‘We Are Not Taxing the Very Wealthy Enough’: Runaway Inequality About to Get Worse
The United States' astronomical levels of economic inequality are poised to become further entrenched in the coming years.
Pundits and political scientists are always searching for that simple theory that’ll explain just what makes our politics tick. Where should they be looking? How about in the eyes of a billionaire at tax time?
By Sam Pizzigati
Physicists the world over have been all abuzz lately. A new research breakthrough has them tantalizingly close to a “grand unified theory” of how absolutely everything in the physical universe actually works, the holy grail of modern physics ever since the days of Albert Einstein.
A “grand unified theory of everything,” of course, could also come in handy for our political universe. Just imagine how much more comprehensible our world would seem if we had a single “grand” proposition to help us make sense of the strange and unconnected political realities we see all around us.
And what might that grand proposition be? In honor of this week’s tax filing deadline, let’s try this one: Rich people really really don’t like paying taxes.
Can a proposition this simple explain everything?
Well, go ahead. Pick a political phenomenon in the United States today. Somewhere in the shadows, if you dig deep enough, you’ll find a billionaire feverishly pulling levers to avoid paying higher taxes. Or some pol, just as fevered, working to remain in that billionaire’s good graces.[pullquote] Our proposition: Rich people really really don’t like paying taxes.[/pullquote]
Take, for instance, the stunning fall into political irrelevance of David Camp, the long-time conservative Republican congressman from Michigan who chairs the powerful House Ways and Means Committee.
Journalists almost always use the word “powerful” when they describe the Ways and Means panel. Only real players in Washington’s power circles ever rise to the top of Ways and Means. David Camp certainly rated as one of these players.
Camp has also always fancied himself a serious legislator, and, a few years back, he launched a mammoth effort to “simplify” the U.S. tax code. Camp took no shortcuts. His panel created 11 bipartisan working groups and conducted 30 separate hearings, then sought feedback on three substantial draft proposals.
Late in February, in a deeply polarized Congress, Camp revealed the surprising fruits of this intense labor, a proposal that actually made an effort to appeal across the political aisle. Most notably, Camp’s plan called for an end to some of the tax breaks and loopholes nearest and dearest to America’s super rich.
One prime target in the Camp proposal: the “carried interest” loophole, the tax code provision that lets private equity and hedge fund wheelers and dealers claim the bulk of their income as capital gains and, in the process, cut their tax bills by almost 50 percent on every million of carried-interest income.[pullquote]Most of the nation’s wealthy wouldn’t have felt any significant new tax bite from the Camp plan.[/pullquote]
Camp made no move to hide what he was proposing. “Stop Subsidies for Excessive Compensation,” the promo package for his plan trumpeted. “Wall Street tycoons,” the text continued, “receive compensation packages riddled with special tax-exempt treatment — courtesy of hardworking taxpayers.”
Camp’s overall plan, to be sure, did have a rich people-friendly cast, mostly from cutting the top tax rate on ordinary income from 39.6 to 25 percent, with a 10 percent surtax on income over $464,000 for joint filers.
The bottom line: Most of the nation’s wealthy wouldn’t feel any significant new tax bite from the Camp plan at all. But some would. And that possibility terrified Camp’s GOP congressional leadership colleagues. They didn’t just refuse to rally around his proposal. They recoiled from it. The Camp plan, three years in the making, sank out of political sight in an instant.
Now Camp has decided to sink out of sight, too. Two weeks ago, a month after the frightfully fast flame-out of his life’s legislative labor, the 60-year-old Camp announced he would not be seeking re-election to Congress. Rich people, David Camp had failed to remember, really don’t like to pay taxes.
This same “grand unified theory” for all things political in 21st-century America works just as well on a more defining phenomenon of our time: the incredibly over-the-top conservative opposition to Obamacare.
On its face, this unrelenting opposition to President Obama’s Affordabe Care Act makes little sense. The basic policy framework of the Obama health care reform, after all, comes from a conservative think tank. That framework first translated into actual law, at the state level, under a Republican governor.[pullquote]Why have GOP leaders spent the last four years ranting against Obamacare?[/pullquote]
So why have GOP leaders spent the last four years ranting against Obamacare and making full-throated hostility toward it their political end-all and be-all?
Some suggest a purely partisan explanation: Whatever President Obama pushes, Republicans must oppose. But the Obama White House has also pushed hard on a controversial education agenda that revolves around a widely unpopular — at the grassroots — high-stakes-testing regimen.
Why have conservatives in Congress done so little to make Obama pay for this unpopularity? Why have they focused so single-mindedly on Obamacare?
Maybe because rich people don’t like to pay taxes — and Obamacare does more to raise taxes on the rich than any legislation over the last two decades. The Obama Affordable Care Act puts in place a 0.9 percent payroll tax and a 3.8 percent tax on investment income for couples making more than $250,000.
The Affordable Care Act also sets a welcome corporate tax precedent. Under the legislation, health insurance corporations will no longer be able to deduct off their taxes any top executive pay they shell out that runs over $500,000 per exec.
The combination of all these tax measures amounts an appreciable hit on the incomes of America’s most financially fortunate. And those fortunate have done their best, right from the start, to wipe that hit away.
Remember that initial summer 2010 Tea Party explosion of anger at Obamacare? Paid for and delivered by the millions of billionaires like the Koch brothers.
Our grand unified theory of contemporary America’s political universe may not wind up explaining every phenomenon that streaks across our political landscape. But we live in a plutocracy. The longer this plutocracy lingers, the grander an explanation our grand theory will surely be.
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, 1900-1970.