The Key to the Brexit Backstory
How did Britain’s wealthy take the end of the British empire? Not well — and the rest of us are still paying the price.
Americans today can take more than inspiration from the struggles against plutocracy that progressives waged years ago. They can take a host of still relevant — and cutting-edge — policy proposals.
Our contemporary billionaires, most Americans would likely agree, are exploiting our labor and polluting our politics. Can we shrink our super rich down to a much less powerful — and more democratic — size? Of course we can. We Americans, after all, have already done that shrinking once before.
Between 1900 and the 1950s, average Americans beat down plutocrats every bit as dominant as ours. A century that began with huge private fortunes and most Americans living in poverty would come to see a mass middle class and suburban developments where grand estates and mansions once stood.
Most of us today, unfortunately, have no inkling that this huge transformation even took place, mainly because that exuberantly middle class America of the mid 20th century has disappeared. Those grand mansions have come back.
Does this super-rich resurgence make failures out of our progressive forebears, the men and women who fought so hard and so long to limit the wealth and power of America’s wealthiest? Our forebears didn’t fail, suggests a new book I’ve just done. They just didn’t go far enough.
Those progressives accomplished incredible feats, relates the just-published The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class. They “soaked the rich” at tax time. They built a union movement that acted as a real check on corporate arrogance and greed.
But these great victories have long since faded away. How can we get back on a plutocracy-busting track? We could start by revisiting those struggles of years past that came up short, those proposals that, had they become law, might have lastingly leveled down our super rich.[pullquote]How can we get back on a plutocracy-busting track? We could start by revisiting those struggles of years past that came up short.[/pullquote]
The Rich Don’t Always Win explores a host of these proposals. Here we spotlight just five.
One: Require the rich to annually disclose the income they’re reporting to the IRS and how much of that income they actually pay in taxes.
Eighty years ago, just like today, America’s rich were routinely and massively avoiding and evading taxes.
If wealthy taxpayers knew their returns would be open to public inspection, reformers argued, they would be far less audacious with their tax games. Disclosure would also help lawmakers identify the tax loopholes that most needed plugging.
In 1934, progressives actually added a disclosure provision to the tax code. But the super rich counterattacked with a media blitz that tied disclosure to the infamous Lindbergh baby kidnapping. If all rich Americans had to disclose their incomes, the argument went, kidnappers would gain a wider pool of targets.
This PR juggernaut carried the day. Congress repealed the disclosure mandate. But the basic idea behind income disclosure remains as promising as ever.
Two: Leverage the power of the public purse against excessive corporate executive pay. Congress couldn’t directly set limits on private corporate executive pay, yesterday’s progressives understood. But Congress could impose limits indirectly by denying federal government contracts and subsidies to corporations that lavished rewards on top executives.[pullquote]Congress once set an indirect limit on CEO pay by denying certain federal contracts to corporations that lavished rewards on their top execs.[/pullquote]
In 1933, then-senator and later Supreme Court justice Hugo Black won congressional approval for legislation that denied federal air- and ocean-mail contracts to companies that paid their execs over $17,500, about $300,000 in today’s dollars.
But the New Deal never fully embraced the Hugo Black perspective. We could now, by denying federal contracts and tax breaks to any companies that pay their CEOs over 25 times what their workers are making.
Three: Give Americans a safe alternative to private banks. For Louis Brandeis, a reform giant who also became a Supreme Court justice, prohibiting financial institutions from speculating with the savings of average Americans always remained a top priority.
In the early 1930s, Brandeis advocated the expansion of postal savings banks, a system — in effect since 1911 — that paid 2 percent interest on modest savings accounts maintained with the post office. That expansion never took place, and postal savings banks withered away. They deserve a second shot.
Four: Tax undistributed corporate profits. America’s biggest corporations are currently sitting on stashes of cash that have hit mega-billion levels. Money that could be invested in creating jobs sits instead in income-generating financial assets that only sweeten corporate bottom lines and executive paychecks.
A similar problem plagued the nation back during the Great Depression, and progressives pushed for a stiff tax on these “retained earnings.” In 1936, Congress passed a watered-down version of this tax that didn’t last and didn’t make much of an impact. A stronger tax today just might.[pullquote]In 1942, President Franklin Roosevelt proposed a 100 percent tax on all individual income over what today would equal $355,000.[/pullquote]
Five: Cap income at America’s economic summit. In 1942, in the midst of a war-time fiscal squeeze, President Franklin Roosevelt proposed a 100 percent tax on all individual income over $25,000, the equivalent of about $355,000 today.
Congress didn’t go along. But lawmakers did set the top tax rate at 94 percent on income over $200,000, and federal income tax top rates hovered around 90 percent for most of the next two decades, years of unprecedented prosperity.
America’s rich fought relentlessly to curb those rates. They saw no other way to hang on to more of their income. But what if we restructured the top tax rate of America’s postwar years to give the rich a new incentive.
We could, for instance, set the entry threshold for a new 90 percent top rate as a multiple of our nation’s minimum wage. The higher the minimum wage, the higher the threshold, the softer the total tax bite out of the nation’s highest incomes.
Our nation’s wealthiest and most powerful, under this approach, would suddenly have a vested interest in enhancing the well-being of our poorest and weakest.
Years ago, progressives yearned to create an America that encouraged just that sort of social solidarity. They couldn’t finish the job. We still can.
Veteran labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, has just been published by Seven Stories Press.