Wealth, Tax Policy & Social Mobility 2 March 2006Posted by Todd in Capitalism & Economy, Democracy, Inequality & Stratification, Political Commentary, Politics.
As a continuation of mine and Equality's discussion about wealth on the Consumerism and Democracy thread, I thought I'd post some numbers about the tax policies of the past 25 years. Warning: Lots of stats ahead.
A 2001-2002 IRS study found that the only demographic to have lowered their overall tax burden as a result of the Bush tax cuts were the top .1%.
Over 10 years, if the Bush cuts are made permanent, those with yearly incomes over $1 million will benefit from the majority of breaks, both in raw amounts paid and share of Federal Income Tax.
The Alternate Minimum Tax (the AMT mentioned by Equality in the other thread) has been the most insidious issue for middle-class (including the PMC) tax payers. The AMT, set in 1969, has never been adjusted for inflation, so anyone with a filed income of over $75K is subject to minimum taxation. For those earning between 100K and 500K per yer, it nullifies 1/2 to 2/3 of the Bush tax cut, meaning that the "merely rich" are paying more than the "super rich" in terms of share. But (and this is the fun part) the way the Bush cuts are written, only 1/3 of those earning more than $1 million/year are adversely affected by the AMT, mainly because investment income is not subject to this tax, and most of the tax cuts over the past 10 years have been on income from investments and dividends.
The main issues for me are that the wealthier you are, the greater your benefit from the Government, ranging from the education of your workers, policing of borders, transportation infrastructure, military backing of trade interests, etc. So although I do believe in redistribution through taxation, it is far more important to me that the wealthy actually pay for the benefits they receive from the government, which are for all intents and purposes welfare for the wealthy. (Middle class welfare would be things like mortgage interest deductinos, college tuition deducions, and college education itself, be it through state funded institutions or federal financing of a private university education.) Off the top of my head, the two things that need to change are: 1) military funding needs to be restructured and our military needs to be reorganized to fight the threats we face now instead of the Cold War model which is a huge burden on our economy; and 2) the erosion of progressive taxation must be halted in its tracks, the losses restored, and the numbers adjusted to account for current values.
[Source: David Cay Johnson. "Richest Are Leaving Even the Rich Far Behind" in Class Matters (Times Books: New York, 2005). It's not a fantastic book, but its solid journalism and analysis. There are some good critiques, however, of the NYT study; The Columbia Journalism Review criticizes the Times for pulling back from its hardest critiques.]
Per mobility, I just wanted to give a couple of observations about mobility in the U.S. First, intragenerational mobility is quite common, an individual moving between classes during his or her lifetime. This usually is an individual gradually rising to meet parental class or a downward mobility do to layoffs or outsourcing or technological shifts.
Intergenerational mobility, or exceeding parental class through education and/or marriage, is rare for native-born Americans, but common among immigrants. The exception to this is the most recent wave of Mexican American immigrants (starting in approximately 1986, after the amnesty) are really struggling to raise their class positions and indicators are that they will fail to do so, for the first time in the history of Mexican-American migration. Historically, there have been two massive upward shifts in class position: 1) between 1880-1920, when the birth of the corporate bureacracy created a new white collar middle class to complement the emerging Professional Managerial Class; and 2) from 1948-1964, often mistakenly credited to the GI bill, this massive upward shift has a lot to do with cold war investment in technical education, the massification of housing in suburbs, and the general rubust economy (a few downturns in the 1950s notwithstanding), which was generally halted by 1968 when the economy stagnated for any number of reasons ranging from petroleum prices to Vietnam.
Intergenerational downward mobility has historically been less than upward, except during depressions (e.g., 1873, 1886, 1892, 1929, etc.). Since 1973, downward mobility has become increasingly significant with the movement of most of the manufacturing jobs; the outlook is still unclear with white collar outsourcing in the past decade, but it's possible that it will have a similar effect on downward mobility.
Longitudinal studies of the U.S. since 1950 shows that mobility is primarily "vertical mobility" between occupations within classes, but that mobility between classes is itself exceptionally rare. (My own family is an exception to this, as both my parents have PMC status now, but were raised in poor and workingclass families.)