Limiting Wealth and Power

Submitted by Ken Watts on Thu, 11/03/2011 - 21:22

In the last few posts I’ve advanced the following argument:

  1. The current market is not a natural phenomenon, but is a creation of government—a creature of laws and policies and contracts based on those laws and policies.
  2. Because of this, we the people, through our government, inevitably exert control over that market, and have a responsibility to see that it functions in the best way for all of us.
  3. To the extent that we neglect that responsibility the fact that wealth is power will inevitably create an imbalance in the market in favor of the wealthy which will lead to a political imbalance in the country, also in favor of the wealthy.
  4. If this continues, we will not only lose the free market, but we will cease to be a free country.
  5. There are three ways we can keep a wealthy minority from taking over the country:
    1. We can keep the 1% from getting too much wealth and power.
    2. We can increase the wealth and power of the 99%.
    3. We can use various types of laws and regulations to control the misuse of power by the 1%.

This post looks at the first of these—six ways to limit the wealth and power of the 1%.

Most ways to do this involve taxation.

Some suggestions:

  1. Increase the top marginal tax rates to pre-Reagan levels.
  • This is the first, and probably the most obvious, step toward controlling the never-ending spiral of wealth and power at the top.
  • Back in the Reagan administration we were sold a bill of goods about the economy, and as a consequence, the gap between the 1% and the 99% has been growing ever since.
  • This step will not eliminate wealthy people, nor should it. There were plenty of wealthy people around before Reagan, at much higher tax rates than we have now.
  • Eliminate the distinction between earned income and other income.
    • There’s no reason that investment income should be taxed at a lower rate than money that was earned.
    • Right now, professional investors pay taxes at a fractional rate of the rest of us, simply because their income is unearned.
    • If you’re concerned about poor old grandma, who’s living off her investments, raise the standard deduction for retired people. But make wealthy people in general pay full taxes on all of their income, just like the rest of us.
  • Eliminate the cap on the employment taxes which fund Medicare and Social Security, levy those same taxes on capital gains and profits, and add means-testing to Social security payouts.
    • Eliminating the cap is the simplest way to secure the future of both programs, and it simultaneously eliminates an unfair discrimination against poorer wage-earners who currently pay these taxes on all of their income while wealthier people do not.
    • Levying the same Medicare and Social Security taxes on unearned income, as well, will have the same effect, and produce some serious benefits which we can talk about next time.
    • A generous means-testing for Social Security payouts will both help stabilize the system and make it more of what it is intended to be: insurance against poverty in old age or disability. A billionaire should not be collecting on that kind of insurance.
  • Close loopholes in the tax law which which only benefit wealth and big corporations.
    • Get rid of the loopholes for the oil industry, for stock speculators, etc.
    • There is absolutely no reason that our government should be subsidizing multi-national corporations or speculators making millions on the market.
  • Return the estate tax to its former level—so that a proportion of the estates of multi-millionaires and billionaires gets recycled back into the country.
  • Create a graduated national equity tax, starting with a very low rate on those with more than twice the average (mean) wealth (which would be over a million dollars), escalating to a very moderate rate on those with ten times the mean (over five million dollars), and continuing to escalate to a significant level for individuals or corporations with twenty or more times the mean.
    • All the rates could be very low, and still provide a significant deterrent to the power-wealth spiral among the top 1%.
    • Such a tax would discourage the growth of corporations, especially growth by mergers and buyouts. It would not take a large corporation long to see that there was a better return to be had, after taxes, by being smaller and that the cost of a merger outweighed the benefit.
    • More important, those decisions would be made by the corporations involved, instead of by the government. If a corporation needed to be larger to be efficient, it could remain larger and pay the tax. Most corporations would probably break themselves up into smaller units—thus increasing competition, doing the trust-busting for us, and improving the functioning of the free market.

    There are other possibilities, of course.

    These would not be enough to level the playing field, restore a truly free market, and start us back on the road to democracy, but they would be a start.

    And we still have two-thirds of the plan to go.

    Next: Strengthening the 99%...