The truth about 'class war' in America
Appeared originally in The Guardian on September 19th, 2011
Taking his cue from Warren Buffett, President Obama has announced a 'millionaire tax' as part of his budget plan; Republicans have denounced it as 'class war'. Photograph: Rick Wilking/Reuters
Republicans and conservatives always fight back against proposals to raise taxes on corporations and rich individuals by making two basic claims. First, such proposals amount to un-American "class warfare", pitting the working class against corporations and the rich. Second, such proposals would take money for the government that would otherwise have been invested in production and thus created jobs.
Neither logic nor evidence supports either claim. The charge of class war is particularly obtuse. Consider simply these two facts. First, at the end of the second world war, for every dollar Washington raised in taxes on individuals, it raised $1.50 in taxes on business profits. Today, that ratio is very different: for every dollar Washington gets in taxes on individuals, it takes 25 cents in taxes on business. In short, the last half century has seen a massive shift of the burden of federal taxation off business and onto individuals.
Second, across those 50 years, the actual shift that occurred was the opposite of the much more modest reversal proposed this week by President Obama; over the same period, the federal income tax rate on the richest individuals fell from 91% to the current 35%. Yet, Republicans and conservatives use the term "class war" for what Obama proposes – and never for what the last five decades have accomplished in shifting the tax burden from the rich and corporations to the working class.
The tax structure imposed by Washington on the US over the last half-century has seen a massive double shift of the burden of taxation: from corporations to individuals and from the richest individuals to everyone else. If the national debate wants seriously to use a term like "class war" to describe Washington's tax policies, then the reality is that the class war's winners have been corporations and the rich. Its losers – the rest of us – now want to reduce our losses modestly by small increases in taxes on the super-rich (but not, or not yet, on corporations).
To refer to this effort as if it had suddenly introduced class war into US politics is either dishonest or based on ignorance of what federal tax policies have actually been. Or perhaps, for conservatives, it is a convenient mixture of both.
Much the same sort of analysis applies to the Republican claims that taxing corporations and rich people takes money that would otherwise be invested in business growth and thus create jobs. Last Friday, the US Federal Reserve reported a record quantity of cash on the books of US businesses (over $2tn). Even with the currently low taxes on businesses and the rich, that money is not being invested and is not creating jobs. It is not being distributed to anyone else and so is not being spent on consumer goods either. Taxing a portion of that money to finance Washington's stimulation of the economy by spending that money – or even better, by using it to hire and pay the unemployed – would be a much more effective way to provide jobs than leaving it as cash hoards in corporations' coffers.
Last month, Warren Buffett upset many of his "mega-rich friends" by what he stated categorically in a New York Times op-ed. He made it clear that he had never encountered any serious investor who decided whether or not to invest based on tax rates. It was always the prospects of profit that made the difference. He then urged Americans to raise taxes on the rich like himself. He also hinted – none too subtly – that it was becoming politically dangerous for the whole economic system's survival to keep having the minority of extremely rich people paying federal tax at lower rates than the middle- and low-income majority.
The final irony of loose talk about class war is this: the Republican and conservative voices opposing all tax increases for corporations and the rich thereby provoke, as Buffett intimated and New York Mayor Michael Bloomberg more explicitly warned last week, a renewal of class consciousness in the US. Then, Washington might learn what class war really is.
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