tax. The dividends would be treated as ordinary income by the shareholder, who would pay the appropriate personal tax rate, depending on income earned from all sources.
Significantly, as part of the system reform, we must empower EVERY child, woman and man with the right to purchase capital assets represented by newly issued shares of stock in financially sound corporations, with the full stream of income attributable to those shares paid out to the new shareholder, who first uses the dividends to pay for the shares, then — after the shares are paid for — to meet his or her living expenses. Dividend income should be treated as ordinary income by the shareholder, with a tax deferral if the dividends are used to make payments on the shares purchased.
Corporations would finance growth not by retaining earnings or borrowing on behalf of the present owners (both techniques concentrate capital asset ownership), but by issuing new equity shares, which would be purchased with insured, interest-free capital credit, repayable out of future earnings generated by the investments. Thus, past savings and equities would not be required to secure the new asset-based capital credit money used strictly for economic growth investment.
This new economic policy direction should be adopted by leaders committed to restructuring the legal and financial system to grow the economy at maximum rates with no inflation. This can be done in ways that build a Just Third Way version of economic democracy as the essential foundation for effective political democracy.
The proposed Capital Homestead Act offers for every citizen a private property, free market-oriented alternative for saving the Social Security System as a national retirement income security plan. At the same time, the Capital Homestead Act offers a new national policy to foster life-long “capital self-sufficiency” as a means to achieve true economic independence for all Americans. If implemented, capital ownership would be systematically de-concentrated and made directly accessible to every person, without reducing property rights for anyone.
This is the basis of the “Capital Homestead” concept proposed by the Center for Economic and Social Justice (www.cesj.org). Briefly, the Capital Homestead Act is a comprehensive legislative program of tax, monetary, and fiscal reforms to make every citizen a shareholder in the technological frontier. It is designed to connect every child, woman, and man to the global economy as a fully empowered participant and owner of new technologies through private property, that is, direct ownership of all forms of wealth-creating, income-producing productive capital.
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.