Just My Luck – Chapter 14–1
Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.
My invitations to dance with the Grim Reaper kindled a great deal of thought about a life worth living. My concern for serving others naturally includes exploring the idea of social justice, a cornerstone of Democracy that appears to be in jeopardy.
Bad Signs of Things to Come
Social justice is impossible absent an economic system that empowers all people appropriately. By appropriately I mean supported in meeting life’s basic needs and having no unfair impediments to finding and enjoying economic and social opportunities. The simple premise at the foundation of this idea is that equal opportunity for all does not necessarily imply equal success for all, but unequal opportunity that makes failure a virtual certainty does not serve a the spirit or the operation of a Democracy.
The more lopsided an economy becomes the more difficult it is for more and more people to meet life’s basic needs. There is ample evidence of this in the American Economy today. I worry that if we don’t wake up and find a way to distribute our nation’s phenomenal wealth much more proportionately, we will be courting a disastrous socio-economic implosion.
The gulf between the wealthy and the rest of us has already widened to the point where we can hardly communicate one side to the other. The polarization of politics is an urgent warning of the polarization in the body politic. The dwindling areas of common ground between the haves and the have nots threaten to rip apart the fabric of our democratic systems. The next Civil War in America will not be fought for territory, it will be economically driven, a fight over the fundamental distribution of wealth.
To divert away from the dangerous path our economy is taking I propose that it is in the best interests of the wealthiest 10% of our nation to not only cease opposition to taxes designed to re-balance the economic playing field , but to champion those tax reforms. Warren Buffett should not be alone in his contention that the wealthy pay much less than they should in taxes.
The bridge and insulation between the wealthy and those below the poverty line has historically been a strong middle class. Tax immunities first granted to the rich in the 1980s and enhanced handsomely thereafter, enabled the 10% to build ever higher mountains of money . Comparisons to the age of the “robber barons,” who amassed ridiculous wealth with no taxes early in the 20th Century, are really not far from the mark.
Meanwhile the middle class has been the repository from which most of the money has been drawn to further swell the mountains of wealth of the 10%. (Hey, it had to come from somewhere.) Furthermore the middle class has borne and will continue to bear the lion’s share of the growing national debt fed by the deficit spending needed to compensate for the loss of tax revenues no longer collected on half of our nation’s wealth for the past 30 or so years.
Further, as the leading taxpayers in this country, it was primarily the middle class who paid for the train wreck of the latest economic meltdown caused by careless bankers and other financiers of the 10%.
It would be foolish to continue to erode the middle class buffer, forcing many to join the ranks of the impoverished. Absent the middle class, the 10% may face hoards of hungry, angry, disenfranchised 90%ers with little or nothing left to lose.
I’m no Economist, but having no corporate blinders or “loyalties” to cloud my vision, I can see how things are operating. I firmly believe we have to change the ways we interpret the goals and principles of Economics in America and put them into action before it is too late.
The Lifeblood of the Economy
If, as I have often heard experts say, “the lifeblood of the economy is consumer spending,” shouldn’t the flow of money be as robust as possible?
When the gulf between the few money-hoarding rich and the hoards of the money un-rich is as wide as it is today, have we not isolated a massive reservoir of dormant buying power in the neighborhoods of the rich?
If the main purpose of this massive reservoir of money is just to grow bigger, how does this churning massive body of wealth contribute to the consumer spending needed for a healthy economy for all?
It simply doesn’t.
Since roughly half of the money of the body politic resides in the hands and serves the interests of the wealthiest 10% of people in this country, the remaining 90% of the body politic is being starved of the nutrients needed to survive. The power of consumer spending is concentrated in the rich, leaving only half of lifeblood of the economy thinly dissipated among the 90% un-rich.
The only place where the economy has been robust in the past several years is among the rich. For a truly robust countrywide US economy to operate, it seems obvious to me that the buying power in the economy needs to be more evenly distributed. More of the lifeblood needs to be released to nourish the whole body politic.
I am NOT suggesting that we need some utopian level playing field where everyone has an artificial equal share of the buying power simply because they are alive. The arguments against this foolishly simplistic notion are valid and well known. Reasonable risk taking, the development of skills, and the time spent in productive work need to be rewarded, especially when they result in something valued by and/or of benefit to society.
I contend the current proportions of the rewards and the access to opportunities need to be seriously revised before it’s too late. One of the key ways to revise the imbalances is via the Tax Codes. We need the income and holdings of the wealthy to yield tax revenues at rates that are at least equal to (preferably higher than) the maximum rates paid by people and businesses with incomes below the 10%.
Graduation Corrupted by Pompous Circumstances
The concept of a “graduated income tax” is built on the premise that money spent on food, shelter, health and other necessities should be taxed at the lowest rate, if at all. Funds available for non-essential items (which we nonetheless deserve) should be taxed on a sliding scale where the more discretionary the funds are, the higher the tax rate should be.
The graduated income tax was invented to help fairly distribute wealth within the body politic so that the money people need to survive is protected and above that level, the tax rates that pay for any and all government services gradually increase as one’s income increases. This way those whose incomes are higher pay a higher rate on their excess money because they can best afford to do so. There comes an income point above which a maximum rate holds steady.
For example, a family of four with an annual income of $60,000 might pay:
- no taxes on the first $20,000 of their income,
- a tax rate of 9% of the next $20,000 [$1,800], and
- 12% of the next $20,000 [$2,400]
This then makes their total tax liability for $60,000 = $4,200, which is 7% of the family’s income. So in this hypothetical tax structure for everyone with an income of $60,000 or more would owe $4,200 taxes on their first $60,000 of income. If their income is above that threshold, the tax rate for the next layer should be a higher rate than the 12% that was applied in the layer below it.
Look at it this way:
(Please note: these numbers are for demonstration purposes only; the actual tax rates at various income levels today are almost certainly different. Any accuracy in these hypothetical rates is amazingly accidental.)
Unfortunately, somewhere along the way in the 1980s, the graduated system was corrupted so that after the maximum rate kicks in at say the $100,000 income level, there comes another tax rate, say at $160,000 of income, where the tax rates change direction and shrink significantly.
(Please note how much more of their income after taxes the wealthy keep. You may say, well yes but there are so few of them, what does it matter? It doesn’t matter how many taxpayers there are, it’s how much in taxes is no longer collected from them. Remember, they control 50% of the economy, so this money lost to taxes is gigantic.)
So let’s say another family makes $1,200,000 per year. The first $60,000 of that amount is taxed just like everyone else’s for $4,200 (7%). With the tax rate graduating upward, lets say the next layer above $60,000 is $40,000 which is taxed at 20% – $8,000. So for the first $100,000 of income the tax bill is $12,200, which is 12.2% of $100,000.
Up to now, the system is working fine asking those who have more to pay a bit more. The $60,000 income is taxed overall at 7% and the first $100,000 portion of the $1.2 million income is at 12.2% But now the system is corrupted. For the remaining $1,100,000 of the family’s enviable income, the tax rate drops to 4% or $44,000.
So here’s how the total tax bills compare:
Income Taxes by layer Tax Rate on Income
$60,000 $0+$1,800+$2,400= $4,200 7.0%
$100,000 $4,200 +$8,000 = $12,200 12.2%
$1,200,000 $12,200+$44,000=$56,200 4.7%
So, the family with the MOST income – $1.2 Million – pays the LOWEST RATE, only 4.7% of earnings in taxes. Meanwhile the family with the LEAST – $60,000 pays proportionately nearly twice as much, 7.0% of their earnings in taxes. And the middle class carries the biggest burden (again) at proptionally well over twice the rate paid by the winning wealthier family.
How did this happen?
Ask the Congresses and the Republican administrations of Reagan, Bush, and Bush II. Ask the spin doctors who planted the idea that taxes are always evil in the American voters’ mindsets. Their’s has been a masterful scenario that has protected the immense tax privileges of the 10% while sticking it to the middle class and keeping the impoverished poor. This grand scale political scam is just as ugly and greed-driven as the phone scammers who prey on the elderly in America. The only difference is the number of zeros in the bottom line number.
Capital Gains vs Earned Income
One might think that the distinction between tax treatment of Capital Gains and that of Earned Income might have something to do with the fact that people work to earn income, people realize capital gains (sell stocks, etc. for more than they paid for them). On the surface one might think money earned via work would be treated a bit kinder than money from stock profits, but it is the other way around.
Earned income (paychecks) for the work you do has a maximum tax rate (the most you would pay for the top portion of your income) somewhere between 30% – 35%. Income comes from long term capital gains (bought a stock for $1 six or more months before selling it for $2, your long term capital gain is $1) is taxed at 15%.
So income from the growing value of a stock portfolio is taxed at about half of what you and I earn from the work we do.
There is a valid rationale for treating these different sources of income differently. Lawmakers wanted to stimulate investment in companies to help stimulate the economy and so used the tax codes to make it more attractive to invest. But the difference between the maximum earned income tax rate and the capital gains rate is very large. There are not many folks who are not at least financially “comfortable” who are likely to risk their hard earned money on the rigged games of Wall Street.
I would be surprised if the investors on Wall Street would pick up their marbles and go home if their incentive to invest was a 25% tax rate instead of 15%.
These are the tax laws that our representatives created in Congress. Makes you wonder if they are OUR representatives or someone else’s.
We also need to punish white collar crime in proportion to the social and economic detriment it causes. The damage caused by the polluted mortgage backed securities knowingly assembled and sold by people intent on defrauding investors was devasting and worldwide. Yet only one banker among literally thousands who stuffed cash in their pockets and laughed at their hundreds of thousands of victims was sent to jail. We have mandatory multi-year sentences for people caught with an ounce of marijuana, but the architects and contractors who built the financial house of cards still walk the streets in freedom. They still smugly gather at their exclusive country clubs knowing they can safely keep their ill-gotten gains. They all should be serving life without parole (as they are in Iceland) if only to protect the public from the predators.
A Disproportioned Bodypolitic
In the metaphoric “bodypolitic,” the components of a healthy economy are generally arranged well in proportion to one another. Though muscles, the engines of the body’s motion and activities in the world, require more lifeblood than does the skeleton, a great deal of lifeblood is needed to keep the central organs of the body, heart, lungs, pancreas, skin, brain, etc. healthy and operational.
Our body politic today is alarmingly disproportioned. Our functioning economy has made us disproportionately muscle-bound at the expense of key organs we need to stay alive. The huge lifeblood reserves hoarded in our muscles (the rich) are starving and weakening the skeleton, organs and skin (the rest of us). All parts of the body, including the muscles, need one another in balance in order to stand erect, operate, and hold things together efficiently and effectively.
What good is it to have massive bicep muscles if the arm bones are too brittle to hold them up and the heart is overworked and ready to give out? The well fed muscles of someone whose heart stops are dead and buried along with the rest of the corpse.
I hold that the present distribution of wealth is this country is life threatening to our entire Democracy. Money is power, and when too much power is concentrated in the hands of the few, the will of the powerful rules, not the will of the people.
If we haven’t already done it (and some insist we already have), we are very close to creating a government:
- Of the Rich,
- By the Rich, and
- For the Rich.
As the gulf between the rich and the un-rich opens wider and wider, I worry we are courting socio-economic disaster and straying farther and farther away from the Democratic ideals upon which this exceptional nation was founded.
Just look at this ugly case in point:
Consider the situation and activities of Sheldon Adelson, the eighth richest man in America. Ensconced in the desert of Las Vegas, he has profited ridiculously by preying on the losses of everyday people who gamble in his casinos. He owns quite a lot, but he wants more, always more. He wants not to be, but to own the President of the United States – a humble aspiration of a humble patriot.
How can he achieve that objective cost efficiently? If he bet on every horse in the race, he would surely win, but at what cost? No, it’s much better to examine the field, pick the horse that will do him the most good, and give him/her $100 million to use to assure victory (bribes, sabotage, etc. – you know, usual politics). So that’s what he did.
When summoned, all but one of the 2016 Republican candidates for the Presidency of the United States flocked to his throne in Vegas to offer large tributes in power to Mr. Adelson in return for a $100 million contribution to the candidate’s campaign. The man ran his own private job interviews to literally fill the vacancy of the Presidency of the United States! He wants to buy the next President. And the Republican candidates were all, (with the exception of one) obviously for sale.
The candidates actually passed one another in the lobby of the hotel, each eager to answer the holy summons. And if Mr. Adelson were to offer $100 million to the Democratic candidate of his eventual choosing, I am confident that (with the exception of one Democrat) we would see a rare case of bi-partisan activity in Las Vegas, though not Washington..
Does anyone see anything wrong with this picture?
Is there anyone left on the planet who recognizes that this is unvarnished influence peddling of the most egregious degree? Why is this not illegal in our Democracy? Why isn’t there rioting in the streets about this? Why does anybody support these politicians who are lining up for the opportunity to sell our Government Of the People, By the People, and For the People, to the Rich and Powerful?
Ironically now we have an overdue voter’s backlash in support of one of the only types of person who can afford to run for the presidency without taking the billionaires’ money: another billionaire. This one is a malignant narcissist to boot. Donald the Trump. Oh, true to form, knowing now that Trump will be the Republican Party’s candidate for the Oval Office, Old Man Adelson invited ‘the Donald’ to Vegas to broker a deal. Adleson has now pledged his $100 Million donation to the Trump campaign. One has to wonder, however, when two sharks swim in the same water, can they both resist the temptation to eat the other one?
Is this a friendly or clandestinely hostile merger strategy of billionaires?
What has caused our country to become so disproportionately muscle-bound while essential organs are starved? The answer is very simple.
(to be continued)
©2016 James Ash
©2016 James Ash