Sunday, July 17, 2011

What class warfare really looks like

What class warfare really looks like

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Here we go again. Democrats single out glaring examples of tax preferences or spending priorities that favor the wealthy and Republicans cry “class warfare!”

The latest round came in the wake of President Barack Obama’s calls to eliminate tax breaks for corporate jet owners. Ending special deductions for the depreciation of corporate aircraft would save roughly $3 billion over the next decade. Republicans argue — correctly — that amounts to less than half of 1 percent of the current national debt. So it was striking how quickly, and passionately, conservative pols and commentators rose to defend the subsidy.

“Dangerous!” “Full-fledged demagoguery!” cried Rush Limbaugh. The president’s “aim is for one group of Americans to hate and despise another!”

“Unprecedented class warfare!” claimed Glenn Beck. The president again showed “his sheer, unadulterated disgust for the wealthy, the successful and anyone who’s ever tried to do anything with their life here in America.”

Really? Closing a single loophole worth less than one-half of 1 percent of the national debt is all that?

The knee-jerk conservative response confirms two things. First, they know the president landed a punch. Second, they’re utterly unwilling to acknowledge how much the playing field in American life has now tilted in favor of the haves.

We know the president’s proposal was largely symbolic. He doesn’t believe that eliminating a $3 billion tax break is really going to break the back of a $14 trillion problem.

But he does believe that highlighting small, but galling, inequities can stimulate a broader conversation about fairness. In our collective effort to deal with our very real fiscal challenges, how do we share the burden? The president’s argument resonated with ordinary Americans precisely because it’s a stand-in for their growing sense that things are out of whack.

This is the conversation conservatives don’t want to have.

It’s indisputable that the gap between the rich and everyone else in this country has grown dramatically. The top 1 percent of Americans now take home nearly a quarter of all income and control more than 40 percent of the country’s wealth — roughly the same amount as the bottom 90 percent.

It’s also indisputable that that gap has gotten far bigger in the past 25 years. In the past decade alone, the wealthiest percentile has seen its income grow by a robust 17 percent, while the middle class has seen its real income fall.

What could possibly account for such gross distortions? Are the superwealthy really that much smarter and productive than the rest of us? Are the organic veggies and hormone-free meat that affluent parents feed their children paying off?

Or could it be something else?

How about the tax structure? The 400 Americans with the highest adjusted gross income saw their effective tax rates plummet from 30 percent in 1995 to 17 percent in 2007.

That’s not according to some left-wing think tank. It comes from a recent cover story in Bloomberg BusinessWeek. General Electric paid no corporate taxes in 2010. ExxonMobil, one of the most profitable companies in the world, still benefits from hundreds of millions of dollars in government subsidies — and it still couldn’t explain, let alone prevent, a devastating oil spill in the Yellowstone River.

Even tax breaks that are supposed to help the middle class too often skew toward the wealthy. Consider the mortgage interest deduction. While political leaders in both parties have long considered it untouchable, it actually helps those at the top of the income scale far more than those at the bottom.

First, low- and middle-income earners are less likely to itemize deductions, so most aren’t even eligible for the benefit. If the mortgage interest deduction were eliminated, according to the Tax Policy Center, the bottom 40 percent of earners would be virtually unaffected.

Those in the middle brackets would see a small increase in their taxes. While those in the top brackets — the same folks who have seen their incomes and wealth skyrocket in recent decades — would take the biggest hit.

Second, it provides the biggest benefit to people who buy the most expensive homes. The deduction on a million-dollar loan at an elevated jumbo rate is worth a heck of a lot more than one for a $250,000 conforming loan.

Third, because people in lower brackets pay lower rates, if a person making $50,000 a year and person making $150,000 a year bought the same house, the higher earner would get a bigger tax break.

Reducing the amount of eligible debt from $1 million to, say, $250,000 is now under discussion. That would help. But it would still provide a bigger benefit to people with bigger incomes.

So the dirty little secret is that the pool man, who’s making $30,000 a year, is subsidizing the million-dollar mortgage for the family whose pool he cleans. No wonder people want to get rid of tax breaks for corporate jets.

And no wonder the American people overwhelmingly support raising taxes on the rich — as well as cutting spending — to reduce the deficit and improve income equality. They don’t believe it’s class warfare.

For generations, Americans who aren’t rich have been generous and admiring of their wealthy compatriots — they want a country where people who work hard can succeed, where the same rules apply to everyone. They expect to have their own shot at getting rich. But increasingly, they are seeing that the game is rigged.

So as Republican congressional leaders stand their ground in the battle over raising the debt ceiling and lowering the debt — no net revenue increase! — Obama must stand his. He must ensure that any deal he may be able to strike moves us back toward a society where the burdens are shared equally — by all our people.

The U.S. now lags behind every country in Donald Rumsfeld’s “Old Europe” in terms of income equality.

“The more divided a society becomes in terms of wealth,” the Nobel Prize-winning economist Joseph Stiglitz wrote recently in Vanity Fair, “the more reluctant the wealthy become to spend on the common needs. The rich don’t need to rely on government for parks or education or medical care or personal security — they can buy these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had.”

That, my friends, is what class warfare really looks like.

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