At some point, the happy, happy, joy, joy political strategy of tax cuts has to peter out. After all, there’s a zero lower bound to tax cuts. Once there are no taxes, cuts are no longer possible. Unless the goal is a taxless America, cutting taxes has to stop some time. Some of us have already decided that tax cutting has gone too far. Of course, we tend to believe in programs like Medicare and see the value in providing a good education. We realize that safe, well-tended roads and bridges don’t build and maintain themselves. And after severe tax cuts and senseless spending by the last Republican president, many of us now realize that taxes will have to be increased.
Fifteen years ago, it was political suicide to oppose a tax cut. Today, President Obama is proposing modest tax increases (if calling the expiration of the Bush Tax Cuts an increase) on the very rich, small increases on the upper middle class, and nothing for bottom 60%. As I write this, Senate Democrats now have enough votes to pass Obama’s tax plan, which came as a surprise to the GOP. TPM reported that ”Senate Majority Leader Harry Reid has enough votes to pass President Obama’s plan to extend the Bush tax cuts for everyone’s first $250,000 in income, according to his office … if Republicans agree not to filibuster it.” Minority leader Mitch McConnell has accused Democrats of playing “Russian roulette with the economy.”
The times are changing.
And they should. As Eric Alterman deftly sums it up,
The income of the top 1 percent of Americans increased by 256 percent between 1979 and 2006, while the lowest quintile saw its income rise by an average of just 11 percent during the same period. As the Nobel laureate economist Joseph Stiglitz has noted, this same 1 percent now enjoys almost “a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent…. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.”
Worse, America is losing its claim as the land of opportunity.
What’s more, while the party in the penthouse grows more and more decadent, the ladder upstairs is being pulled out for the folks who might like a hand up… According to a 2006 study, 42 percent of American men raised in the bottom fifth of incomes stay there as adults. This is a much higher rate than those of the allegedly class-stratified nations of Europe: Denmark’s level is only 25 percent, while terrible old Great Britain’s is just 30 percent. Roughly 62 percent of Americans (male and female) raised in the top fifth get to stay in the top two-fifths. Likewise, 65 percent of those born in the bottom fifth stay in the bottom two-fifths.
At the root of the growing disparity is tax policy. Not only have we cut property and income taxes, we’ve cut the capital gains tax rate that most affects wealth, which really drives economic inequality. Capital gains used to be taxed at the same rate as earned income. This changed under Ronald Reagan. Warren Buffet likes to point out, he’s taxed at a lower rate than his secretary. The reason: most of his money come from investments, which are taxed at 15%.
This graph between Romney and Obama’s tax policies may not be worth 1000 words, but it’s damn pretty revealing. It tells a tale of two Americas, one in which disparity grows, the middle class continues to shrink, and wealth continues to accrue in the hands of a few. Republican tax cuts aren’t just a matter of fairness, they are a matter of corruption, the corruption of democracy. The quality of American depends on the distribution of money. If money accumulates in the hands of few, if tax policy continues to redistribute income away from the middle class, democracy will die. We will continue down the path of plutocracy and away from America’s true faith in democracy. It’s an age old tale with a moral we can all recite and tend to forget: “The love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.”
NOTE: For anyone curious about the income of the top 1%, but the NYT’s Economix blog explains it well:
American households right at the 99th percentile (that is, the cut-off for the top 1 percent) will earn about $506,553 in cash income this year, according to a Tax Policy Center analysis. The income curve is very steep at the high end, meaning that people just a few tenths of a percentile point above that make much, much more. A family at the 99.5th percentile, for example, makes $815,868; its neighbor at the 99.9th percentile makes more than double that, at $2,075,574 a year.