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Thursday, March 26, 2015

Addressing the Problems of the Super-Rich (essay)

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The most serious problem facing the United States today is the giant - and growing - disparity between the prosperity of the Super-Rich and the middling or even stagnating fortunes of the Rest of us.

The key long-term American goals are peace and prosperity, equality of opportunity, freedom and justice for all.  The imbalance of the riches flowing - or flooding - to the richest Americans clearly impedes progress toward the last four of these five national goals, and may even contribute to threats to American peace, both abroad and at home.

Also, the wealth disparity is so big that it puts the whole U. S. economy out of balance.  In a capitalist market system, it's bad for one small group of individuals to control a severely unequal proportion of the wealth and commerce of the entire country, as President Theodore Roosevelt well knew.

It is most urgent, then, for voters in U. S. elections to select only those candidates whose top priority is addressing our most serious problem, reducing the size of the yawning abyss between the Super-Rich and all the Rest of us.

1

But what systemic factors, what policies and practices can be changed in order to begin slowly restoring more of a balance in our stuttering economy?

The exaggerated gap between the Rich and the Rest is directly perpetuated by the fact that the next generation of the Super-Rich do not start their own careers at a level anywhere remotely similar to the place where the next generation of the Rest of us start.  The children of the Super-Rich build their whole life-plan on the certainty that at some point they will inherit billions of the wealth controlled by the previous generation.  This is the opposite of providing equality of opportunity.

One measure any political leader ought to be talking about, therefore, is a very significant increase in the graduated inheritance tax.  We should identify a generous base that will not be taxed, in order to reward the older generation for accumulating more than enough to take them comfortably through their old age, no matter what happens (to their health, for instance).   Maybe that amount might be as high as $3 million per estate.  Maybe even more.

The problem to be addressed by improving the inheritance tax, by the way, is not the size of the estate but the amount each next-generation individual inherits. Let others work out the precise numbers, but - for instance - the new system might start at 5% of the inheritance at $3 million, go to 10% at $10 million, 25% at $25 million... up to 95% at $5 billion or more.

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A key way the economy gets out of whack when too few control too large a proportion of the nation's wealth and commerce, is that too high a percentage of the country's revenue is made by manipulating finances rather than by producing goods and services.  Income from this kind of financial dealing, therefore, should not be encouraged by attractive tax breaks - as it is currently.

Candidates for election, therefore, should also be making the case that capital gains must be taxed the same as earned income.  Earned income is better for the system as a whole, so why does our tax code impose more tax on income from work than on income from financial deals?

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Those we elect must be sure that the added tax revenue from these two systemic changes is spent on projects clearly related to reducing the inequalities of opportunity in our current system.  One of the most glaring areas of inequality, in need of considerably more funding, is public education.

Part of the problem is the traditional method of funding public schools through property taxes.  For one thing, flat rather than graduated property taxes favor the Rich over the Rest of us.  Even more basic is the fact that neighborhood schools in low-wealth neighborhoods cannot be equally funded to those in high-wealth neighborhoods.  Obviously!

Perhaps the funding of all districts in the whole of a metropolitan area should come from all property taxes in the Metropolis pooled together, rich districts and poor districts alike... with, by the way, super mansions of the Super-Rich taxed at a higher rate than the modest housing of the Rest of us.  Then, school districts would be funded on a per-student basis: if there were 100,000 students in all districts combined, for example, 1 student enrolled in a particular district would bring in 0.001% of the pooled property tax revenue, which is 1 divided by 100,000.

In any case, candidates in future elections must tell us how they are going to change the traditional method of funding public schools in order to equalize the quality of schools for everyone, regardless of the socio-economic power of those who live near to or far from the schools getting the funding.  The amount spent per-student should be approximately equivalent everywhere.

That would go a long way toward insuring equality of opportunity in America.

4

That's a beginning:  
     Add a strong, steeply graduated inheritance tax.
     Tax capital gains the same as earned income.
     Fund all public schools equally and adequately.

We will need to select candidates too on the reforms they propose in order to make high-quality health care accessible for all, in order to reduce the power of big money to control public elections, and in order to improve the judicial system.

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