Column: Progressive taxation is key to a just society

  • Steve Nelson

For the Valley News
Friday, February 01, 2019

Newly elected House members, especially the colorful Alexandria Ocasio-Cortez, of New York, and the estimable Sen. Elizabeth Warren, of Massachusetts, have ignited a fiery debate over progressive taxation and a just society.

Ocasio-Cortez proposed a top marginal income tax rate of about 70 percent and the punditry went wild. She was accused of being a dangerous dilettante, despite her proposal being endorsed by several Nobel Prize winning economists. Warren, not to be outdone by an upstart provocateur, came out with an unprecedented proposal to tax actual wealth, not just income, at rates of 2 or 3 percent depending on how massive a wealthy person’s assets are. According to economist Emmanuel Saez, Warren’s proposed wealth tax would raise $2.75 trillion over 10 years. The Washington Post estimates that Ocasio-Cortez’s 70 percent top income tax rate would generate $700 billion over the same 10-year period.

To the surprise of, well, no one, rich people and their political allies were apoplectic. Grover Norquist, the lobbyist who coined the “drown government in the bathtub” phrase, likened a 70 percent top rate to slavery. The alarmist reaction is based on revisionist history and intentional obfuscation. As to history, 70 percent was the approximate top rate from 1936-1980, a period of remarkable economic growth. As to intentional obfuscation, the proposed 70 percent rate would apply to only the part of one’s income above $10 million. So, according to Norquist, a multi-millionaire crossing this threshold, while still having $6 or 7 million left in disposable income, would be forever enslaved. Sign me up for shackles if this is slavery.

But I don’t write to provide an economic analysis of these rates. It’s complicated, although history shows that all the dire predictions associated with tax increases — job loss, business constriction, recession — have never come to pass. To the contrary, there is a strong association between progressive taxes and economic vitality.

The emotional response is more illuminating. In my readings and obsessive wallowing in comment sections of news articles, several themes arise. Perhaps most “enthusiastic” is outrage that the government would “confiscate” the hard-earned income of America’s best and brightest. “They deserve it!” Of course it is mostly “they” who claim that “they” deserve it. It is the entrepreneurs and risk-takers who make America great, “they” say.

I have long been humored by the absurd idea that the wealth accumulated by entrepreneurs and businessmen is hard earned. I made a pretty decent living and, while experiencing some added stress with more responsibility, I worked less hard as I became more successful. Sure, I had experience and judgment that helped, but mostly I won the game that is played in most businesses and organizations. Being white helps a lot. Being male helps a whole bunch. Knowing certain social conventions and being reasonably well educated was useful.

The very wealthy folks I have known, and there have been many, have more leisure time, more freedom to manage their own personal affairs and less stress from being at the mercy of others. And the very wealthy I’ve known are not smarter, more creative or virtuous than the folks who work for them or for other wealthy executives. It’s all a complex social sorting based primarily on several kinds of privilege combined with aggression in many cases. America’s greatest myth is that people deserve what they get and get what they deserve.

That myth always been false, but it is now more so.

Many of the richest Americans are simply playing a complex casino game where they are the “house.” Hedge fund billionaires don’t produce anything but the vigorish on financial transactions. During the past four or five decades, producing things has dropped from 25 percent of economic activity to about 10 percent and profiting from transactions (finance, insurance and real estate) has increased from about 10 percent to about 25 percent.

Wealthy people claim to do more “good” through philanthropy than would be accomplished by government programs funded by their tax dollars. Also false.

Virtually every study shows that government programs are more efficient. And I, for one, don’t care to have plutocrats driving social policy by supporting their personal preferences. I vote for legislators to do that, although that hasn’t been going so swimmingly well recently. But I still like Congress more than I like the Koch brothers or the Walton family.

Critics intentionally ignore the real work that creates “wealth.” Over these past decades, workers (even in the transaction businesses) have seen incomes shrink as the richest folks skim off more and more of the cream.

And we mustn’t ignore the abundant public resources that are available to entrepreneurs, businesses and corporations, most of whom do not pay their fair share. They benefit from public infrastructure, national security and many other things. In recent years, they have gone even further and transferred responsibility for the well-being of their workers to the rest of us. There are many egregious examples, like the growing number of low-wage workers at places like Walmart who depend on government benefits to survive.

Corporations are licensed by us, the people, and have a right to exist and do business based on the needs and values of society. Having a corporate charter to operate a profitable business is a privilege, not a right. We live in a society, not an economy.

Progressive taxation and redistribution of wealth is the only way to craft a truly civil society.

Steve Nelson lives in Boulder, Colo., and Sharon. He can be reached at stevehutnelson@gmail.com.