Seriously Taxing The Rich Will Take ‘Guts’ — And More
Above Photo: From Inequality.org
Note: Economist Thomas Piketty writes in the Boston Globe, “Between 1930 and 1980, the rate applied on the highest incomes was on average 81 percent, and the rate applied to the highest inherited estates was 74 percent.” Piketty, who is the author of the best-selling book, Capital in the 21st Century describes how this made the US more “egalitarian and more productive, at a time when the United States had not forgotten that educational advancement and investment in training and skills” were important to US society. Since 1980 these taxes have been reduced, inequality has grown as has economic insecurity for most people in the United States. Piketty says, now we need new thinking on taxation and calls for a new “innovation” in taxation “an annual wealth tax in addition to the income and inherited estate taxes.” He also explains how it is “crucial to allocate all the revenue to the reduction of inequalities.” Piketty calls for a reformulation of property taxes so they are made progressive “with graduated rates on net assets, with the key element being strong reductions for indebted households who are seeking to accede to property ownership.” The extreme wealth divide that has left a majority of households struggling, insecure and unable to afford even a small surprise expense and just two or three paychecks away from homelessness, is an opportunity to rethink how the US tax system can be remade to reduce inequality and create economic security. KZ
Egalitarians in the mid-20th century set high tax rates on the high-income set. Egalitarians in our century have some new ideas on how to make those stiff rates stick.
Jan Schakowsky doesn’t need to apologize for anything. This veteran member of Congress from Illinois has a record second to none on issues that matter to working people. Over the course of her 20 years on Capitol Hill, Schakowsky has introduced much more than her share of innovative legislation, bills like her Patriot Corporations of America Act, a measure designed to give companies that pay their top execs only modestly more than their workers a better shot at winning government contracts.
But today, in a special Congressional Progressive Caucus Capitol Hill briefing on taxes, Schakowsky did some apologizing of sorts. Her previous attempts at making the U.S. tax code more progressive, she acknowledged, had called for a tax rate on America’s highest income bracket at no more than 49 percent.
Schakowsky called that 49 percent — a figure close to the top rate during most of the Reagan years and a dozen points over the current top rate — the highest rate she “had the guts” to propose. But then, she added, along came Alexandria Ocasio-Cortez and her call last month for a 70 percent top rate “for the richest among us.”
“And lo and behold,” smiled Schakowsky, referencing the favorable polling on that 70 percent proposal, “the American people think that’s a good idea.”
Schakowsky went on to pledge that she’ll be working with Ocasio-Cortez, her Congressional Progressive Caucus co-host for today’s tax briefing, to draft legislation that enshrines a new, considerably higher top rate in America’s tax code.
In a sense, the bold Ocasio-Cortez move to propose a 70 percent top rate — a rate totally unimaginable in polite political circles just weeks ago — has liberated Schakowsky to go as bold on taxing the rich as she has always wanted to go, and that couldn’t be better news. Today, at a time of intense income and wealth concentration, we need to be bold — on multiple tax fronts.
We need, as Rep. Ocasio-Cortez has proposed, to restore the top marginal tax rates that did so much in the middle of the 20th century to check grand fortune. But we can’t be content to just recreate that mid-century progressive tax structure. We need to do what egalitarians back then could not do. We need to make steep top rates politically sustainable over the long haul.
And how might we do that? At today’s Congressional Progressive Caucus briefing, Economic Policy Institute president Thea Lee highlighted one promising approach: We could start linking income tax rates for America’s richest to the minimum wage for America’s poorest.
If the tax code set the threshold for a new, much higher top tax rate as a multiple of the minimum wage, Lee explained, those at our economic summit would be more personally “invested in raising the minimum wage.” The higher the minimum wage, the less of their income subject to the top marginal tax rate. People at our economic bottom, for their part, would have a direct personal stake in keeping that linkage — and steeply progressive tax rates — in place.
Lee also noted another linkage proposal that analysts at the Institute for Policy Studies have been advocating: tying the U.S. corporate tax rate to the ratio between CEO and worker pay.
If the tax code fixed a higher corporate tax rate on companies with wide gaps between executive and worker compensation, the Economic Policy Institute’s Lee pointed out, corporate enterprises would have a powerful “incentive to raise their worker pay”and, in the process, help reduce our income gap before taxes.
Our tax rates, Ocasio-Cortez observed in her remarks at today’s Congressional Progressive Caucus briefing, can be a mighty tool to help us “mitigate inequality.” Yes, tax rates can certainly play that essential role — but only, her briefing strongly suggested, if we stay bold.