Class warfare, now a part of the current political mantra, is the cry when it comes to proposals to tax the rich at a higher rate to raise revenues. To consider any issue “warfare” assumes a serious conflict or disagreement sometimes with the intent to destroy. Paul Krugman, in an article for The New York Times, takes a look at that very subject.
Krugman points out that median income has risen 100 percent since World War II according to the Congressional Budget Office. During the period of 1979 to 2005 the median income of the middle class increased 21 percent compared to 480 percent for the top 100th of 1 percent of income distribution. Some of the disparity can be attributed to government policies, financial deregulation, and continued pressure on organized labor. In the current environment a big driver of the disparity is our tax system as it has evolved and so far the wealthy do not appear to be suffering from any form of class warfare.
The tax system in the United States as established by law is progressive in nature. By definition, the more income you make the more you will pay in taxes on an incremental basis. Tax brackets break down the intervals and rates applied to those intervals. A flat tax or proportional tax applies a set rate to total income received. The point of taxes has always been to pay for a structured, decent, functioning society in which everyone benefits. Currently our tax system is more regressive than progressive as the rates are higher for those who make less than for those who make more.
While everyone has gotten a tax reduction, the wealthy have benefited the most. You may have heard that “it takes money to make money” and that is true when it comes to real wealth. The tax on capital gains and dividends has never been lower while payroll taxes continue to increase. Now as the number of those employed is dwindling so are the tax receipts. Many corporations are still profitable and the dividends continue to be paid. The balance of revenue sources has shifted. If the wealthy and their corporations used their increased cash flow to expand their businesses and employ more people the entire society could benefit.
“There is nobody in this country who got rich on his own”, states Elizabeth Warren, a financial reformer and candidate for the United States Senate in Massachusetts. There is a “social contract” between society and those who live in that society that funds will be provided to enable the decent functioning of that society so that all can prosper.
Krugman finds it hard to understand why some in our society seem to think that the wealthiest among us should be exempt from contributing to a society afflicted with budget deficits and unemployment. We are all beneficiaries and contributors to our American way of life. As such, class warfare has no place in our dialogue.
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