The Redistribution Contract
(if you must, read the original here)
By PAUL RUGMANN
This week President Obama offered the obvious: that the 47 percent of Americans who pay no federal taxes, should not bear any responsibility in reducing the long-run budget deficit. Republicans like Representative Paul Ryan responded with shrieks of “class warfare” and this shrieking is getting tiresome.
Because Obama is rubber and Ryan is glue, what Ryan says bounces off Obama and is simply untrue. In fact, it’s people like Mr. Ryan, who want to exempt the very rich (“his people,” as AG Eric Holder might say) from deficit reduction. The reality is the rich should pay more — their fair share — and make our finances sustainable.
Estimates from the Congressional Budget Office show that between 1979 and 2005 the inflation-adjusted income of families in the middle of the income distribution rose 21 percent. That’s growth, but it’s slow, especially compared with the 100 percent rise in median income over a generation after World War II. The first lesson: class warfare corresponds with the end of the disco era.
And because it may not support my case, I’ll ignore the incomes of the very rich (the top 100th of 1 percent of the income distribution) in the generation after World War II and the effect of the confiscatory (87 percent in 1954) federal income taxes. I’ll also ignore the income growth of the poor because I’m not interested in class warfare, but only in the very rich, that .01 percent of all Americans.
Instead, my point is between 1979 and 2005, the income of the very rich rose by 480 percent. No, that isn’t a miss print. In 2005 dollars, the average annual income of that group rose from $4.2 million to $24.3 million. Another lesson: that’s more than any human being should be allowed to earn without a deep wallet cleaning by the taxman. As George Harrison advocated, there’s one for you, nineteen for me.
Still another lesson: because these very rich earn more, it’s obvious that Republicans are waging class warfare.
The CBO’s numbers show the federal tax burden has fallen for all income classes but because I’m only interested in the federal tax burden, I’ll ignore other taxes: property, vehicle, state and local income taxes, sales taxes, taxes on capital gains and dividends, estate (so-called “death” taxes), and the large litany of other consumptive taxes (tobacco, alcohol, telecommunications, “luxury” taxes, etc.). I’ll also ignore the taxes paid by businesses like payroll taxes and corporate taxes.
But what does it mean? That a very rich man like Warren Buffett can use all of the wealth he’s accumulated to buy lawyers, lobbyists, and love, and can “get by” with paying himself a $100,000 salary because he’s put almost all his wealth into a tax-avoiding trust. One final lesson: this cheats Uncle Sam. Now, I know the Bush-led right will respond with misleading statistics and fraudulent moral claims about whose money it is in the first place.
On one side, taxes paid by the rich are rising, but this is because they’re richer than they used to be. When middle-class incomes grow barely 20 percent while the incomes of the .01 percent rise by a factor of six, how could their tax share of the rich not go up? In other words, they’re paying more, but so what?
On the other side, we have the dubious assertion that the rich have the right to keep their money, an assertion which entirely misses my major point: I don’t think that’s right. How much income and wealth should the government allow each very rich person to keep? I’m not sure, but it’s less than it is now.
Elizabeth Warren, who is running for Scott Brown’s U.S. Senate seat that used to be Ted Kennedy’s U.S. Senate seat, recently made some eloquent remarks that are, on the left, getting a lot of attention. “There is nobody in this country who got rich on his own. Nobody,” she declared, pointing out that the rich can only get rich thanks to the government letting them keep some of the income and wealth they’ve earned.
Which brings us back to those shrieks of “class warfare.”
Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have a stake in the nation’s future — should not be called upon to play a greater role than they already are in warding off that existential threat.
Well, that amounts to a demand that a small number of very lucky people (skills, ability, and hard work don’t make any difference) be less affected by a government redistribution scheme that has a greater effect on everyone else. And that, in case you’re wondering, is what real class warfare looks like.