Income & Wealth Inequality 2: Realistic Taxation Might Help

Re: 'It's Economic Inequality Stupid -- What to Do About the Biggest Crisis Facing America’
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Robert CreamerPolitical Organizer, Strategist, Author; Partner Democracy Partners

Mr. Cremer mentions that economically the wellbeing of the middle and working poor classes have been on a downtrend or static for decades:

Today, to qualify for the top 1%, your family has to have an income of at least $394,000 -- and the average income of the top 1% of the population is $717,000. The average for the rest of the population is $51,000. The difference in net worth is even more stark. The top 1% have net assets that average $8.4 million. That would be 70 times the average net worth of the rest of the population.

And this inequality is growing. In 2012, the share of income flowing to the top 1% soared to almost 20% of the income generated by the entire economy. That is the highest level since 1927 - the height of the "Roaring 20's" that set the stage for the Great Depression.

This increase in income and wealth inequality has gone on for some time. According to a study by UC Berkeley economist Emmaunuel Saez, from 1993 to 2012 average real income for the bottom 99% of the population increased 6.6%. Average real income for the top 1% went up 86%. In other words, over the last two decades, the top 1 percent received two thirds of the overall economic growth in real income per family.

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...who did nothing to earn these fortunes except benefit by the accident of birth.

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This is often heard but despite being born iINTO wealth a child is never born guilty ‘a priori’ as implied. It also seems ‘whimsy’ to tax the rich too quickly and heavily just as it is unfair to tax lesser income strata more than their commensurate ABILITY TO PAY, so ‘less wealthy’ classes should have a lesser tax rate than the rich. The country needs to evaluate exactly what ‘fair’ means and what for what PURPOSE(s) do our taxes really serve!

What exactly is our national tax purpose? Is it simply to make the rich pay their ‘fair share’ whatever that might be and even-out the tax impact? Or, to accumulate government surpluses just because it sounds good? Or, as an optional purpose, one might propose a ‘TAX ENOUGH’ policy that focuses on meeting a few significant objectives but leaves a goodly amount of monies in circulation for jobs, investment, risk etc.

What is the real-life tax impact on our socio-economic classes? Can we even guess at taxation equivalencies?

Oversimplifying, a quick look at tax reform might start with a simple ‘equation': increase the ‘rich’ tax rate but not to de-motivate investment and risk; give the middle class relief by tax reductions and/or tax-reduction-equivalents (college credits, national health care, family tax credits, etc); and give the working poor emergency relief that prioritizes the concept that ‘WORKING POOR’ is not a permanent class but a temporary condition. And above all, avoid the conservative POV that a ‘good’ social policy is one that is punitive in spirit and result, i.e., one that ‘strikes the fear of God’ into the minds and spirits of the taxed...as if America is mired forever in the past battles between the Shires and Robin Hood - a too-easily referenced template left over from America’s core roots in feudal Europe.

The Growing Inequality of Wealth in America and the Globe: Revisiting the Red Queen of Productivity and the False God of ‘Profit’ (July 19, 2013)

Is America's economic 'INEQUALITY' increasing (e.g., Robert Reich's new movie, Inequality for All)? Is America becoming an economically locked-down caste system? Has American class mobility, the basic promise of our democracy, been lost? America’s and the world’s drift in this direction has been seen and felt for some years. Prior to seeing Professor Reich’s movie, this blogger mused in a previous previous post on (July 19, 2013), that in the glare of immense wealth and a ‘Bling’ culture, America seems to have forgotten a basic economic reality - an economic market is an interdependent world of consumer-product-and-capital - and when the consumer is removed or de-emphasized in this ‘model-equation’, everything breaks down. Why? Because we seem to have forgotten that ultimately, economics is all about someone being able to consume, i.e., BUY. So, when the buyer is stripped of the means to perform their function by losing jobs or being paid less than rising costs of living, the reality of the model dictates a collapse. Robert Reich’s movie presents this ‘truth’ with elegant clarity. Even though there are many graphs and tables to look at in his movie, the story is easily seen.

Are we at the economic crisis point Reich believes we are? Joel Kotkin’s October 6, 2013, article , 'California’s New Feudalism Benefits a Few at the Expense of the Multitude’, presents a detailed case that we are near Reich’s economic crisis point by looking at the growing ‘skewedness’ of California’s wealth and power. Kotkin reluctantly focuses on the current-context mis-directedness of liberalism’s previously held sacred icons of environmental protection and the advantages of clean industry, notably the digital technologies. Kotkin makes a good point that there are ‘unforeseen consequences’ of these old standards that today makes environmental protection equate with job loss and overseas outsourcing. But, overall is it really true that the 'good' guys and causes (e.g., politically 'progressive techies' and environment protection) are actually bad medicine for our economic health?

The following is Mr. Kotkin’s view of the changed value of environmental protection and clean-industry laws; previously I've thought this pov was right wing propaganda against the EPA but now things seem fuzzier as the mix of trade-offs among protection costs vs benefits has grown more complex. So, are even the techies guilty of riding globalization to bigger profits...and contributing to wealth inequality? Also, the article floats a new meme, 'techno-coolies', which will probably pop up more and more - imported technical labor for the digital hubs like Silicone Valley because US education is failing to teach our kids math and science. "Digital Oligarchy" is another descriptor that seems meme-destined.

"...The state’s digital oligarchy, surely without intention, is increasingly driving the state’s lurch towards feudalism. Silicon Valley’s wealth reflects the fortunes of a handful of companies that dominate an information economy that itself is increasingly oligopolistic. In contrast to the traditionally conservative or libertarian ethos of the entrepreneurial class, the oligarchy is increasingly allied with the nominally populist Democratic Party and its regulatory agenda. Along with the public sector, Hollywood, and their media claque, they present California as “the spiritual inspiration” for modern “progressives” across the country.
Through their embrace of and financial support for the state’s regulatory regime, the oligarchs have made job creation in non tech-businesses—manufacturing, energy, agriculture—increasingly difficult through “green energy” initiatives that are also sure to boost already high utility costs. One critic, state Democratic Senator Roderick Wright from heavily minority Inglewood, compares the state’s regulatory regime to the “vig” or high interest charged by the Mafia, calling it a major reason for disinvestment in many industries."

And Mr. Kotkin writes this about California's mal-distribution of wealth:

"...The gap between the oligarchic class and everyone else seems increasingly permanent. A critical component of assuring class mobility, California’s once widely admired public schools were recently ranked near the absolute bottom in the country. Think about this: despite the state’s huge tech sector, California eighth graders scored 47th out of the 51 states in science testing. No wonder Mark Zuckerberg and other oligarchs are so anxious to import “techno coolies” from abroad."

Also from Mr. Kotkin’s article is his use of the term, ‘liberal apartheid’which though harsh-sounding strikes home regardless of one’s political loyalties:

“"...liberal apartheid,” a sharp divide between a well-heeled, mostly white and Asian population located along the California coast, and a largely poor, heavily Latino working class in the interior. But the class divide is also evident within the large metro areas, despite their huge concentrations of affluent individuals. Los Angeles, for example, has the third highest rate of inequality of the nation’s 51 largest metropolitan areas, and the Bay Area ranks seventh."

Another of Mr. Kotkin’s word-inventions is his assertion that with the new California mal-distribution of wealth has come an increasingly wide communication gap between the ‘have’s an have not’s’. And, despite the legality of the map-distributed wealth which is supported by the historical religious-political iconizing of wealth and accumulation in America, this gap is, in summation, dysfunctional because it describes the loss of common societal goals which are useful to maintain a smoothly functioning and stable society. To help resolve this disfunction and the associated communication gap between classes, Mr. Kotwin proposes that there has risen a middle-situated class by analogy with medieval-feudal society in Europe. This 'mid-class’ (not middle class) serves to mediate between the oligarchy and the rest of America. He terms this class the “Clerisy” which in his words, does the dirty work of the oligarchy:

"...in today’s hyper-secular America, the job of shaping the masses has fallen to the government apparat, the professoriat, and the media, which together constitute our new Clerisy. The Clerisy generally defines societal priorities, defends “right-thinking” oligarchs, and chastises those, like traditional energy companies, that deviate from their theology".

Mr. Kotkin’s proposal has much credibility in defining a need for a mediating bloc to soften the friction between the Oligarchy and the ‘Serfs’ (Mr. Kotkin). But, this blogger disagrees with the expectation that the ‘Clerisy’ is/will be a somewhat independent ‘estate’. Although This blogger agrees a ‘Clerisy’ has been created, this blogger also believes the ‘Clerisy' has been co-opted by Big Money in the hands of and almost completely controlled by the ‘Oligarchy. This corruption of a theoretical modeling of America as a system of 'power-blocs-in-balance’ is especially exampled by the controversial (to some) Supreme Court (SCOTUS) decisions in recent years that extend corporate election funding prerogatives.

But, Mr. Kotkin goes further to propose an extended future for this feudalism:

"...Yet except for occasional rumbling from the left, neo-feudalism likely represents the future."

But, this future of a feudal longevity is too much a stretch for this blogger. Contrary to Mr. Kotkin’s conclusion that economic feudalism in California and the rest of America is here to stay, this blogger believes the keystone and the miracle of America is still its democratic basis which remains intact and ever ready to show its strength through the ‘vote’. This means change is always at most 2 years away and thus makes it impossible for Kotkin’s dire modeling of a long, feudal American future. And, as we are seeing now, the balance of powers written into the Constitution remains a very powerful ‘check’, though sometimes it appears to be mis-applied as in the current stoppage of government by the GOP dominated House (US)(October 2013).

This blogger doesn't agree with all of Mr. Kotkin’s views. Or maybe this blogger takes issue that Mr. Kotkin, despite his admirable effort to sort out what is happening, or has happened, to California and by extension, to America, needs to risk going further to envision what kinds of paradigm changes might work. Such an adventure would be especially fruitful about environmental protection: 'Yes, there are economic penalties to pay (right now) for a clean environment but what about the reduction in medium-to-long health costs to cities, states and the nation? And doesn’t this just mean we have to find new paradigms to pay for and justify the costs? One hopefully sees a multitude of articles, and books and books, on this subject of new paradigms. Right now it appears no one or very few are taking risks to stretch imaginations and conjecture about a workable future of economic equitability and re-establishing the ‘good society’ looked forward to in 1776.