The Huffington Post
By: Larry Womack
August 24, 2011
There's a novel idea being championed by Republicans this month. Everyone, from Mitt Romney to Rick Perry and Michele Bachmann, seems to believe that the problem with the tax system is not that the very rich get off too easy, but that the very poor do. In fact, Republicans in Congress sound pretty eager to see payroll taxes on working Americans rise again in January.
This should strike most people as odd, since the super rich in this country are taxed just 17 percent of their earnings while the rest of us fork over around 36 percent. But the argument, Dallas Tea Party founder Phillip Dennis explained to Hardball viewers last month, is that, "The top one percent pays fifty percent of the taxes in this country."
"What," he asked, "about the bottom forty-eight percent who doesn't pay anything?" Yes, really: Americans are being asked to believe that if the top 1 percent managed to match the bottom 99 percent (which pays a rate more than twice as high,) that this would be evidence not of a truly breathtaking national wealth gap, but of a downtrodden upper class.
No one in America can leave their home, eat a meal, make a phone call or even turn on the lights without paying some sort of a regressive tax that disproportionately affects the poor and working class, so the premise of Dennis' argument is just factually untrue. What is true is that many Americans pay no federal income tax, because it has a progressive structure to counter that effect. It even manages to shake out surprisingly equitably among the poor and middle class, with those earning anything between $20,000 and $500,000 per year handing over a whopping 40 percent of their income to the government one way or another. Only the super rich seem to get off relatively easily, contributing just 17 percent.
Dennis' numbers are a bit off (the top 1 percent paid 28.1 percent of federal income taxes last year,) but even the correct numbers are evidence of an astronomically large gulf between the super-rich and working American. In fact, the wealth gap in the United States is wider than it has ever been. In 2009 alone, the pay of America's highest earners quintupled, while more Americans found themselves on food stamps than ever before. Wealth inequality in the United States had already hit its highest level since 1929 two years before that. Throughout the recession and its jobless aftermath, that gap has only grown bigger. And bigger. And bigger. We're now roughly on par with China.
It hasn't always been this way. Between the New Deal and 1980, the American working class was given a slightly better shot at success with each new generation. But we also didn't get to this point through a single recession, either.
This return to pre-depression insanity is the result of three decades of real class warfare stretched over three Republican and two Democratic administrations and every imaginable combination of legislative control. In this bizarre new America, the fantasy of supply-side economics lingers, now usually in the form of a "job creator" talking point. (You know what really creates jobs? A working class capable of making purchases.) So today, any suggestion that the wealthy aren't paying enough is branded class warfare, but "a broad-based, regressive increase" targeting the working poor might be just what the doctor ordered. As a result, the super rich are charged a before-deduction tax rate that is half of what it was under Nixon and a real tax rate that is half of what their secretaries pay. It's income redistribution, alright -- from the bottom, which pays taxes, to the top, which does not.
We also leave people born to poor families disgracefully little opportunity to become one of those wealthy tax-dodgers we're so intent on pampering. The United States bills itself as the land of opportunity -- and when it comes to politics, nobody has anything on us. Our dirty little secret is that when it comes to economics, that couldn't be furtherfrom the truth. In fact, the U.S. offers its citizens the very lowest chance among wealthy nations for upward intergenerational socioeconomic mobility. If you're born to a poor family in America, you're probably going to die poor, too -- and so will your children. Unless, of course, you or they manage a move to Denmark.
It's almost too easy to see how we got to this point. After all, it isn't an overstatement to observe that we currently have tax, education and healthcare systems that actively suppress a near-permanent underclass without regard to how they affect either those people or the nation as a whole. It's a good thing we're a nation gifted with many resources, because we're pretty intent on squandering human ones.
If you're born poor in the United States, you'll probably be getting a sub-standard education, because we make education a relatively low priority and leave the funding of schools to local governments with wildly unequal means. We also charge a lot of money for a college education, so if you do manage to make it through that sub-par school and head to a university that you are ill-prepared for, it is unlikely that institution will land you the kind of connections you'll need for upward mobility. Even at a state school, you'll be borrowing a lot of money to attend, since your parents can hardly afford to help you out. So in the best-case scenario, you'll likely be starting your adult life saddled by debt.
Between that debt and the 40 percent you'll be forking over in taxes, even a college graduate from a poor family is not likely to be purchasing a home or accruing much savings to pass on to your children. As you try to build your life, you'll find yourself disadvantaged at every turn. You'll be paying a lot of fees for the privilege of being poor. Your means will limit your access to credit, which will in turn severely limit your independence. Oh, and you'll likely be living from financial crisis to financial crisis.
Before you die, you're probably going to get sick, which will cost so much that even if you have insurance you may well have to declare bankruptcy. And there's a good chance that you'll be losing that home, if you did manage to buy it, along with any savings, if you had them. (Hopefully, these scenarios at least will be less likely if the Affordable Care Act survives the courts.)
In the end, a child born to a wealthier family will be 22 times more likely than you to become rich. Don't worry, though -- you won't be alone. Among wealthy nations only one, Mexico, has higher rates of childhood poverty.
That is, if you survive at all. America's health care "system" doesn't just move people from middle class to street beggar; it has also left the wealthiest nation on planet Earth lagging behind 41 others in infant survival, mostly because of poverty.
The word "shameful" doesn't even begin to describe it. Still, we steadfastly refuse to invest in anything that might help to keep this country's workforce viable in a world economy, because it might also help the poor. Anything that helps give the working or middle class a fair chance at helping America succeed is branded the socialist machinations of a doomed welfare state. It is as if we would rather see our nation fail than risk letting our neighbor's kid have it any easier than we did.
And when I say fail, I'm not just talking about arts and letters. I'm talking dollars and cents. According to findings by the Organization for Economic Co-Operation and Development, a 25-point increase in average math, reading and science scores over 20 years would bring the U.S. an additional $41 trillion dollars in this generation's lifetime. Bringing the U.S. up to the level of Finland would yield an extra $103 trillion. Yet, most every state in the country is being forced to cut education because of our $14 trillion national debt. Exactly how low are those math scores?
That's not even the tip of the iceberg. It is estimated that the lifelong poverty trap costs America the equivalent of 4 percent of GDP every year through reduced productivity, higher crime and unnecessary healthcare costs. Given the methodology, that strikes me as a conservative estimate.
In contrast, even with record unemployment claims and more Americans on food stamps than ever before, the social safety net amounts to under half a trillion dollars of spending per year. Keep in mind that more than twice as many Americans are currently unemployed as usual, so that number is grossly inflated right now. And in order to get it that high, one has to include many things that seem a stretch, like earned-income and child tax credits, school meals and programs for abused children. We're told time and again that we simply cannot afford a functioning government, but the average actual welfare state -- like Finland or Denmark -- enjoys a AAA S&P credit rating and a national debt lower than America's by about 10 percent of their GDP. Looking at the numbers, it seems impossible to escape the conclusion that by constantly indulging the rich and relentlessly beating down the working class, we are slowly ruining this country not just morally but financially, as well.
After this recession, as most of the poor continue to linger in poverty, we won't be collecting any of the revenue that they could be generating. And when another recession hits and our expenditures skyrocket again, we'll cut programs for the poor and taxes for the rich again. And again. And again. Somehow we will expect this to add up to a functioning economy.
Unless and until we put a stop to this madness, at some point this system will no longer work. The middle class and working poor won't be able to support it any longer because they will no longer have the means to.
It's a penny wise, dollar foolish, unconscionably cruel and supremely misguided age of austerity we're living in.