CAMPAIGN OUTSIDER Spread the wealth
By Muhammad Cohen
HONG KONG - In a campaign in which Republicans have labored tirelessly to
transfer the discussion from reality to fantasy, Senator John McCain and
Governor Sarah Palin are doing it again with Joe (Not) the Plumber and
Democratic Senator Barack Obama's call to "spread the wealth". Lies from the
Grand Old Party about Obama's tax plans and cries of "socialism" are as much
about the electorate's gullibility as Republican dishonesty.
"He believes in redistributing wealth. That's not America," McCain says of
Obama.
In fact, the idea is quintessentially American, going back to the founders who
rebelled against nobility and did their best to prevent its establishment in
their new nation. Since the current income
tax began in 1913, it has always had a strong element of progressivity, and
even under George W Bush's tax cuts it still does.
"Progressivity" means those who earn more pay a greater proportion of their
income than those who earn less. Today the lowest income earners face a 10% tax
rate, the highest income earners pay 35%. Amid the bellyaching and catcalling,
ditching the Bush tax cuts would hike the top tax rate to 39.6%. Of course when
you're earning US$5 million that raises your tax bill by $190,334.
Progressive taxes are a form of redistributing wealth and have done it
effectively. In 1929, just ahead of the Great Depression, when the top tax rate
was 24%, the top 1% of earners received 23.9% of US income, according to
research compiled by the Council on International and Public Affairs. In the
wake of Franklin Roosevelt's New Deal, that proportion declined steadily over
the next half century as top rates reached 94% during World War II. After
post-war tax cuts, the top rate jumped back above 90% in 1951 and remained
there through 1963, prime earning years for a second-rate actor named Ronald
Reagan. By 1976, the top 1% share had declined below 9%.
13 = 1929?
But then the tax-cutting craze began with California's Proposition 13, that
capped property taxes and carried through the Reagan administration, and was
brought to a crescendo with the Bush tax cuts. These Republican tax cuts have
redistributed wealth dramatically. Now the top 1% is back to grabbing its
largest share of US income since 1929, one of several indicators that wealth is
more concentrated than at any time since the Great Gatsby era. The top 1% earns
more than the bottom 40% of workers, the top 5% earns more than the bottom 60%,
and the top 20% out-earns the bottom 80%.
Wealth is even more skewed. The top 1% holds 34.7% of total US wealth and the
next 9% has 35.4%, leaving just 29.9% of the pie for the bottom 90%.
Despite the current tend, there's a broad constituency for spreading the
wealth. John Ford, who blogs on the election at
trackingpolls.com recorded this comment from a capitalist perhaps more
widely esteemed than Obama advisor Warren Buffett: "It is not very unreasonable
that the rich should contribute to the public expense, not only in proportion
to their revenue, but something more than in that proportion." The capitalist
who said it was Adam Smith. "If the Republican platform is now to repudiate
Adam Smith," Ford wrote, "it's difficult to see that there's any economic
philosophy at all behind it."
Taken to school
Ford also noted this exchange between a student and a presidential candidate at
a rally at Michigan State University in 2000. "Why is it that someone like my
father who goes to school for 13 years gets penalized in a huge tax bracket
because he's a doctor?" the student asked.
"I think it's to some degree because we feel obviously that wealthy people can
afford more," the candidate said.
"Are we getting closer and closer to, like, socialism?" the student asked.
"Here’s what I really believe: That when you reach a certain level of comfort,
there's nothing wrong with paying somewhat more," the candidate said.
A year later, that losing candidate said of the Bush tax cuts, "I don’t believe
the wealthiest 10% of Americans should get 60% of the tax breaks. I think the
lowest 10% should get the breaks."
That advocate of progressive taxation and wealth redistribution was McCain. But
he's not the only one confused.
"Now is not the time for the government to experiment with socialism," Palin
says, reaching to link Obama with Karl Marx. (Each had a father that was not
from our America, you betcha.) The Republican vice presidential candidate says
it with a straight face, even though the Bush administration, with McCain's
affirmative vote, made the unprecedented injection of $1.2 trillion in taxpayer
money into banks and financial companies. Socialism, someone should tell the
governor, means government ownership of banking and other industries.
Ex-Democrats unite!
A few years ago I met a pair of my cousins in California, a couple in their
30s. He was doing data entry while in junior college seeking his associates
degree. She was a department store clerk who was collecting a disability check.
"We used to be Democrats," they told me. "But we don't like taxes."
Never mind that Republicans would do away with student loans that made it
possible for him to go to school. Never mind that junior colleges wouldn't even
exist without the taxes that built them. Never mind that Republicans would end
disability payments and labor unions that protect easily replaced workers such
as sales clerks. Never mind that my cousins, and their parents, benefit from
government services far more than they pay in taxes.
Republican rhetoric demonizing taxes has convinced millions of Americans to
vote against their own economic interests, bringing us to the story to Joe the
Plumber. Sam Joe Wurzelbacher complained to Obama that his tax plan would
punish him with higher taxes if he bought the business where he worked and it
earned over $250,000 a year. That logic follows the McCain campaign's trope of
millions of small business owners that a) earn that much money and b) aren't
rich.
Of course, it turns out that Wurzelbacher isn't a licensed plumber and doesn't
have anywhere near the money to buy the business, particularly if it's as
lucrative as he hopes. (And, by the way, it's not.) Rather than being a regular
guy who plays by the rules just looking for an even break, Wurzelbacher owes
$1,200 in back taxes. In reality, he'd benefit from the Obama tax plan, as
would all Americans earning less than $250,000 a year. Even knowing that
Wurzelbacher still said he's against it. If he wasn't such a self-parody,
Wurzelbacher could be a symbol for a campaign, but he's signed on with the
wrong side.
Unplugged leaks
Imagine Wurzelbacher lives in a rented trailer and complains about the property
taxes he'd pay if he owned a mansion. So the city reduces the property taxes
that he doesn't pay and to balance its budget cuts Wurzelbacher's job as a
plumber taking care of municipal properties. That would make him an even better
symbol for the Republican campaign because the party's trickle-down economic
policies have consistently leaked.
Reagan promised that his tax cuts would raise more revenue, based on the
calculations of the aptly named economist Arthur Laffer and his famous Laffer
Curve. Instead, tax cuts deepened deficits. The Bush tax cuts were supposed to
give America an economic boom. Instead, even with a pair of wars and record
deficit spending to give an added push, the best this Bush administration could
manage was six years of jobless growth that is now climaxing in the worst
global financial crisis since 1929. Trickle-down economics have run dry.
McCain thinks that more of the Republican prescription of tax cuts for the
rich, with bigger lies about the alternatives, is the way out. Obama proposes
tax cuts for the bottom 95% and higher taxes for the top 5%. The truth is that
all taxes redistribute wealth; the choice is whose wealth gets redistributed to
whom.
Former broadcast news producer Muhammad Cohen told America's story to the
world as a US diplomat and is author of Hong Kong On Air (www.hongkongonair.com),
a novel set during the 1997 handover about television news, love, betrayal,
high finance and cheap lingerie.
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