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The Lost Art (and Joy) of Taxing the Rich
By ending the practice of taxing the those with the most, we have witnessed an incredibly intense concentration of wealth that has recreated the same sort of top-heavy economic imbalances that ushered in the Great Depression almost a century ago.
Sep 05, 2023
Eight decades ago, at a pivotal turning point in American history, our nation’s richest faced a 94 percent federal tax rate on their income over $200,000, the equivalent of about $3.5 million today. At that point, near the end of World War II, only one other nation — the UK — taxed its rich at a steeper rate. The wealthiest Brits ended the war facing a 97.5 percent tax on their top-bracket income.
These stiff top tax rates — all nearly unimaginable today — would help usher in a generation of unparalleled economic progress for average Americans and Brits. And those rates ebbed only slightly in the postwar years. In the 1950s, America’s richest faced a 91 percent top tax rate. The GOP president then sitting in the White House, Dwight Eisenhower, made no move whatsoever to hack that top rate down.
Overall, notes the economist Thomas Piketty, America’s wealthiest faced an average 81 percent top tax rate between the years 1932 and 1980, one key reason why our richest 0.1 percenters — over the course of the 20th century’s middle decades — saw their share of the nation’s wealth sink from 25 to just 7 percent.
The rich — on both sides of the Atlantic — would spend plenty of time stewing about that shocking sink throughout those middle decades. But these deep pockets would eventually regain their political mojo, first in the UK with Margaret Thatcher’s 1979 political ascent and then a year later with Ronald Reagan’s election. By 1988, the UK’s top rate had sunk by over half, and America’s richest faced just a 28 percent top-bracket bite.
But none of this tax cutting — back then and ever since — has brought us the nirvana that the Thatcherites and Reaganites promised. We’ve experienced no uplifting trickle-down. We have, instead, witnessed an incredibly intense concentration of wealth that has recreated the same sort of top-heavy economic imbalances that ushered in the Great Depression almost a century ago.
Our rich are still raking it in
The Democratic Party in the United States and the Labour Party in the UK have had, since the late 1980s, some modest success undoing the most generous of the tax breaks that have gone rich people’s way. The mainstream leadership of both parties has over recent years signaled, at least rhetorically, support for undoing even more.
In 2021, for instance, the Labour Party insider set to become the UK’s top finance official should Labour regain a majority in the upcoming 2024 elections, reaffirmed her support for hiking the tax burden on her nation’s grandest fortunes.
“People who get their income through wealth,” opined Rachel Reeves at that time, “should have to pay more.”
The Labour Party’s prime-minister-in-waiting Keir Starmer last September pledged to undo the ruling Conservative Party’s axing of Britain’s 45 percent top-bracket tax.
“I would reverse it — be absolutely clear about that,” Starmer told the BBC.
The UK Conservative Party’s tax giveaways to the rich, Starmer would add at the Labour Party’s annual conference last fall, rested on the “wrong headed” argument that “if you allow the rich to get richer, somehow that money will trickle down into the pockets of all the rest of us.”
But Starmer and Reeves have both changed their tune over recent months. In June, Starmer openly backpedaled on his commitment to press for a higher tax rate on top incomes if Labour triumphs, as polls now predict, in Britain’s next elections. Then Reeves, asked if Starmer’s about-face meant that Labour was abandoning the tax-the-rich path, started spouting a standard rich people-friendly line.
“I don’t see a route towards having more money for public services that is through taxing our way there,” she told reporters. “It is going to be through growing our way there. And that’s why the policies that we’ve set out are all about how we can encourage businesses to invest in Britain.”
“We have no plans for a wealth tax,” Reeves went on to emphasize at the end of August. “I don’t see the way to prosperity as being through taxation. I want to grow the economy.”
But that economy’s growth, the British labor movement detailed last month, is enriching only the already rich. The UK, says Trades Union Congress general secretary Paul Nowak, now needs “ to start a national conversation about how we tax wealth in this country.”
That conversation appears to be exactly what the Labour Party’s current leadership seems intent on quashing. Britain’s 50 richest families, notes the University of Sheffield’s Prem Sikka, hold more wealth than the entire bottom 50 percent of the nation’s population. Yet the Labour leadership, he points out, will not consider broadening “the tax base by levying a wealth tax.”
This leadership, Sikka goes on, wants Labour “to be seen as a party of fiscal responsibility,” a stance that can only bring on a continuation of the Conservative Party’s “austerity and real wage cuts for public sector workers.”
“The UK is splitting apart,” a New Statesman analysis last month would agree, “fueled by a tax system that entrenches inequality.”
The United States, in the meantime, faces the same split and a similar inequality-entrenching tax system. The Democratic Party in the United States also faces, like the British Labour Party, a general election in 2024. Will the mainstream leadership of the Democrats follow the Labour Party’s leadership lead and reject the sort of bold moves needed to fix that tax system? Or will the Democratic Party take inspiration from the serious tax-the-rich agenda of the New Deal years so long ago?
The struggle to answer questions like these will define and determine our future.
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Dear America: Sanctions Don't Solve Problems
Harsh economic penalties rarely, if ever, work to change a targeted regime's behavior; so why do we still use them?
Dec 13, 2022
The definition of insanity, it is often said, is doing the same thing over and over and expecting different results. Yet that is exactly what U.S. and other Western policymakers have done in imposing broad economic sanctions against adversarial and otherwise problematic regimes.
Ordinary citizens of these countries suffer in terms of declining standards of living and increased government repression, while a shrinking elite prospers from control over limited resources.
The results have generally not been positive. Instead of persuading authoritarian and aggressive leaders to change their ways, broad sanctions have reinforced anti-democratic tendencies and incentivized nuclear and other proliferation. Meanwhile, ordinary citizens of these countries suffer in terms of declining standards of living and increased government repression, while a shrinking elite prospers from control over limited resources.
We have seen this movie over and over in places as distant and distinct as Venezuela and Iran, Cuba, Syria, and North Korea.
The latter country is a particularly depressing poster child for sanctions. Since it began developing and testing nuclear weapons--after the George W. Bush administration withdrew from a non-proliferation deal known as the Agreed Framework in 2002--North Korea has been hit with wave after wave of sanctions and has become increasingly isolated. While there is no mass starvation of the sort that killed as many as two million people in the 1990s, there is serious food insecurity with many North Koreans eating only one meal a day, according to well-informed sources.
Using COVID-19 as an excuse, the government of Kim Jong-un has refused access to international aid agencies such as the World Food Program and made it more difficult for North Koreans to learn about the outside world or to escape as refugees. The China-North Korea border, which was once relatively porous, is now hermetically sealed, with, informed sources say, 169 watchtowers and two barbed-wire perimeters preventing North Koreans from reaching and crossing the Yalu River and eventually making their way to South Korea via third countries.
Meanwhile, North Korea has conducted multiple missile launches this year and restarted a nuclear reactor at Yongbyon that is a likely radiation catastrophe in the making. Funds for these endeavors come from stealing crypto currency and other crimes that sanctions incentivize. Kim, the grandson of North Korea's founder, appears to be grooming a fourth generation to maintain control over this small nation of 25 million people, with the support of China which would rather have a nuclear pariah as its neighbor than a unified, prosperous and democratic Korean peninsula.
Iran is another example of sanctions run amok. Multilateral sanctions preceding the 2015 Joint Comprehensive Plan of Action may have played a role in encouraging successful nuclear negotiations, but they lost their purpose when the Trump administration unilaterally withdrew from the JCPOA in 2018 while Iran was in full compliance. Rather than negotiate a better deal, the Iranian regime has advanced its nuclear program to the point where Iran could produce sufficient fissile material for a nuclear weapon in a matter of days. Iran continues to support militias in Iraq and Yemen, props up the repressive regime of Bashar al-Assad in Syria and maintains close ties with Lebanon's powerful anti-Western, anti-Israel Hezbollah. Iran has also developed increasingly sophisticated missiles and drones, despite long-time U.S. and multilateral trade restrictions on weapons and dual use trade. Iran has supplied drones and rockets to the Houthis in Yemen and is now providing drones to Russia to use in its aggression against Ukraine.
The domestic political situation in Iran has also deteriorated under sanctions. Trump's trashing of the JCPOA destroyed the political fortunes of those within the Iranian regime who supported the deal and ushered in a unitary hard-right administration whose efforts to reinforce laws requiring women to wear headscarves and modest clothing have now boomeranged spectacularly. The widespread protests that broke out in Iran after the death of Mahsa Amini on Sept. 16, 2022, in the custody of the so-called "morality police," have led to new sanctions on Iran linked to human rights violations which are sensibly targeted. However, negotiations over reviving the JCPOA, which would bring relief of broader sanctions on Iran's banks, oil exports and manufacturing, are moribund.
While corruption and mismanagement are also at fault, sanctions have had a major role in Iran's economic decline. The Iranian people have grown increasingly impoverished as their currency's value has tanked, inflation has soared, and trade and investment have dwindled. More than a third of the nation of more than 80 million people is now classified as poor, by the government's own standards, with the decline occurring since the introduction of broad sanctions about a decade ago.
Iran trade expert Bijan Khajehpour wrote recently that, "the continued disempowerment of the middle class will add to the economic erosion that the country is set to experience due to a lack of infrastructure investments." Yet to lift sanctions now would cause an uproar because it would also put more resources into the hands of a hated regime. Unfortunately, that regime has a monopoly over what little resources Iran earns.
Other countries that have faced such broad embargos, such as Cuba, Syria, and Venezuela, have also not changed for the better. Recently the Biden administration has relaxed restrictions on U.S. investment in Venezuelan oil production, to compensate for efforts to choke off oil exports by another sanctioned pariah, Russia, which continues its aggression in Ukraine.
Sanctions proponents suggest that these penalties will encourage a change in regime policies if not a change in regimes themselves. But the link between sanctions and regime change is tenuous and sanctions often seem to prolong the worst dictatorships, not overturn them.
So why do sanctions keep being imposed? As virtue signaling? As a substitute for war? To placate domestic political constituencies? All of the above?
There are many reasons, but the results do not seem to justify the means. Will politicians ever acknowledge the facts and change course?
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Run-off Victory in Georgia Signals Good News for Social Security Recipients
With their run-off victory in Georgia, Democrats now have a mandate to protect Social Security. Here's what they need to do next.
Dec 08, 2022
Social Security was on the ballot in Georgia's December 6 run-off election.
It's bad news for the Wall Street-backed politicians who are determined to reach into our pockets and steal our hard earned benefits.
Senator Reverend Raphael Warnock's re-election victory there should be good news for Gold Star families, paralyzed veterans, seniors, and indeed all of Social Security's over 65 million beneficiaries.
It's bad news for the Wall Street-backed politicians who are determined to reach into our pockets and steal our hard earned benefits.
Defeated Republican nominee Herschel Walker proudly campaigned with and took money from Senator Rick Scott (R-FL), the author of a plan that would put Social Security on the chopping block every five years.
Walker would have been a rubber stamp for this plan--and others that would be even worse.
Senator Ron Johnson's (R-WI) plan would put Social Security on the chopping block every single year. The Republican Study Committee, a group that counts about 75 percent of House Republicans as members, wants to raise the retirement age to 70, slash middle class benefits, and give billions of Social Security dollars to Wall Street and private insurance corporations.
Republican House Leader Kevin McCarthy, who will be House Speaker next year, says he will take a must-pass debt limit bill hostage to cut our earned Social Security benefits. Senator John Thune (R-SD), the No. 2 Senate Republican leader, has endorsed the same approach--and would have had Walker's support.
As a self-funded program that has no borrowing authority and can only pay benefits if it has sufficient revenue, Social Security does not add one penny to the federal debt. Nevertheless, these Republicans want to cut our earned benefits so badly, they're willing to risk an economic catastrophe by defaulting on our obligations.
Warnock's victory gives Democrats a clear majority in the Senate. Along with President Biden, most of these lawmakers are committed to expanding Social Security--with no cuts--while requiring the wealthiest to begin to pay their fair share.
Social Security embodies the best of our values: that all human beings deserve dignity, freedom, and independence, that hard work should be rewarded, and that we are all connected, sharing the same risks and benefits.
Social Security is as reliable as it is essential. Through pandemics, wars, and economic recessions, Social Security has always continued to reliably pay monthly benefits, allowing its beneficiaries and their families to pay rent, buy food, and fill life-saving prescriptions.
Americans of all political backgrounds rely on our earned Social Security benefits, and fortunately Warnock supports protecting and expanding them.
As a member of the Senate Aging Committee, Warnock led the successful fight to cap the cost of insulin for seniors. He was part of the winning vote to finally allow Medicare to negotiate with Big Pharma to lower drug prices.
With his re-election, Warnock and his Democratic colleagues have a mandate to protect Social Security's earned benefits. They must not only oppose cuts--they must also refuse to negotiate benefits with the extremists who plan to take the debt limit hostage.
To avoid a dangerous and potentially calamitous game of chicken, Democrats should thwart the kidnappers by raising or eliminating the debt ceiling before the end of this year. That will foil the right-wing plan to force highly unpopular and unwise Social cuts that voters across America resoundingly rejected this year.
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