“What’s Really Radical? Not Taxing the Rich,” By David Leonhardt

I know it has been a long time since you last heard from me, but I’ve been through chemo and radiation therapy, a nasty surgery, and I’m still waiting to get healthy enough to have another operation. In the meantime, I haven’t had the energy to take care of the writing duties associated with a blog.

But I still do a lot of reading and the following column by The New York Times columnist David Leonhardt especially inspired me to post it here for your consideration (if you have any comments, I’ll try to engage).

I realize posting in full another person’s work isn’t exactly ideal, but I know many of you don’t subscribe to the Times (you should, though, despite its continuing problems adjusting to Tr-mp) and you therefore may not otherwise be exposed to the opinion below. I think it is worth the risk (once again) of getting in trouble, and please know my intentions are good. Here it is:

What’s Really Radical? Not Taxing the Rich

“It’s time to reverse the extreme upward redistribution of the last 40 years.”

By David Leonhardt

A house is the biggest asset that most families own. If middle-class families can pay an annual tax on their main source of wealth, wealthy families can, too, says David Leonhardt.CreditCreditMatt Rourke/Associated Press

Imagine for a moment that a presidential candidate made this speech:

My fellow Americans, I’m here today to tell you about my economic plan. Each year, I will require every middle-class family across this great country to write a check. We will then pool the money and distribute it to the richest Americans among us — the top 1 percent of earners, who, because of their talent, virtue and success, deserve even more money.

The exact size of the checks will depend on a family’s income, but a typical middle-class household will hand over $15,000 each year. This plan, I promise all of you, will create the greatest version of America that has ever existed.

You would consider that proposal pretty radical, wouldn’t you? Politically crazy. Destructive, even. Well, I’ve just described the actual changes in the American economy since the 1970s.

Economic output — known as G.D.P. — per person has almost doubled over this period. But the bulk of the bounty has flowed to the very rich. The middle class has received relative crumbs.

If middle-class pay had increased as fast as the economic growth, the average middle-class family would today earn about $15,000 a year more than it does, after taxes and benefits. Instead, that middle-class family effectively forfeits the money to the rich, year after year after year. (Larry Summers, the former Treasury secretary, first got me thinking about calculations like these.)

The extreme redistribution of income — upward — has multiple causes. Some of them, like technological change, stem mostly from private-sector forces. But government policy plays a crucial role. Tax rates on e wealthy have fallen sharply. Labor unions have been undermined. Big companies have been allowed to grow even bigger and more powerful. The United States has lost its lead as the most educated country in the world.

More often than not over the past 40 years, our government has helped the rich at the expense of everyone else. As a result, economic inequality has reached Gilded Age levels.

In the face of these trends, the radical response is to do nothing — or to make inequality even worse, as President Trump’s policies have. It’s radical because soaring inequality is starting to threaten the basic fabric of American life. Many people have grown frustrated and cynical. Average life expectancy, amazingly, has fallen over the past few years.

Over the sweep of history, the main reason that societies have declined, as the scholars Daron Acemoglu and James Robinson have written, is domination “by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people.” The name of Acemoglu’s and Robinson’s book on this phenomenon is, “Why Nations Fail.”

It’s worth keeping all of this in mind when you hear critics (or journalists) describe the economic proposals of the Democratic presidential candidates as “radical.” They’re not radical, for the most part. The proposals are instead efforts to undo some of the extreme economic changes of recent decades and to ensure that most Americans workers — not just a narrow elite — fully benefit from economic growth.

The proposals also happen to be popular, broadly speaking. On social issues, like abortion and immigration, the country is deeply divided. But clear majorities support higher taxes on the wealthy, higher taxes on corporations, more education funding and expanded government health insurance. No wonder: Americans don’t resent success, but they do resent not receiving their fair share of economic growth.

The coming primary campaign will be a good time for the candidates to hash out which specific ideas make sense and which don’t. So far, the agenda looks pretty good. Elizabeth Warren has a plan to increase workers’ power within companies — and help them get larger pre-tax raises. Cory Booker and Kamala Harris want to lift the after-tax pay of the middle class and poor. Kirsten Gillibrand and others support reducing major living costs, like child care and education.

Perhaps most important, some Democrats have begun pushing for a wealth tax — to reverse the upward redistribution of the past 40 years. Warren has proposed an annual 2 or 3 percent tax on large fortunes. Bernie Sanders has proposed a big increase in the inheritance tax.

These wealth taxes are a classic example of policies that are less radical than their opponents claim. Do you know who already pays a wealth tax? Middle-class Americans. It’s called the property tax, as Noah Smith of Bloomberg Opinion has noted. Every year, homeowners pay a percentage of their house value in tax. A house, of course, is the biggest asset that most families own. If middle-class families can pay an annual tax on their main source of wealth, wealthy families can, too.

The United States as we have known it — optimistic, future-oriented and more powerful than any other nation — cannot survive the stagnation of mass living standards over many decades. I’m glad to see that some political leaders understand this and are trying to recapture a core feature of American life.

Maybe we should start describing those leaders as conservatives.

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24 Comments

  1. It’s good to see you back again. I did not know of your health problems, and I wish you well. I will look for you here again.
    Helen

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    • Thanks so much, Helen. I have a problem sitting in a chair, but I managed to rig up a system where I can lie in bed and type. It’s just a lot slower than my old desktop with two screens and plenty of time to research and write and, occasionally, edit out the many mistakes!

      Good to hear from you again. My best to you and yours. Again, thanks for the kind words.

      Duane

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  2. Bayard Pidgeon

     /  February 4, 2019

    No apology needed…you’re ill…it happens. I wish you well. However, if you’ve ever behaved, ever in your life, even only in thought, like Virginia’s two top pols…well, maybe a teeny apology is in order now, followed by public self flagellation when you’ve recovered your health. Seems we can no longer ever escape any transgressions, eh?

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    • I confess I am bewildered at what is happening in Virginia. Man, did things turn ugly there.

      Duane

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    • The younger Mr. Northam surely is guilty of more than just poor judgment. But the more mature Mr. Northam has a record of many years of support for women and racial minorities and of speaking out against, and acting against, racism. It is the current Mr. Northam that we should judge, if indeed we are to judge.
      Surely we should acknowledge the double standard. Let’s acknowldege that Democrats as well as Republicans (see Justice Kavanaugh, Justice Thomas, Senator King) can be allowed to claim “that was almost 40 years ago” and indeed, let’s look at the on-going, current, as in right now, rasicm of our president.
      I think Mr. Northan should resign only after those Republicans do.

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      • Bayard Pidgeon

         /  February 5, 2019

        Unfortunately, it seems that the liberal/left has become as unforgiving and relentlessly punitive as the religious right used to be…before that group decided to forgive all for Trump. The left has always had “purity” problems, usually resolved by forming circular firing squads, which is what we’re seeing now. Doesn’t leave very many standing.

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        • The right-wing pundits have been damn good at playing upon the alleged hypocrisy of the left that was exhibited, they claim, by the way they protected Bill Clinton after all the charges against him (some of them quite credible) were broadcast far and wide. I lived through those days as a right-wing conservative and I can verify that there was plenty of hypocrisy to go around, as there always is.

          I couldn’t agree more that the purist reflex on the left is a big, big problem. That used to be mostly confined to the far left, but it is creeping across the spectrum I fear. As I told Helen in another response, my tendency is to look at each case independently and not to rush to judgment (I am sure my reflexes have to do with the fact that I once was a dittohead conservative myself and don’t want people to judge me by that sad period of my life). That tendency is not just for cases of alleged scandal, but also cases of policy ideas, etc. And it is in the latter cases that I fear our side has embraced an ethic of purity that I think could set us back, if it prevails. I worry that too many on our side are “unforgiving and relentlessly punitive” against people who, say, don’t embrace their idea of single-payer healthcare or some other policy position. That could, as the last election demonstrated, be quite dangerous.

          As for me, at this point, given the way the filibuster works in the Senate, I would be happy with any Democrat worthy of the name to run against Tr-mp. As I’ve said countless times, unless there are 60 reliable progressives in the Senate, even having the House and the Whites’ House won’t get us much of what we want. Thus, getting rid of the cancer on our democracy that Tr-mpism represents should be our first, second, and third objectives. That is something we *can* accomplish if we don’t fall into the purist trap and just stick together for at least another election cycle. I do have hope that, at least when it comes to defeating Tr-mp next time, our folks will bend enough to accept just about any Democrat who wins the nomination.

          Duane

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      • There are a lot of folks on the left who feel the way you do, Helen. After Al Franken was run out of the Senate, largely by his fellow Democrats (many of them women), one could sense a feeling on the left that people were starting to realize that we were way too quick to react to even the flimsiest of evidence against one of our own, even as the other side would tolerate racists like Steve King and racist-misogynists like Tr-mp.

        As for me, I like to take things on a case by case basis. In the case of the governor of Virginia, he badly handled the revelation of that photo. I watched his weird press conference last weekend and, well, it was awful. I was predisposed to give him a break (although I admit that people of color have much more of a right to moral judgment than I do on this particular transgression), but after that performance I was much less inclined to do so. Now, the entire thing is a mess, with the possibility that the governorship could end up in the hands of a Republican (although I highly doubt that will ever happen).

        I’d like to think there was a way the governor could have handled this matter such that he could have held on to his office, even though there are other bones that black critics have picked with him besides the blackface issue. At this point, I think he has screwed it up so much that even if he does hold on he won’t have much power to wield. As you know, this issue is further complicated by his next two would-be successors and their problems. That development may be the only thing that can save the governor at this point, but this mess is far from over.

        Duane

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  3. With finance, as with most things, the devil is in the details. Fixing income inequality will be very difficult, not only because the rich understand the details but because the majority of voters do not. However, there are two areas that seem promising to me, the capital gains tax and the inheritance tax. Both of these represent leverage available disproportionately to the rich and neither rewards economic progress or vitality.

    I looked up what has changed regarding the capital gains situation and its effects over the last half-century are larger even than I expected, shocking even. Here is a graph of it from Wikipedia.

    As for the inheritance tax, that seems easy to understand. A fair tax polity ought to allow a person to fund a comfortable retirement and education for her children, but not to create a dynasty such as to discourage the productivity of descendants.

    The challenge for the Democratic Party now is how to get voters to understand factors like these without alienating donors and leaders. Moderation will be important, I think.

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    • Jim,

      I agree that not enough voters know the “details,” but I am confident that a majority feel it in their bones that the system is rigged against them. Heck, even about half of Republicans (as I try to remember without looking it up) are in favor of raising taxes on the wealthy in some way or another. The problem in the last election was that a crucial few in crucial states weirdly thought Tr-mp was the answer.

      I like your points about the capital gains tax and inheritance tax. I still remember years ago on this blog when I wrote about preserving (or maybe increasing) the inheritance tax. A few people, which surprised me, wrote in to say that it was “unfair” (or words to that effect) to “double tax” people’s earnings by taxing it as income and then taxing it as a windfall to their children. Talk about not knowing the details. People don’t understand that a substantial amount of an estate is not subject to the tax; many think that all inheritance is taxable.

      But when I read your comment about discouraging “the productivity of descendants,” I thought about how many lectures are given by right-wingers (we have the Watered Gardens pastor here in Joplin who is big on this) about the moral damage done to souls who are given handouts. Apparently, for conservatives, and oddly for some on our side, it is perfectly fine, morally speaking, to hand off a gazillion dollars, tax free, to your children.

      Finally, I agree that for Democrats effective messaging is essential. I worry a lot about that because some of this requires relatively lengthy explanations. It might be better to just stick to broader ideas and not get too far into the weeds. That seemed to work for Tr-mp, and I think people are so fed up with the corruption and incompetence they see that they will not require of Democrats long dissertations on economic policy. Just get the big picture right.

      Duane

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  4. Policy, not “polity.”

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  5. Also germane to the issue of income inequality is health care. For those interested in this aspect, here is the best summary of the issue’s complexity that I have ever read. It is from Vox.

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    • Jim,

      As usual, Ezra puts it all in proper perspective. I’ve been saying for two years now that there isn’t a chance in hell of passing a single-payer scheme, no matter what it is, through Congress. Democrats would need all of government, including 60 reliable progressive votes in the Senate. That ain’t happening anytime soon.

      Thus, we are left with incrementalism and/or hybrid programs. It seems clear to me that anyone selling a scheme that would force Americans to give up their employer-provided private insurance will not win a general election. Choice is the answer. The simplest strategy is to build on the ACA by adding a public option (or something akin to this strategy) and let things develop from there, while all the while promoting the general idea that everyone should have access to affordable health care and that the best leverage we have over drug companies, etc., is through the power of large numbers.

      Thanks for the excellent link.

      Duane

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  6. Duane – it’s been a while but I do still visit now and again. Sounds like you’ve been through the wringer – damn sorry about that. This old blogfriend cares about the other old blogfriends.Get well, and keep on pumping out the good stuff. (Hi Jim Wheeler!)

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    • Wow, Moe. It has been awhile. Damn, I am so glad to hear from you! When I noticed you stopped blogging (assuming you didn’t change sites or something), I had hoped it wasn’t because of poor health or something nasty like that. Hearing from you reminds me so much of better times, when both I and the country were much healthier. My best to you and yours and thanks for stopping by. Hope you are doing well.

      Duane

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    • Moe, I join with Duane in happiness that you are OK. I have truly missed you and hope you will chime in often.

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  7. Tony48219

     /  February 11, 2019

    Why is Al Qaeda more compassionate than pro-lifers?

    The 9/11 hijackers got to die instantly!

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  8. ansonburlingame

     /  February 21, 2019

    Welcome back, Duane,

    To the point of your blog, I was surprised several weeks ago when David Brooks made a point (true or not I have no idea) during his weekly summary on PBS News Hour. He said that before JFK cut taxes on rich from 70% to 50%, and later Reagan took the highest brackets from 50% to 30(something)%, up to today with highest bracket at 38% that federal income tax revenue remained constant at 19% of GDP.

    His point, a compelling one if true, is that fed income tax revenue grows with GDP, but as a % of GDP it remains reasonably constant, regardless of top bracket taxes.

    It is relatively easy to see why that might be the case. As Congress tinkers with tax code brackets, others tinker with tax code loopholes. While the former, brackets, is very public and well argued, the latter is behind the scenes and only understood by a few.

    Which leads me to raise a new point, one you have heard me introduce on a more private exchange. Tinkering with taxes is “financial engineering”, the same kind of “engineering” that certainly caused the Great Recession, in that case tinkering with “credit”, to make huge profits.

    We are all in agreement over concerns about income inequality. My new idea is correct it through “human engineering” not lame attempts at “financial engineering”.

    Of course explaining that concept, much less defending it, requires a lot, a very lot of thinking, writing, etc. and is not understandable through sound bites.

    Anson

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    • Anson,

      I’m not surprised that David Brooks, whose quality of analysis has suffered severely over the last few years, trotted out that old tired BS/voodoo economics that is the mantra of the government-loathing right wing.

      The last time I checked, federal revenues for 2018 were 16.3% of GDP. If you go back to the year 2000, memory tells me it was around 20%. Memory also tells me that we were running something close to surpluses during the late 1990s up until George W. took office and cut taxes. That was because of the George H. W. Bush/Bill Clinton tax increases in the early 1990s. H. W. Bush lost his job because he raised taxes and when Clinton did it we got Newt Gingrich and the radical right controlling the House. We all know how that has worked for us.

      The truth of it is that despite right-wing claims to the contrary, when taxes are raised, revenues increase. And if revenues are a sufficient percentage of the GDP, considering that no one has the appetite to cut spending, we can live fiscally responsibly. We are way below where we should be, in terms of how much revenue is needed to sustain current (and future) spending levels. Everyone knows that. But everyone should know that raising taxes does in fact provide more revenue to the government and that cutting taxes, particularly in decent economic times, does not produce a supply-side miracle. To the contrary, it just puts us further and further in debt.

      I would think that by now everyone would be wise to the economic nonsense peddled by people like David Brooks (I’m assuming you correctly cited him). But, alas, I thought people could see a con man like Tr-mp for what he is. So, maybe people just aren’t paying attention.

      Finally, I will repeat something I’ve said to you. You keep making a distinction between “human engineering” and “financial engineering.” I fail to see that distinction. Financial engineering, which is partly the job of the politicians we elect, is human engineering. What else could it be? We have the kind of income inequality we have because of a failure of human engineering, i.e, a failure of politics (which includes voters). No one would seriously argue that we can eliminate all income inequality (my man Rawls comes in to play here), but we can do much better. And we could do much better if people like David Brooks would get his facts straight and tell the truth.

      Duane

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      • Duane, as usual, you seem to be able to articulate my thoughts and opinions better than I can. I wish you the best possible recovery, and hope to be reading your commentary for many more years.

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  9. Good to hear from you, Duane — even in a limited capacity. I missed this entry when it came out 3 weeks ago. We all wish you a genuine recovery. Since my comment is later than the rest of the crew I have the advantage of a few weeks of watching sanity prevail over the ever present contemporary knee-jerk (Virginia) and a few hours of Mikey Cohen’s house testimony (I’m watching now).
    I was disappointed in Northam’s antics when in med school, but c’mon. I’m a native Virginian and was pleased that Sen. Gillibrand wasn’t spewing her self-righteousness all over the issue. Cooler heads prevailed and the Old dominion will be the better for it. I miss Al.
    As for the whores in the GOP House, they’d like to take Mikey out to middle of 5th Avenue and give Trump a gun to shoot him down. With a little luck, that would be the only thing he wouldn’t get convicted of. Jim Jordan needs to flushed away like the huge turd he is and has always been.
    Well, that’s my 2 cents. I just want to get back into the mix — and stay up with your progress. Think good thoughts.

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    • I appreciate it so much.

      I spent the day watching the Cohen testimony. One thing surprised me: how much Cohen did to turn me around on him. I actually had sympathy for him as time went on and found him quite believable. At the end I was rooting for him to get his life back together somehow. There was one thing that didn’t surprise me: how horrid congressional Republicans are–down to the core, all of them with the possible exception of Justin Amash, who has a few interesting wrinkles in his soul.

      Thanks again for the encouragement. I need it.

      Duane

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  10. ansonburlingame

     /  February 28, 2019

    So now the forum, herein, is back. Hi General.

    Back to taxes, the subject of blog. When I raised the point made by Brooks, Duane countered that his point was wrong, primarily because Brooks is a conservative writer, commentator, and thus not to be trusted. So trading statistics back and forth becomes a mote point it seems. OK. Fairly common situation, today, with anyone able to construct a graph to make just about any point they care to make, it seems.

    Try this approach. We have about an $800 B deficit this year. So how do we raise taxes next year to gain an $800 B plus in tax receipts, over this year (FY I suppose), Throw out any and all ways imaginable to raise revenues by $800 B in FY 2020, argue all the ways then vote with end result of ……..

    Then sit back and watch GDP in 2020. If the new tax brackets cause GDP to go down then a big Opps, back to another plan, and repeat the cycle. Anyone think that we will ever reach point of zero deficits, using tax plans of every sort to achieve that goal. Hell, most will say the goal, zero deficits is not prudent. OK, say that and then let the people vote. My guess is big spenders will win that vote, popular vote. Just watch presidential campaign for 2020 where large taxes on rich and higher spending (some elements of Green New Deal) will win that presidential campaign, no doubt about it. GOP has NO CHANCE at all in 2020, an even worse chance than it had in 2008.

    As for Cohen. Not sure who is worse, Cohen or trump. Both are terrible men. General may not know that I made a public call for trump to resign, or at least, announce he would not run in 2020, neither of which will happen. So go ahead and impeach him if you can. I will only comment on the actual grounds for impeachment when they go before the Senate. As for Cohen’s testimony, or was it just a circus, there was nothing new there legally. That is not my view. It was said by a former Whitewater prosecutor, on PBS Newshour last night. It was all show, no substance, legally.

    trump is probably every thing Cohen said he is, yesterday. But to impeach such must be proven in a legal proceeding in the Senate. Go ahead and give it a go and I will watch. But nothing will change until Jan 20,2020. Then you guys will get your control of government, again, and we can then see what happens.

    Cynically,

    Anson

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