The Republicans have been very successful at winning elections by promising to lower taxes. Conversely, the Democrats have been unsuccessful in suggesting that taxes might have to be raised in the interest of fiscal responsibility. Take Fritz Mondale, for example, who promised to raise taxes, and promptly lost the election. At the same time money flowing into Republican coffers has defeated candidates and campaigns that promised to benefit the middle class at the expense of the rich and super rich. Consider the swift boat campaign that brought down John Kerry. Or consider the Willie Horton ad campaign that bought Bush the elder the Presidency or consider the Harold and Louise ad campaign that resulted in the defeat of the Clinton universal health care program in the early 90s.
There were many reasons for the death of comprehensive healthcare reform. Washington pundits have laid blame on many doorsteps: the overcomprehensiveness of the plan, the secret meetings of the healthcare task force, the ineffective advocacy effort by the Democratic National Committee, the contentious paid television advertisements such as the now famous "Harold and Louise" pieces, the lack of bipartisanship, the lack of presidential coordination with Congress, and the multimillion-dollar effort of special interest groups bent on preserving the status quo. At one point, H. Ross Perot offered the Republican Party at least $1 million to produce a televised program to critique President Clinton's healthcare reform plan.
All these ad campaigns were paid for by millions of dollars spent by corporate and individual interests who sought successfully to influence politics in a way favorable to them. And what was favorable to them was to have the Republicans lower their taxes. The real issue is whose taxes are to be lowered and whose are to be raised. The Republicans delivered on their promise to lower taxes for everyone, but the lion's share of the dividends went to the rich and the corporations. The poor and middle class, by comparison, got a mess of pottage and whatever meager social programs they were benefiting from got reduced or eliminated.
The tax issue is a serious problem for American democracy because the rich and super rich have become political power brokers in and of themselves and this threatens democracy itself. CEOs and hedge fund managers have been taking home $100 million and up annually. According to the Washington Post's David Ignatius:
A measure of just how rich the new financiers are is a list compiled annually by Alpha magazine of the top 25 hedge fund managers. Average earnings for these financial titans last year were $570 million, an increase of 57 percent from 2005. "In total, the top 25 earners raked in more than $14 billion, equivalent to the GDP of Jordan or Uruguay," writes Alpha. You read sentences like that and you wonder why there isn't a revolution against a global financial system that produces such disparities.
Is Alpha's readership of tycoons embarrassed by these numbers? Apparently not. A June editorial urged greater political activism by the super-rich in Washington to save their tax breaks. "The time is now," the article warned. If current trends continue, "we may wake up one day to find fundamental changes affecting our business." What a happy thought.
With a progressive income tax system such as the US used to have, this wouldn't have been possible. Now $100 million (let alone $570 million) is way more than any rational person could conceivably spend on their lifestyle in a particular year. So where does the rest of the money go? It goes into paying lobbyists to influence public policy in the interests of the rich and super rich. It goes into supporting political candidates who will do their best to support policies and pass laws that favor the rich and super rich, and it goes into campaigns to defeat candidates or policies that the rich and super rich don't think are favorable to them.
The question is why do the majority of people vote for and support programs and political candidates that do not represent their interests? In other words why does the majority of people vote against their own economic interests? Like lemmings, they are influenced by TV ads because they are too lazy to research the issues for themselves and then vote in their own interests. Also rich people have the money to outspend the interests representing the middle class and the poor. They spare no expense and leave no stone unturned in order to insure that the public will be sufficiently swayed to their point of view. So the issue of progressive taxation is not only an issue of who gets to keep how much and whether it is morally right for individuals to possess wealth above and beyond that necessary for any conceivable luxurious lifestyle. The issue is whether certain individuals are allowed to accumulate wealth to the point where it affects democracy itself.
Here in a nutshell is what the Dems should do: campaign on a pledge of lowering taxes on the middle class while raising them on the rich, the super-rich and corporations. For individuals to be taking home $100 million and up is not only unfair, but it results over a period of time in these individuals having complete control of the political process. This could not happen if individuals' take home pay was put to use for what I would call legitimate purposes: lifestyle (even a luxurious lifestyle) and retirement. People taking home $100 million annually are not exactly living paycheck to paycheck! For instance, the Forbes Fortune 400, the 400 richest Americans, are all billionaires! We have to distinguish between an individual's net worth in terms of assets and a person's annual earnings. If you have assets of $1 billion and put it in a secure money market account earning the going rate of 5% interest, you would have an annual income from your assets alone of $50 million. This so-called "unearned income" (the Republicans haven't been able to change the pejorative terminology - yet) is what's called a return to capital. The normal middle class financial assumptions involving money do not apply here. For the middle class, most money earned by working goes into current consumption whereas capitalism is all about capital accumulation and the return to capital that results from capital accumulation in the form of stock dividends, interest on bonds, rents from real estate, stock options and other financial derivatives and manipulations. Middle class asumptions that, if they work hard and play by the rules, they will be rewarded, are entirely bogus. Rewarded by whom? The government? Private corporations? God? No, it's starkly clear that the middle class has been hoodwinked by the Republican Party which represents corporations, the rich and the super rich. Middle class folk have to be in the business of pursuing their own interests just as tenaciously as the rich have pursued their interests. And it has nothing to do with working hard and playing by the rules. It has everything to do with capital accumulation and living off the return to capital. However, most people can live quite comfortably on a return from a $5 million capital accumulation, for example. There is no need for a society to allow individuals to accumulate money in the billions because that spills over into controlling the political process itself.
In a society where most money is earned from a return to capital and not from actual work ("earned income"), there is a danger of that society becoming a corporatocracy or plutocracy, i.e., a society controlled by the rich, super-rich and corporations. The financial realities of the wealthy stand middle class assumptions on their head. Only part of their annual earnings (both "earned" and "unearned") go to support lifestyle, (even a luxurious lifestyle) while the rest are available to make campaign contributions to candidates and ad campaigns and lobbyists who support their interests for making even more money. When the rich control the political process in this way, the only thing left to the middle class is the voting booth itself. Voting is the last refuge of the middle class because here they can actually elect candidates who represent their interests and not the interests of those running the slickest and most numerous TV ads. Since monied interests have been able to control the government, politicians who have accepted their donations have passed legislation favoring their interests. In return the politicians can look forward, upon leaving government "service", of being offered a lucrative job as a lobbyist or on a corporate board. They only need to bring their Rolodex. It becomes a positively self-reinforcing circular process.
So what the Dems need to do (although since they accept money from the same super rich and corporate interests as the Pubs, they are less likely to do it!) is to raise taxes progressively on the rich and super rich and corporations and reduce them on the middle class. There is no need to even deal with the issue of tax relief for the poor as they don't really figure in the political process. The middle class does. Much as the poor need and deserve to be helped in a compassionate and even Christian society, they are written off in the US where "money talks and shit walks." The Republicans don't even mention them and the Democrats shouldn't either. It just detracts from their appeal to the middle class. Maybe some day the poor will be treated as Jesus suggested treating "the least of these my brethren" but, until then, the Dems should court the middle class and disabuse them from Republican propaganda and from voting against their own economic interests. That's what makes John Edwards "poverty tour" so ridiculous. The poor, unfortunately, don't vote in great enough numbers to influence the political process and there are not enough altruists out there who espouse the causes of the poor to matter. So it's better to represent those people who actually have a chance to politically affect the outcome of an election, the people who have been targeted for political destruction ever since Ronald Reagan, namely, the middle class.
So when I say the Dems should raise taxes on the rich, where do we draw the line. First of all, doctors and lawyers making $200,000. to $400,000. a year are no longer upper class when some people (CEOs and hedge fund managers) are making $570 million, several orders of magnitude more! $400,000 and less is middle class, but assets have to be factored into the equation and they can be readily since they are producing "unearned income" under the return to capital principle. So a CEO could be taking home $100 million for his salary, have income producing assets of $50 million and stock options worth another $100 million. For the purposes of taxation all of this has to be figured in and not just his so-called "earned income." Ideally, in a democratic society even the individuals with the greatest incomes should not make more than they could conceivably spend on their lifestyles, in other words, on consumption. Else they have money that is inevitably going to find its way into influencing the political process.
So the Dems should pledge to raise taxes on those making more than $400,000 annually in a progressive fashion going up to a 90 % tax rate while keeping taxes constant for those in the $100,000 - $400,000 range and lowering taxes for those making less than $100,000. In other words lower taxes on the middle class! Also since corporations have the rights of persons, they should bear the same responsibilities and not get any tax breaks just because they're corporations. If they produce American jobs and for a limited variety of other good deeds, maybe they should get a tax break. If the Democratic nominee for President ran on this plank of a platform, they would get a majority of the votes on this issue alone. They would have to take the chance of alienating the super rich and the corporations and they would have to counter vicious TV ad campaign propaganda, but, if they could overcome those two hurdles, we might be able to go back to a democracy. If not, it will be full steam ahead to plutocracy and corporatocracy.