Plutocracy and the Debt Ceiling Debate

Plutocracy and the Debt Ceiling Debate

 

By Sam Pizzigati

July 21, 2011 - 5:58pm ET

http://www.ourfuture.org/blog-entry/2011072921/plutocracy-and-debt-ceiling-debate

 

Looking for a lesson in the goings-on in D.C. these

days? Here's one: The more our nation's wealth

concentrates, the more our democratic give-and-take

becomes all take -- by the rich.

 

Once upon a time in America, back a century ago, our

nation's rich paid virtually nothing in taxes to the

federal government. And that same federal government did

virtually nothing to better the lives of average

Americans.

 

But those average Americans would do battle, over the

next half century, to rein in the rich and the

corporations that made them ever richer. And that

struggle would prove remarkably successful. By the

1950s, America's rich and the corporations they ran were

paying significant chunks of their annual incomes in

taxes - and the federal projects and programs these

taxes helped finance were actually improving average

American lives.

 

America's wealthy, predictably, counterattacked -- and,

by the 1980s, they were scoring successes of their own.

 

Today, the rich and their corporations no longer bear

anything close to their rightful share of the nation's

tax burden. The federal government, given this revenue

shortfall, is having a harder and harder time funding

initiatives that help average working families. The

result: a "debt crisis."

 

This "debt crisis" in no way had to happen. No natural

disaster, no tsunami, has suddenly pounded the United

States out of fiscal balance. We have simply suffered a

colossal political failure. Our powers that be, by

feeding the rich and their corporations one massive tax

break after another, have thrown a monstrous monkey

wrench into our national finances.

 

Some numbers -- from an Institute for Policy Studies

report released this past spring -- can help us better

visualize just how monumental this political failure has

been.

 

If corporations and households taking in $1 million or

more in income each year were now paying taxes at the

same annual rates as they did back in 1961, the IPS

researchers found, the federal treasury would be

collecting an additional $716 billion a year.

 

In other words, if the federal government started taxing

the wealthy and their corporations at the same rates in

effect a half-century ago, the federal debt to investors

would almost totally vanish over the next decade.

 

Similarly stunning numbers have come, earlier this

month, from MIT economist Peter Diamond and the

University of California's Emmanuel Saez, the world's

top authority on the incomes of the ultra-rich. These

two scholars have shared some fascinating "what ifs"

that dramatize how spectacularly the incomes of our

wealthiest have soared over recent decades.

 

In 2007, Diamond and Saez point out, taxpayers in the

nation's top 1 percent actually paid, on average, 22.4

percent of their incomes in federal taxes. If  that

actual tax burden were to about double to 43.5 percent,

the top 1 percenter share of our national after-tax

income would still be twice as high as the top 1

percent's after-tax income share in 1970.

 

So why aren't we taxing the rich? Why are we now

suffering such fearsome "debt crisis" angst? Why are our

politicos so intent on shoving the "fiscal discipline"

of layoffs and cutbacks -- austerity -- down the throats

of average Americans?

 

No mystery here. Our political system is failing to tax

the rich because the rich have fortunes large enough to

buy off the political system. Again, some numbers can

help us better visualize that plutocratic big picture.

 

In 2008, the IRS revealed this past May, 400 Americans

reported at least $110 million in income on their

federal tax returns. These 400 averaged $270.5 million

each, the second-highest U.S. top 400 average income on

record.

 

In 1955, by contrast, America's top 400 averaged -- in

2008 dollars -- a mere $13.3 million. In other words, the

top 400 in 2008 reported incomes that, after taking

inflation into account, amounted to more than 20 times

the incomes of America's top 400 a half-century ago.

 

But 1955's top 400 didn't just make far less than 2008's

top 400. The rich in 1955 paid far more of their income

in taxes than today's rich. In 2008, the new IRS data

show, the top 400 paid only 18.1 percent of their total

incomes in federal income tax. The top 400 in 1955 paid

51.2 percent of their total incomes in tax.

 

The bottom line: After taxes, and after adjusting for

inflation, 2008's top 400 had a staggering $38.5 billion

more left in their pockets than 1955's most awesomely

affluent.

 

Multiply that near $40 billion by the annual tax savings

the rest of America's richest 1 percent have enjoyed

over recent years and you have an enormous war chest for

waging class war, billions upon billions of dollars

available for bankrolling think tanks and candidates and

right-wing media.

 

In the face of these billions, should the rest of us,

America's vast non-rich majority, just toss in the

towel? Our counterparts a century ago certainly didn't.

They challenged their rich, on every battlefront

imaginable. They eventually prevailed. They sheared

their rich down to democratic size.

 

We can do the same.

 

Sam Pizzigati edits Too Much, the Institute for Policy

Studies weekly newsletter on excess and inequality. To

keep updated on the growing pushback against that

inequality, sign up to receive Too Much in your email

inbox and check Inequality.Org for more background on

the groups working to narrow the economic gaps that

divide us.

 

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