Most
Americans know that the Republican tax bill will widen economic
inequality by lavishing breaks on corporations and the wealthy while
taking benefits away from the poor and the middle class. What many may
not realize is that growing inequality helped create the bill in the
first place.
As
a smaller and smaller group of people cornered an ever-larger share of
the nation’s wealth, so too did they gain an ever-larger share of
political power. They became, in effect, kingmakers; the tax bill is a
natural consequence of their long effort to bend American politics to
serve their interests.
As
things stand now, the top 1 percent of the population by wealth — the
group that would primarily benefit from the tax bill — controls nearly
40 percent of the country’s wealth. The bottom 90 percent has just 27
percent, according to the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.
Just three decades ago these numbers were almost exactly the reverse:
The bottom 90 percent owned nearly 40 percent of all wealth. To find a
time when such a tiny minority was so dominant, you have to go back to
the Great Depression.
Continue reading the main story
An Egregious Wealth Gap Returns
The net worth of the richest Americans continues to eclipse
that of almost everybody else, more so than at any time since the Great
Depression.
Percent of net personal wealth held by the
top 1% of Americans
50%
2014:
39%
40%
Wealth of
top 1 percent
exceeds
bottom 90
30%
27%
20%
Percent of net personal wealth held by the
bottom 90% of Americans
10%
1913
’20s
’30s
’40s
’50s
’60s
’70s
’80s
’90s
’00s
’10s
As
kingmakers, rich families have supported candidates who share their
hostility to progressive taxation, welfare programs and government
regulation of any kind. These big-money donors have pushed the
Republican Party in particular further to the right by threatening
well-funded primary challenges against anybody who doesn’t toe the line
on tax cuts for the rich and other pro-aristocracy policies. The power
of donors has contributed to political polarization and made the federal
government less responsive to the needs of most voters, a new book by Benjamin Page of Northwestern University and Martin Gilens of Princeton University argues.
The
power of the one-percenters may help explain why President Trump, who
ran as a populist, has not only abandoned any pretense of fighting for
the working class but also joined Republicans in Congress in ripping up
regulations that protect families and the environment — in order to help
business tycoons. Together, they’ve tried to repeal the Affordable Care Act.
Its repeal would have deprived millions of people of health insurance
while trimming taxes for high-income families. Now, they want to cut
taxes on corporations and offer new loopholes to the rich, even if that
means hurting their own constituents by limiting the ability of
middle-class families to deduct state and local taxes on their tax
returns.
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Most
political campaigns now rely on a small group of wealthy donors who
give tens of thousands of dollars or more per election cycle. About 40
percent of contributions to campaigns during the 2016 federal election
came from an elite group of 24,949 donors, equivalent to 0.01 percent of
the adult population. In 1980, the top 0.01 percent accounted for only
15 percent of all contributions, according to an analysis by Adam
Bonica, a Stanford professor, and his collaborators.
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Campaigns for the Very Few
An elite group of “superdonors” — 24,949 people in the last
federal election — contributed an enormous share of campaign funding.
… made about
… and
Those superdonors, who make up
of the adult population,
or one out of every 10,000 people …
of the adult population,
or one out of every 10,000 people …
of all
of all
contributions
in 1980 …
in 1980 …
contributions
in 2016.
in 2016.
Average 1980 contribution in 2016 dollars:
Average 2016 contribution:
$14,795
$108,459
Of
course, the growing importance of wealthy donors is not exclusively a
Republican phenomenon. Democratic candidates have also benefited from
the largess of wealthy donors like George Soros, Tom Steyer and James
Simons. But on economic and tax issues, big-money liberal donors have
not really shoved their party to the far left. Donations from Wall
Street and corporate America have, in fact, pushed many Democrats to the
center or even to the right on issues like financial regulation,
international trade, antitrust policy and welfare reform.
Further,
liberal donors have been nowhere near as skillful at coordinating their
giving as conservative donors have been. No liberal organization comes
close to rivaling the network of donors and political activists created
by the conservative Koch brothers, says Theda Skocpol, a professor at
Harvard, who has written extensively about these issues. The Koch
network has spent years methodically pushing state and federal lawmakers
to cut regulations, taxes and government programs for the poor and the
middle class. The leading donor network on the left, the Democracy
Alliance, is smaller and much less successful.
Even
allowing for money “wasted” on losing candidates and failed causes, the
donor class has notched many impressive wins. Tax rates have fallen
substantially, with the top marginal income tax rate now just below 40 percent, from 70 percent when Ronald Reagan won the presidency. The top corporate tax rate has dropped to 35 percent, from 46 percent in 1980, and many businesses pay an effective rate that is much lower than that.
While supply-side economics remain mostly a Republican fiction,
politicians from both parties have supported the effort to reduce taxes
on capital — profits, capital gains and dividends — on the grounds that
this would spur investment and make American businesses more
competitive.
Continue reading the main story
Decades of Falling Taxes
Under the Republican plan, the top corporate tax would fall
to less than half of what it was for most of the 1950s, ’60s and ’70s.
100%
94%
91%
Top individual rate
80
70%
60
52%
48%
Proposed
new rates:
40%
Corporate rate
40
37%
35%
21%
20
1913
’20s
’30s
’40s
’50s
’60s
’70s
’80s
’90s
’00s
’10s
But
the cuts have done little to bolster the economy or the working class.
In fact, incomes have stagnated, and workers have been forced to part
with a larger share of their pretax earnings in the form of payroll
taxes.
Meanwhile,
where are the political champions of poor Americans? Whoever they are,
they haven’t been producing results. Wages for the poorest have
languished, partly because Congress has been so slow to raise the
minimum wage — $7.25 an hour since 2009 — that its purchasing power is
now about 10 percent less
than it was in 1968. Lawmakers and conservative judges have also
undermined workers by making it harder for them to unionize, so they are
not in a position to demand better pay and better working conditions.
This tax bill would exacerbate all these trends. The Urban-Brookings Tax Policy Center and the Joint Committee on Taxation,
both respected, both nonideological, say the bill would primarily
benefit the wealthy and would leave most poor and middle-class Americans
worse off over the long run. That’s without Congress doing anything
else to widen the gap. But even now, Mr. Trump and Republicans in
Congress are talking about cutting government programs like Medicare,
Medicaid and Social Security next year to help make up for the more than $1 trillion the tax bill would add to the federal deficit.
Inequality
in America does not have to be self-perpetuating. When people turn up
at the polls, as they did recently in Alabama, they can produce
unexpected results. That’s why Republican lawmakers might want to think
again about whether they want to be the means through which their
wealthy donors pull off this heist.
