How often do you hear your uber conservative uncle harp about how high taxes are? If you are like me, you hear this focus quite often. In reality, our tax rates are not that high compared to the rest of the world, and especially historically when the highest tax rate was over 90%. But this is the mantra the Republican Party has adopted since their hero Ronald Reagan overhauled the United States tax code and began the dismantling of the American middle class in 1981.
If you are reading this and saying “what’s wrong with a tax cut?”, you are not alone. If you delve deeper into the tax cuts that have been enacted throughout history then you will find that the tax relief almost always goes to the wealthiest Americans. The average person does not benefit from a tax cut. The old trickle down thinking goes “if you give rich people more money, they will invest it and create jobs.” We have been trying this method for nearly 40 years, from Reagan all of the way down to yes, Obama. The results have been stagnant wages and lower quality jobs due to outsourcing and corporate greed. The 1980’s can be summed up with a quote from Gordon Gekko from the movie Wall Street when he said “greed is good.” Corporations were emboldened and the age of increasing profits for shareholders at the expense of employees began.
The chart above illustrates the economic plight facing this country. That is what 40 years of tax cuts, deregulation and the neutering of collective bargaining has resulted in. The U.S is the wealthiest nation in the history of the world but the majority of Americans would never guess that. The top 1% of Americans bring in nearly 99% of economic gains. Now I am 100% pro capitalism and understand that some inequality is inevitable and encouraged but the level of inequality we currently have in the country is not sustainable. American’s are now deeper in debt than before the financial crisis that occurred only one decade ago. The average american household credit card debt stands at $16,061 which is up 10% from ten years ago. The root of this problem is while the cost of living continues to increase, wages have remained stagnant. Another new major burden on households is student loan debt which has now become the second biggest form of debt behind housing. The average household has nearly $50,000 in student loan debt and default rates are already starting to rack up. Those numbers are not sustainable.
Donald Trump’s administration has been adamant about re-figuring the tax code and cutting taxes for the wealthiest Americans. A new analysis by the Tax Policy Center configures that under Trump’s broad tax proposal, the average family earning under $25,000 will get a $40 annual tax cut, or 0.3 percent of their income. The real winners of the plan would be the ultra wealthy .1% of the population who would gain an average cut of $937,000 or 13.3% of their after-tax income. When will republicans and even democrats learn that this fiscal policy is not beneficial for the country? Does the CEO of a major corporation like AIG work THAT much harder than a nurse, firefighter, police officer or teacher? I would argue no. Many CEO’s have no idea what the hell is going on with their company to begin with and then get rewarded. Martin Sullivan, the former chief executive officer of AIG was rewarded a $47 million severance package after AIG’s stock price decreased 98 percent during his tenure. I wish I could get paid $47 million to destroy a company.
Sometimes I hear people say “you are jealous of success” when referring to higher taxes on the richest Americans. No, actually I admire success when you earn it on a level playing field. If you can convince me how a CEO is worth 350-400 times more to a company than the average employee then I am all ears. The fact of the matter is the economy blossomed when tax rates were higher, union membership was above 30% and corporations cared about their employees and paid them a livable wage with good benefits. Times have changed but the current system is not working for everyone.