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July 2011, Week 4

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Fri, 22 Jul 2011 21:41:06 -0400
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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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