It’s time to end “wealthfare”
By Gerald E. Scorse, special contributor to
Progressive Charlestown
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| And this just counts subsidizes to corporations. Add to that the tax breaks for the Top 1% and it comes to more than $1.5 TRILLION dollars! |
In 1996, making good on a shrewd political promise,
President Clinton ended "welfare as we know it". In 2017, battered by
election losses, the Democratic Party should double down on a far bigger
reform: ending "wealthfare" as we know it.
The mission couldn't begin at a worse time, or a
better time. The triumphant GOP, trifecta in hand, is off in its usual
direction. The party is giddy at the prospect of handing another huge tax cut
to the rich, including the elimination of an estate tax that affects less than
one-third of one percent of all Americans.
If the idea of making the rich richer sticks in your
craw, you're not alone. Americans of all political stripes have had it up to
here with a rigged system, and nothing says rigged louder than "wealthfare".
"Welfare as we know it" met its end because
Everybody Just Knew the money went to people who didn't deserve it.
"Wealthfare" has reached its apotheosis
because Everybody Just Knows the money goes to people who do deserve
it. They're all supposed masters of the universe, hardworking, hard-driving job
creators; the rest of us, awestruck, can only properly show our gratitude by
showering them with more money. We do this in myriad ways, most blatantly with
tax expenditures.
The Tax Policy Center defines tax expenditures (a.k.a.
tax breaks) as "the estimated revenue losses from special exclusions,
exemptions, deductions, credits, deferrals, and preferential tax rates in
federal income tax law."
For fiscal 2018, the Office of Management and Budget estimates those losses at more
than $1.5 trillion, slightly more than the amount paid in individual
income taxes in 2015. Putting it another way, the Treasury will lose more
revenue in fiscal 2018 from tax breaks than it took in from personal income
taxes in 2015.
According to a TPC analysis, the top 1 percent of the
income hierarchy receive 32 percent of all benefits from itemized deductions;
even more, the same 1 percent receive over 62 percent of the benefits from
preferential rates on capital gains, dividends and related preferences.
Lower rates on capital income than labor income are
the biggest single driver of income inequality. Modest moves by President Obama
to raise capital-gains taxes for those making upwards of $200,000 were enough
by themselves to reduce such inequality for the first time in years.
Now, of
course, a GOP-controlled Congress could well do away with Obama's actions (all
in the supremely ironic, "alternative fact" name of tax reform).
These few paragraphs barely scratched the surface of
"wealthfare". Here are two books that dig far deeper, without
ever mentioning the word:
Dean Baker, "Rigged: How Globalization
and the Rules of the Modern Economy Were Structured to Make the Rich Richer; James
Kwak, Economism: Bad Economics and the Rise of Inequality.
Baker's book speaks to "an enormous upward
redistribution of income in the United States in the last four decades...
[This] was not the result of globalization and the natural workings of the
market. Rather it was the result of conscious policies that were designed to
put downward pressure on the wages of ordinary workers while protecting and
enhancing the incomes of those at the top."
Kwak writes that bright-eyed collegians, hungry for
answers, too often take as gospel the elegant graphs and theorems of Economics
101. They become easy prey for a central belief of supply-side economics: the
virtue of "reducing the tax burden for the very wealthy." That's no
problem at all, given "the particular zeal politicians have for reducing
or eliminating taxes on investment income--money you earn by sitting around and
watching your assets grow."
Taken together, the books make a compelling case for
pulling back from individual-centered "wealthfare" and
putting the money instead toward the common good (infrastructure, for
instance).
At this point I'm proud to introduce Sheryl J. Grana,
a professor at the University of Minnesota and a fierce "wealthfare" critic . You'll
meet her at the end of the following comments thread to a recent article on the
website Truthout.
Barry: It
is well-known that great wealth [and the trans-generational passing of such
wealth] undermines democracy. It really is about time to demand that the rich,
who have benefited most by our economic system, pay [their fair share].
Re-asserting inheritance taxes on estates over $5MM and increasing long-term
capital gains rates to at least that of ordinary income would be a good
start....
Gerald: Re
estate taxes, the phrase "death taxes" has unfortunately turned the
majority of Americans against them; this has been a huge framing victory for
the right, especially of course for the rich...
Josh:
Framing of the "death tax" is akin to the framing of welfare. If only
equivalent statistics of "wealthfare" could be
exposed. About 10 years ago, my freshman sociology professor drilled into the
class that "wealthfare" costs 7 times that of
welfare. I can only imagine that the difference has increased.
Gerald:
Love the term "wealthfare," kudos to your sociology
professor. I've heard "welfare for the rich" before, but not "wealthfare":
much catchier.
Josh: A
professor each and every incoming freshmen, let alone upperclassman, would duly
benefit from, Dr. Sheryl J. Grana relentlessly seizes your attention with
subject matter, perspective, and the skills of a seasoned orator...
Gerald E. Scorse
helped pass the bill requiring basis reporting for capital gains. He writes on
taxes.
© 2017 Gerald E. Scorse