Thursday, March 27, 2014

It's Time to Increase Estate Taxes for the One Percent!

Photo: Rich rentier after getting a large inheritance

Author Michael Parenti, in his book, 'Dirty Truths', was the first to expose the lie that most wealth is amassed by plain old hard work. In fact, he showed - using census and other data not easily available- that 95 percent of wealth is accumulated by way of inheritance.  He believed this important to attend to, given how the Repukes, assorted conservative blowhards and other friends of the rich, often used the "hard work" mantra to beat the less fortunate over the head for their plight - blaming THEM - instead of the corrupted system that enabled the rich to do so well.

This is even more critical now for citizens to have on the radar, given the past ten years have seen 80% of Americans lose in income, many falling out of the middle class, meanwhile the other twenty percent have ratcheted up gains - especially the top 1%..  This as inequality in the U.S. has never been higher, now rivaling Mexico and the Philippines  - with a Gini coefficient approaching 0.5. (A Gini of 1.0 denotes total income-economic inequality, while 0.0 denotes complete economic equality.)

Incredibly, 15.6 million kids still go to bed hungry every night because of cuts to food stamps, most recently as part of a Farm Bill which delivers huge subsidies to rich, corpora-farms.  Economist Jared Bernstein has put it this way:

"It's like don't look at all the ways in which the economy is underperforming, and the benefits are flowing right to the top. Look at the people getting $4.50 a day for food stamps. It's an old trick but it continues to be used."

All this, as French economist Thomas Piketty released into the English-speaking world last week his 700-page work entitled  “Capital in the 21st Century,” setting off a firestorm of media commentary. In the book, Piketty painstakingly reconstructs the last couple of centuries of wealth and income inequality in the world and provides cogent theories to explain the origin and dynamics. He uses those theories and projections about future growth to predict what the next century of inequality will look like, and it’s not a pretty picture. Among other things, we will see the  further rise of inheritance as a major player in economic fortunes.

That means even more scions will be able to sit on their asses after collecting nice tidy sums of  forty million or more, while they castigate those in minimum wage jobs or those low-wage parents having to work two or more jobs just to feed their kids and keep a roof over their heads.

The U.S. itself, as Parenti noted (op. cit.) didn't always have inherited wealth play such an immense role in inequality.  That didn't really take off until the Reagan Years and conservative think tanks changed the language - using the term "DEATH TAXES" instead of Estate Taxes.  The Democrats- as they usually are (e.g. when Rs said in 2011 that eliminating the Bush tax cuts was "raising taxes")  were caught flat-footed and unable to  come up with a counter narrative.  Thus, they had to look on impotently as estate taxes were halved and then lowered further, and  have remained low since, allowing the rentier and parasite class to profit immensely.

Early in the country's history, however, inheritance played only a limited role, probably owing to historical accident. When you start out as a country of 3 million people and grow your population as rapidly as the U.S. has, inheritance can’t loom that large. The inevitable rapid population growth, and the overall national income growth that accompanied it, ensured that the bulk of the wealth at any given time had to be new wealth. It also ensured that year-over-year gains to stockpiles of old wealth couldn’t dominate everything else.

Because of these historically contingent factors,  and then reasonable estate taxes, inheritance and capital stockpiling weren't able to play the kind of role in the U.S. that they have in many European countries, most notably France and Britain. Even still, what we know of inheritance in the U.S. paints a bleak picture, especially from the time the estate tax was diluted.

A 2011 study by Edward Wolff and Maury Gittleman found that the wealthiest 1 percent of families had inherited an average of $2.7 million from their parents. This is 447 times more money than the least wealthy group of people — those with wealth less than $25K — had inherited. In between the wealthiest and least wealthy groups, inheritance levels ran in exactly the direction you would expect: the wealthier a group of people, the more they had inherited. From this the more inequality could be forecast over time.

How so?  As lopsided as these inheritance disparities seem, they only reflect half of the inheritance problem. Overlooked about piles of wealth is that they deliver to their owners passive, unearned streams of income called "rents":  dividends, profits, capital gains, interest and so on- hence the term Rentier. Those who get big inheritances can just park those inheritances in investment accounts that just get bigger and bigger without having to lift a finger to do a day's honest work. As a result, the gaping inheritance disparity actually grows more gaping each year after the inheritances have been received. Without estate taxes of fifty percent or more, or some other redistribution method to control them, the silver spoon set can run wild - frequenting all night clubs,  then sleeping their days away - while some poor guy at MickeyD's has to apply for food stamps to get enough to eat.

How can we halt this climb to more passive wealth accumulation? We can construct  more cogent and powerful ways to break up and limit wealth concentrations and intergenerational wealth transfers, most notably through large (50% or more) estate taxes and redistribution. The problem is that so many of our citizens have been brainwashed by conservo propaganda to react in 'dog whistle' fashion  to  “death taxes” -  as the meritocracy-loving conservatives and their media slaves call them.

"AEIEEEE! Yuh can't impose DEATH Taxes on these unfortunate little silver spooners!"

YES we can - and we do feel sorry that the rich and the Repukes mind-fucked you with the language embolism, but it can certainly be done!  We just need politicos with the balls to do it and not bought and paid for by the likes of the Koch brothers!  
These changes that would head off the horrific  inegalitarian future are politically possible but we need to make sure we elect the people with the nerve to do it - though we will likely have to flush the money "free speech" from the corrupt system first.

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