Believe it or not, those who idealize the 1950s may be right on target, at least in some areas:
Since the passing of that halcyon period of economic growth and greater income equality, this country has basically jumped back to the period of the “Robber Barons” of the late 19th and early 20th centuries. That transformation began during the administration of President Ronald Reagan and has continued when Congress has had Republican majorities and under other Republican presidents, culminating in Donald Trump’s major tax cuts for the wealthy in 2017 with the Tax Cuts and Jobs Act of that year.
In a written statement presented to a Senate Budget Committee hearing on “The Income and Wealth Inequality Crisis in America,” Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, made the following points:
In her testimony Anderson made the following recommendations for reducing income inequality:
Tax Excessive CEO Pay Act. This legislation would apply a graduated tax rate increase on large corporations based on the size of the pay gap between their CEO and the median worker.
Financial Transaction Tax. Placing a financial transaction tax on Wall Street trades would generate much needed revenue and curb executive excess.
CEO pay ratio incentive in federal procurement. Giving corporations with narrow pay ratios preferential treatment in granting government contracts.
Close the “carried interest” loophole. “Carried interest” refers to earnings that are tied to a percentage of the company’s profits. It is actually compensation for managing other people’s investments and should be taxed as regular income.
Fully close a loophole that allows unlimited tax deductions for excessive pay.
Restrict stock buybacks.
Require top financial executives to contribute compensation into a fund to pay for penalties.
Finalize and firmly enforce the remaining Dodd-Frank executive compensation reforms.
Additional recommendations made by Anderson include making it easier to organize and form labor unions, taxing the accumulated wealth of the ultra-rich, taxing investment income at the same rate as income from work, raising corporate income tax rates on offshore profits to make them equal to domestic rates, and shutting down the means used by the wealthy to hide money and avoid taxes. Further, she suggests broadly canceling federal student debt and establishing a “baby bonds” program to help narrow the racial wealth divide. “Baby bonds” refers to a government policy in which every child at birth would receive a publicly funded trust account, potentially with more funding for lower income families.
Democrats in Congress are working to remedy tax inequities and salary inequities. President Biden also made his intentions clear for 2025 before he dropped out of the electoral race. There is no doubt that Vice president Harris agrees.
The Democrats’ plan is to increase the tax rate of the wealthy and of corporations. The increased revenue would be invested in childcare programs, internet access, and housing.
A proposal introduced by progressive legislators, including Sen. Elizabeth Warren (D-MA), this year would put into effect a 2% tax on households worth $50 million to $1 billion and a 3% tax on those worth more than a billion. According to an article in USA Today by Riley Beggin, it would affect the wealthiest 100,000 households in the country, which amounts to about 0.05% of the population. It includes provisions to prevent people from dodging the tax. The proposal also includes a 40% exit tax on those worth more than $50 million who dump their citizenship to avoid paying. According to the Wharton Budget Model at the University of Pennsylvania the proposal would produce an estimated $2.7 trillion over the next decade.
Much hangs on the election in November. We cannot expect any major changes in tax policy or in income inequities without a substantial victory by the Democrats. They must take not only the presidency, but also win majorities in the House and Senate. That can only happen if the Party wins over Independents and moderate Republicans.
A native of Wicomico County, George Shivers holds a doctorate from the University of Maryland and taught in the Foreign Language Dept. of Washington College for 38 years before retiring in 2007. He is also very interested in the history and culture of the Eastern Shore, African American history in particular.
Title image: Late summer at Custis Pond, Northampton Co., Va. Photo: Gren Whitman