Let’s Stop the Redistribution of Wealth!
Conservative, libertarian and neoliberal arguments often accuse progressives of trying to “redistribute wealth” by taxing the rich and giving the money to the poor. Let’s be honest, over the past few decades, there has indeed been a redistribution of wealth in USA, based in part on changing tax rates.
A Wall Street Journal article from July 23, 2008, explained how there has been a trend in recent years where the wealthiest 1 percent of Americans have seen their income rise faster than any other group of earners in the country while at that same time, the tax rate for the top 1 percent has fallen faster than anyone else’s.
According to an article in Forbes magazine, the wealthiest 400 Americans paid roughly 30% in taxes in 1995. By 2008, the top 400, who collectively made over $105 billion, paid only 17% in taxes, roughly half the rate they paid a few years earlier and far less than most middle class Americans pay.
That huge reduction in taxes for the very rich is largely due to the fact that investment income was only taxed at 15%. If Conservatives have their way, the Capital Gains tax will be eliminated altogether, allowing many of the wealthiest people on Earth to pay no taxes at all.
For example, Exxon Mobil, the most profitable of the biggest five oil companies, paid zero taxes to the federal government in 2009. In 2011, Exxon Mobil announced a net profit of $41 billion for the year, the highest profits of any company in history. In July of 2012, their net profit for just one quarter was $15.9 billion. That’s a profit of $174 million per day or $121,000 per minute.
Many people thought that maybe after setting world record profits, Exxon Mobil no longer needs huge tax subsidies. Thanks in part to those tax subsidies, Exxon Mobil’s effective tax rate is now only 13%, lower than the average American’s tax rate.
Yet Republicans, like Rep. Joe Barton, insisted that the big oil companies will go out of business if we take away their tax subsidies.
While the most profitable companies in world history continue to get huge tax breaks, Congress proposes reducing the deficit by curbing “entitlement programs” like Medicare and Social Security even though these programs did not contribute a single penny to our national debt last year. If you eliminate Social Security and Medicare today, it would have no impact at all on the size of our deficit.
So rather than cutting subsidies to extremely profitable companies, we’re probably going to cut health care and retirement benefits for the elderly, which does nothing to cut the deficit.
According to Nobel Prize winning economist Paul Krugman, some Republican budget proposals will cut up to $3 trillion over the next ten years, yet it won’t reduce our debt because they’re offset by $3 trillion in tax cuts for corporations and the very wealthy.
Back in the 1950s, the top tax rate on the wealthiest Americans was nearly 90%. Now their top tax rate is 39%, less than half of what it once was. If tax cuts for the wealthy stimulate the economy, then our economy should be booming right now. Instead, while stock market is up, economy is not shining on the middle class. Yet Republicans recently proposed to further cut the top tax rate to 25%.
The shortfall in tax revenue from all these tax cuts and subsidies for the rich has been a major contributor to the huge budget deficit. Yet conservatives tell us that asking the rich to contribute even a little bit more means we’re trying to redistribute wealth from the rich to the poor.
There truly is a redistribution of wealth occurring in the United States, but the wealth has been moving from the middle class to the wealthy. The rich aren’t getting richer because they’re working harder. They’re getting subsidies, bailouts and special tax cuts that the rest of us aren’t getting.
During the Clinton years, we briefly stopped relying on tax cuts for the rich to boost the economy. Clinton actually raised taxes on the wealthiest 1.2% of Americans. Somehow the wealthy prospered and the middle class and the poor prospered too as we added 22 million new jobs. According to the Census Bureau, the percentage of Americans living in poverty fell every year during the Clinton years – from 13.6% to 9.6%.
When Bush became president, we returned to tax cuts for the wealthy as the primary means of growing the economy. During that time, the wealthy prospered but we only added about 3 million new jobs and the percentage of Americans living in poverty increased for six of the 8 years Bush was in office, from 9.6% to 12.6%.
History has shown that cutting taxes for the rich is not an effective way to stimulate the overall economy or create jobs. It just increases the divide between the rich and the poor by redistributing wealth to those who already have most of the wealth. Nobody objects to the rich getting richer, but most of us would be happy to see the income of the wealthiest Americans grow at about the same rate as the rest of America. When the economy grows, it should benefit all Americans, not just the wealthiest.