Policies
and rule changes that level the playing field eliminate the unfair
wealth and power advantages that flow to the 1 percent. Examples
include:
Invest in Education. In the current global economy,
disparities in education reinforce and contribute to inequality trends.
Public investment in education is one of the most important
interventions we can make to reduce inequality over time. “Widespread
education has become the secret to growth,” writes World Bank economist
Branko Milanovic. “And broadly accessible education is difficult to
achieve unless a society has a relatively even income distribution.”
Reduce
the Influence of Money in Politics. Through various campaign finance
reforms—including public financing of elections—we can reduce the nexus
between gigantic wealth and political influence. Reforms include limits
to campaign contributions, a ban on corporate contributions and
influence, and a requirement for timely disclosure of donations.
Implement
Fair Trade Rules. Most international free trade treaties have boosted
the wealth of the 1 percent, whose members are the largest shareholders
of global companies. Free trade rules often pit countries against one
another in a race to lower standards addressing child labor,
environmental protection, workers’ rights to organize, and corporate
regulation. Countries with the weakest standards are rewarded in this
system. Fair trade rules would raise environmental and labor standards,
so companies compete on the basis of other efficiencies.
Rule Changes That Break Up Wealth and Power
We
can raise the floor and work toward a level playing field, but we
cannot stop the perverse effects of extreme inequality without boldly
advocating for policies that break up excessive concentrations of wealth
and corporate power.
For example, we cannot pass campaign finance
laws that seek clever ways to limit the influence of the 1 percent, as
they will always find ways to subvert the law. Concentrated wealth is
like water flowing downhill: it cannot stop itself from influencing the
political system. The only way to fix the system is to not have such
high levels of concentrated wealth. We need to level the hill!
This
section examines several far-reaching policy initiatives, the tough
changes that have to be considered if we’re going to reverse extreme
inequality. Some of these proposals have been off the public agenda for
decades or have never been seriously considered.
Tax the 1
Percent. Historically, taxing the 1 percent is one of the most important
rule changes that have reduced the concentration of wealth. In 1915,
Congress passed laws instituting federal income taxes and inheritance
taxes (estate taxes). Over the subsequent decades, these taxes helped
reduce the concentrations of income and wealth and even encouraged
Gilded Age mansions to be turned over to civic groups and charities.
Taxes
on higher income and wealth reached their zenith in the mid-1950s. At
the time, the incomes of millionaires were taxed at rates over 91
percent. Today, the percentage of income paid by millionaires in taxes
has plummeted to 21 percent. Back then, corporations contributed a third
of the nation’s revenue. Today, corporations pay less than one-tenth of
the nation’s revenue. The corporate 1 percent pays an average of 11.1
percent of income in taxes, down from 47.4 percent in 1961.
Taxes
on the wealthy have steadily declined over the last fifty years. If the 1
percent paid taxes at the same actual effective rate as they did in
1961, the U.S. Treasury would receive an additional $231 billion a year.
In 2009, the most recent year for which data are available, 1,500
millionaires paid no income taxes, largely because they dodged taxes
through offshore tax schemes, according to the IRS.
As with
inequality, the higher up the income ladder people are, the lower the
percentage of income they pay in taxes. This is why Warren Buffett’s
disclosure about his own low taxes was so important. Buffett revealed
that in 2010, he paid only 14 percent of his income in federal taxes,
lower than the 25 or 30 percent rate that his co-workers paid. Buffett
wrote:
While the poor and middle class fight for us in
Afghanistan, and while most Americans struggle to make ends meet, we
mega-rich continue to get our extraordinary tax breaks. Some of us are
investment managers who earn billions from our daily labors but are
allowed to classify our income as “carried interest,” thereby getting a
bargain 15 percent tax rate. Others own stock index futures for 10
minutes and have 60 percent of their gain taxed at 15 percent, as if
they’d been long-term investors.
These and other
blessings are showered upon us by legislators in Washington who feel
compelled to protect us, much as if we were spotted owls or some other
endangered species. It’s nice to have friends in high places.
The richest 400 taxpayers have seen their effective rate decline from over 40 percent in 1961 to 18.1 percent in 2010.
Between
2001 and 2010, the United States borrowed almost $1 trillion to give
tax breaks to the 1 percent. The 2001 and 2003 tax cuts passed under
President George W. Bush were highly targeted to the top 1 and 2 percent
of taxpayers. They included reducing the top income tax rate, cutting
capital gains and dividend taxes, and eliminating the estate tax, our
nation’s only levy on inherited wealth.
Are we focusing too
much on taxing millionaires, given the magnitude of our fiscal and
inequality problems? Won’t we have to raise taxes more broadly? It is
true that taxing the 1 percent won’t entirely solve our nation’s
short-term deficit problems or dramatically reduce inequality in the
short run. But it will have a meaningful impact on both problems over
time. Thirty years of tax cuts for the 1 percent have shifted taxes onto
middle- income taxpayers; they have also added to the national debt,
which simply postpones additional tax increases on the middle class.
Progressive taxes, as were seen in the United States after World War I
and during the Great Depression, do chip away at inequalities. These
extreme inequalities weren’t built in a day, and the process of
reversing them will not be instant, either. But when there is less
concentrated income and wealth, there will be less money available for
the 1 percent to use to undermine the political rule-making process.
Rein
in CEO Pay. The CEOs of the corporate 1 percent are among the main
drivers of the Wall Street inequality machine. They both push for rule
changes to enrich the 1 percent and extract huge amounts of money for
themselves in the process. But they are responding to a framework of
rules that provide incentives to such short-term thinking. An early
generation of CEOs operated within different rules and values—and they
had a longer-term orientation.
There is a wide range of policies
and rule changes that could address the skewed incentive system that
results in reckless corporate behavior and excessive executive pay. What
follows are several principles and examples of reforms that will reduce
concentrated wealth among the 1 percent and also reform corporate
practices:
• Encourage narrower CEO-worker pay gaps. Extreme pay
gaps—situations where top executives regularly take home hundreds of
times more in compensation than average employees—run counter to basic
principles of fairness. These gaps also endanger enterprise
effectiveness. Management guru Peter Drucker, echoing the view of Gilded
Age financier J. P. Morgan, believed that the ratio of pay between
worker and executive could run no higher than twenty to one without
damaging company morale and productivity. Researchers have documented
that Information Age enterprises operate more effectively when they tap
into and reward the creative contributions of employees at all levels.
An
effective policy would mandate reporting on CEO-worker pay gaps. The
2010 Dodd-Frank financial reform legislation included a provision that
would require companies to report the ratio between CEO pay and the
median pay for the rest of their employees. This simple reporting
provision is under attack, but should be defended, and the pay ratio
should become a key benchmark for evaluating corporate performance.
•
Eliminate taxpayer subsidies for excessive executive pay. Ordinary
taxpayers should not have to foot the bill for excessive executive
compensation. And yet they do—through a variety of tax and accounting
loopholes that encourage executive pay excess. These perverse incentives
add up to more than $20 billion per year in forgone revenue. One
example: no meaningful regulations currently limit how much companies
can deduct from their taxes for the expense of executive compensation.
Therefore, the more firms pay their CEO, the more they can deduct off
their federal taxes.
An effective policy would limit the
deductibility of excessive compensation. The Income-Equity Act (HR 382)
would deny all firms tax deductions on any executive pay that runs over
twenty-five times the pay of the firm’s lowest-paid employee or
$500,000, whichever is higher. Companies can pay whatever they want, but
over a certain amount, taxpayers shouldn’t have to subsidize it. Such
deductibility caps were applied to financial bailout recipient firms and
will be applied to health insurance companies under the health care
reform legislation.
• Encourage reasonable limits on total
compensation. The greater the annual reward an executive can receive,
the greater the temptation to make reckless executive decisions that
generate short-term earnings at the expense of long-term corporate
health. Outsized CEO paychecks have also become a major drain on
corporate revenues, amounting, in one recent period, to nearly 10
percent of total corporate earnings. Government can encourage more
reasonable compensation levels without having to micromanage pay levels
at individual firms.
An effective policy would raise top marginal
tax rates. As discussed earlier, taxing high incomes at higher rates
might be the most effective way to deflate bloated pay levels. In the
1950s and 1960s, compensation stayed within more reasonable bounds, in
part because of the progressive tax system.
• Force accountability
to shareholders. On paper, the corporate boards that determine
executive pay levels must answer to shareholders. In practice,
shareholders have had virtually no say in corporate executive pay
decisions. Recent reforms have made some progress toward forcing
corporate boards to defend before shareholders the rewards they extend
to corporate officials.
An effective policy would give shareholders a
binding voice on compensation packages. The Dodd-Frank reform includes a
provision for a nonbinding resolution on compensation and retirement
packages.
• Accountability to broader stakeholders. Executive pay
practices, we have learned from the run-up to the 2008 financial crisis,
impact far more than just shareholders. Effective pay reforms need to
encourage management decisions that take into account the interests of
all corporate stakeholders, not just shareholders but also consumers,
employees, and the communities where corporations operate.
An
effective policy would ensure wider disclosure by government
contractors. If a company is doing business with the government, it
should be held to a higher standard of disclosure. Taxpayers, workers,
and consumers should know the extent to which our tax dollars subsidize
top management pay. One policy change would be to pass the Patriot
Corporations Act to extend tax incentives and federal contracting
preferences to companies that meet good-behavior benchmarks that include
not compensating any executive at more than 100 times the income of the
company’s lowest-paid worker.
Stop corporate tax dodging.There
are hundreds of large transnational corporations that pay no or very low
corporate income taxes. These include Verizon, General Electric,
Boeing, and Amazon. A common gimmick of the corporate 1 percent is to
shift profits to subsidiaries in low-tax or no-tax countries such as the
Cayman Islands. They pretend corporate profits pile up offshore while
their losses accrue in the United States, reducing or eliminating their
company’s obligation to Uncle Sam.
These same companies, however,
use our public infrastructure—they hire workers trained in our schools,
they depend on the U.S. court system to protect their property, and our
military defends their assets around the world—yet they’re not paying
their share of the bill. In a time of war, the unequal sacrifice and tax
shenanigans of these companies are even more unseemly.
Corporate
tax dodging hurts Main Street businesses, the 99 percent that are forced
to compete on a playing field that isn’t level. “Small businesses are
the lifeblood of local economies,” said Frank Knapp, CEO of the South
Carolina Small Business Chamber of Commerce. “We pay our fair share of
taxes and generate most of the new jobs. Why should we be subsidizing
U.S. transnationals that use offshore tax havens to avoid paying taxes?”
This
same offshore system facilitates criminal activity, from the laundering
of drug money to the financing of terrorist networks. Smugglers, drug
cartels, and even terrorist networks such as al-Qaeda thrive in secret
offshore jurisdictions where individuals can hide or obscure the
ownership of bank accounts and corporations to avoid any reporting or
government oversight.
The offshore system has spawned a massive
tax-dodging industry. Teams of tax lawyers and accountants add nothing
to the efficiency of markets or products. Instead of making a better
widget, companies invest in designing a better tax scam. Reports about
General Electric’s storied tax dodging dramatize how modern
trans-nationals view their tax accounting departments as profit centers.
The
combination of federal budget concerns and a growing public awareness
of corporate tax avoidance will lead to greater focus on legislative
solutions. One strategic rule change would be for Congress to pass the
Stop Tax Haven Abuse Act, which would end costly tax games that are
harmful to domestic U.S. businesses and workers and blatantly unfair to
those who pay their fair share of taxes.
One provision of the act
would treat foreign subsidiaries of U.S. corporations whose management
and control are primarily in the United States as U.S. domestic
corporations for income tax purposes. Another provision would require
country-by-country reporting so that transnational corporations would
have to disclose tax payments in all jurisdictions and not easily be
able to pit countries against one another.
The act would generate an estimated $100 billion in revenues a year, or $1 trillion over the next decade.
Reclaim
Our Financial System.Wall Street and the top 1 percent have conducted a
dangerous experiment on our lives. They have destroyed the livelihoods
of billions of people around the planet in a bid to control the
financial flows of the world and funnel money to the global 1 percent.
We
sometimes forget that our financial sector is a human-created system
that should serve the public interest and be subordinate to the credit
needs of the real economy. Instead, we have a system where the planet is
ruled by a tiny 1 percent of financial capital.
As quoted earlier,
David Korten writes in “How to Liberate America from Wall Street Rule”
that the “priority of the money system shifted from funding real
investment for building community wealth to funding financial games
designed solely to enrich Wall Street without the burden of producing
anything of value.”
Communities across the country, as discussed
earlier, are shifting funds out of the speculative banking sector and
into community banks and lending institutions that are constructive
lenders in the real economy.
More than 650,000 individuals have
closed accounts at institutions such as Bank of America and moved their
money. A number of religious congregations, unions, and civic
organizations have followed suit. Now local governments are beginning to
shift their funds. In the City of Boston, the City Council has voted to
link deposits of public funds to institutions with strong commitments
to community investments.
Here are some interventions to break Wall Street’s hold on our banking and money system:
•
Break up the big banks. Reverse the thirty-year process of banking
concentration and support a system of decentralized,
community-accountable financial institutions committed to meeting the
real credit needs of local communities. Limit the size of financial
institutions to several billion dollars, and eliminate government
preferences and subsidies to Wall Street’s too-big-to-fail banks in
favor of the 15,000 community banks and credit unions that are already
serving local markets.
• Create a network of state-level banks.
Each state should have a partnership bank, similar to what’s been in
place in North Dakota since 1919. These banks would hold government
funds and private deposits and partner with community-based banks and
other financial institutions to provide credit to enterprises and
projects that contribute to the health of the local economy. The North
Dakota experience has shown how a state bank can provide stability and
curb speculative trends. North Dakota has more local banks than any
other state and the lowest bank default rate in the nation.
•
Create a national infrastructure and reconstruction bank. Instead of
channeling Federal Reserve funds into private Wall Street banks,
Congress should establish a federal bank to invest in public
infrastructure and partner with other financial institutions to invest
in reconstruction projects. The focus should be on investments that help
make a transition to a green, sustainable economy.
• Provide
rigorous oversight of the financial sector. The 2010 reforms to the
financial sector failed to curtail some of the most destructive,
gambling-oriented practices in the economy. The shadow banking
system—including unregulated hedge funds—should be brought under greater
oversight, like other utilities, and Congress should levy a financial
speculation tax on transactions to pay for the oversight system.
•
Restructure the federal reserve. The Federal Reserve has been creating
money and channeling it to beneficiaries within the economy with no
public accountability. The Fed contributed to the economic meltdown by
failing to provide proper oversight for financial institutions under its
jurisdiction, keeping easy credit flowing during an asset bubble,
ignoring community banks, and then propping up bad financial actors. The
Fed must be reorganized to be an independent federal agency with proper
oversight and accountability. Its regulatory functions should be
separated from its central bank functions, the new regulator given teeth
to enforce rules, and individuals who work for the regulatory agency
prevented from subsequently going to work for banks.
• Re-engineer
the Corporation. The concentration of power in the corporate 1 percent
has endangered our economy, our democracy, and the health of our planet.
There is no alternative but to end corporate rule. This will require
not only reining in and regulating the excesses of the corporate 1
percent but also rewiring the corporation as we know it.
Unfortunately, the Supreme Court’s
Citizens United (2010)
decision moves things in the wrong direction, giving corporations
greater “free speech” rights to use their wealth and power to change the
rules of the economy. An essential first step in shifting the balance
back to the 99 percent is reversing the Citizens United decision through
congressional action.
There are good and ethical human beings
working in corporations and in the 1 percent. But the hardwiring of
these companies is toward the maximization of profits for absentee
shareholders and toward reducing and shifting the cost of employees,
taxes, and environmental rules that shrink profits. The current design
of large global corporations enables them to dodge responsibilities and
obligations to stakeholders, including employees, localities, and the
ecological commons. The corporate 1 percent may pledge loyalty to the
rule of law, but they spend an inordinate amount of resources lobbying
to reshape or circumvent these laws, often by moving operations to other
countries and to secrecy jurisdictions.
At the root of the
problem is a power imbalance. Concentrated corporate power is
unaccountable—and there is little countervailing force in the form of
government oversight or organized consumer power.
Looking at
corporate scandals such as those of Enron and AIG, or at the roots of
the 2008 economic meltdown, we find case studies of the rule riggers
within the corporate 1 percent using political clout to rewrite
government rules, dilute accounting standards, intimidate or co-opt
government regulators, or outright lie, cheat, and steal.
Changing
the rules for the corporate 1 percent is not anti-business and, by
creating a level playing field and a framework of fair rules, will
actually strengthen the 99 percent of businesses that most contribute to
our healthy economy. A new alignment of business organizations reflects
this. The American Sustainable Business Council is an alternative to
the U.S. Chamber of Commerce and advocates for high-road policies that
will build a durable economy with broad prosperity.
Communities
have used a wide range of strategies to assert rights and power in
relation to corporations. In 2007, the Strategic Corporate Initiative
published an overview of these strategies in a report called “Toward a
Global Citizens Movement to Bring Corporations Back Under Control.” Many
strategies are incremental, but worth understanding as part of the lay
of the land in rule changes.
• Engage in consumer action. As
stakeholders, consumers have leverage to change corporate behavior.
Examples include consumer boycotts that changed Nestlé’s unethical
infant formula marketing campaigns around the world and softened the
hardball anti-worker tactics of companies such as textile giant J. P.
Stevens. New technologies are enabling consumers to be more
sophisticated in leveraging their power to force companies to treat
employees and the environment better.
• Promote socially
responsible investing. Shareholders can also exercise power by avoiding
investments in socially injurious corporations. In 2010, over $3
trillion in investments were managed with ethical criteria. Companies do
change some behaviors when concerned about their reputations.
•
Use shareholder power for the common good. For more than forty years,
socially concerned religious and secular organizations have utilized the
shareholder process to change corporate behavior and management
practices. Shareholder resolutions, in conjunction with educational and
consumer campaigns, have altered corporate behavior, such as the
movement to pressure U.S. companies to stop doing business in South
Africa during the apartheid era.
• Change rules inside
corporations to foster accountability. There are internal changes in
corporate governance that potentially could broaden accountability and
corporate responsibility.
These include:
• Shareholder power
reforms. Presently, there are many barriers to the exercise of real
shareholder ownership power and oversight. Corporations should have real
governance elections, not hand-picked slates that rubber-stamp
management decisions.
• Board independence. Public corporations
should have independent boards free of cozy insider connections. This
will enable them to hold management properly accountable.
• Community
rights. Communities should have greater power to require corporate
disclosure about taxes, subsidies, treatment of workers, and
environmental practices, including use of toxic chemicals.
• Require
federal corporate charters. Most U.S. corporations are chartered at the
state level, and a number of states, including Delaware, have such low
accountability requirements that they are home to thousands of global
companies. But corporations above a certain size that operate across
state and international boundaries should be subject to a federal
charter.
• Define stakeholder governance. A federal charter could
define the governing board of a corporation to include representation of
all major stakeholders, including consumers, employees, localities
where the company operates, and organizations representing environmental
interests. The German experience with co-determination includes boards
with community and employee representation.
• Ban corporate influence
in our democracy. Corporations should be prohibited from any
participation in our democratic systems, including elections, funding of
candidates, political parties, party conventions, and advertising aimed
at influencing the outcome of elections and legislation. This would
require legislation to reverse the impact of the Supreme Court’s
Citizens United decision.
Citizens United and Corporate Power
In January 2010, the U.S. Supreme Court decided the case known as
Citizens United v. Federal Election Commission.
It gave new rights of free speech to corporations by saying that
governments could not restrict independent spending by corporations and
unions for political purposes. This opened the door for new
election-related campaign spending and has given birth to super PACs
that further erode the power of the 99 percent to influence national
politics.
Senator Charles Schumer (D-N.Y.) sponsored legislation
called the DISCLOSE Act to force better disclosure of campaign
financiers, but it has been opposed by the U.S. Chamber of Commerce and
other big business lobbies.
Other potential remedies include a
push for an amendment to the Constitution to remove the free speech
rights for corporations that Citizens United provides. Move to Amend is a
coalition organizing such an amendment.
The reeingineered
corporation will still employ thousands of people and be innovative and
productive. But it will be much more accountable to shareholders, to the
communities in which it operates, and to customers, employees, and the
common good.
Redesign the Tax Revenue System. This final section
of rule changes examines how farsighted tax and revenue policies can aid
in the transition to a new and sustainable economy. Present tax rules
do not reflect the widely held values and priorities of the 99 percent.
Rather, they reflect the designs and worldview of the powerful 1 percent
of global corporations and wealthy individuals. The 1 percent devotes
considerable lobbying clout to shaping and distorting our tax laws,
which is one of the reasons those laws are so complex and porous.
Our
tax revenue system should be simple, treat all fairly, and raise
adequate revenue for the services we need. Tax rules and budgets are
moral documents; we should not pretend they are value neutral.
We’ve
already discussed two ways that the tax code has been distorted. The
first is how it privileges income from wealth over income from work by
taxing capital gains at absurdly low rates. Second, the offshore system
gives advantages to the global tax dodgers in the corporate 1 percent
who force domestic businesses in the 99 percent to compete on an uneven
playing field.
Another example is the way our tax code offers larger
incentives to mature extractive industries such as oil and natural gas
instead of directing resources to communities and corporations that
conserve resources, care for the Earth, and catalyze new green
enterprises.
The present tax system not only fails to raise adequate
revenue from those most capable of paying but also serves as a huge
impediment to progress. Current tax rules lock us into the economy of
the past, rather than encouraging a transition to a new economy rooted
in ecological sustainability, good jobs, and greater equality.
Conventional
tax wisdom asserts that we should “tax the bads” by placing a higher
price on harmful activities. Hence the notion of “sin taxes” levied on
liquor, tobacco, and now, with increasing ferocity, junk food. Taxing
these items raises revenue to offset the societal costs of alcoholism,
cancer, and obesity. But sin taxes, like any sales tax, are regressive,
requiring lower-income households to pay a higher percentage of their
income than the wealthy pay.
There are three major “bads” that our tax code should be revised to address:
1. Extreme concentrations of income, wealth, and power that undermine social cohesion and a healthy democracy
2. Financial speculation, such as the activities that destabilized our economy in 2008
3. Pollution and profligate consumption that deplete our ecosystems
There
are several bold interventions that focus on “taxing the bads” of our
contemporary era and reversing two generations of tax shifts away from
the 1 percent. They cluster around three foci: taxing concentrated
wealth, taxing financial speculation, and taxing the destruction of
nature.
• Tax inheritances. Levy a progressive estate tax on the
fortunes of the 1 percent. At the end of 2010, Congress reinstated the
estate tax on estates over $5 million ($10 million for a couple) at a 35
percent rate. Congress could close loopholes and raise additional
revenue from the 1 percent with the greatest capacity to pay. The
Responsible Estate Tax Act establishes graduated tax rates, with no tax
on estates worth under $3.5 million, or $7 million for a couple, and
includes a 10 percent surtax on the value of an estate above $500
million, or $1 billion for a couple. Estimated annual revenue: $35
billion.
• Institute a wealth tax on the 1 percent. A “net worth
tax” should be levied on individual or household assets, including real
estate, cash, investment funds, savings in insurance and pension plans,
and personal trusts. The law can be structured to tax wealth only above a
certain threshold. For example, France’s solidarity tax on wealth is
for those who have assets in excess of $1.1 million.
• Establish
new tax brackets for the 1 percent. Under our current tax rate
structure, households with incomes over $350,000 pay the same top income
tax rate as households with incomes over $10 million. In the 1950s,
there were sixteen additional tax rates over the highest rate (35
percent) that we have today. A 50 percent rate on incomes over $2
million would generate an additional $60 billion a year.
•
Eliminate the cap on social security withholding taxes. Extend the
payroll tax to cover all wages, not just wage income up to $110,100.
Today, some in the 1 percent are done paying their withholding taxes in
January, while people in the 99 percent pay all year.
• Institute a
financial speculation tax. A tax on financial transactions could
generate significant funds for reinvesting in the transition to a
financial system that works for everyone. Speculative trading now
accounts for up to 70 percent of the trades in some markets. Commodity
speculation unnecessarily bids up the cost of food, gasoline, and other
basic necessities for the 99 percent. A modest federal tax on every
transaction that involves the buying and selling of stocks and other
financial products would both generate substantial revenue and dampen
reckless risk taking. For ordinary investors, the cost would be
negligible, like a tiny insurance fee to protect against financial
instability. Estimated revenue: $150 billion a year.
• Tax income
from wealth at higher rates. Giving tax advantages to income from wealth
also encourages speculation. As described by Warren Buffett and others,
we can end this preferential treatment for capital gains and dividends
and at the same time encourage average families to engage in long-term
investing. Estimated revenue: $88 billion per year.
• Tax carbon.
Instead of taxpayers paying indirectly for the expensive social costs
associated with climate change, taxes could build some of these real
costs into purchases and products. Perhaps the most critical tax
intervention to slow climate change would be to put a price on dumping
carbon into the atmosphere from the transportation, energy, and other
sectors. For example, the real ecological and societal costs of private
jet travel would greatly increase the cost of owning or using private
jets. A gradually phased-in tax on carbon would create tremendous
incentives to invest in energy conservation and regional green
infrastructure. Proposals include a straight carbon tax or a
cap-and-dividend proposal that would rebate 50 percent of revenue to
consumers to offset the increased costs of some products and still
generate $75–100 billion per year. We could also explore similar taxes
on other pollutants, such as nitrates that are destroying our water
supplies.
• Tax excessive consumption. Consumption of unnecessary
stuff, especially by the 1 percent, is filling our landfills and
destroying our environment. A tax on certain nonessential goods, such as
expensive jewelry and technological gadgets, would reflect the real
ecological cost of such items. It could apply only to purchases that
exceed a certain amount, such as cars that cost more than $100,000. Some
states currently charge a luxury tax on high-end real estate
transactions.
Objections by some in the 1 percent to these
proposals will be strong, along with howls of “class warfare” and “job
killing.” Some will argue that government shouldn’t be in the business
of picking winners in the economy. But the reality is that our current
tax policy is picking winners every day, and they’re usually in the 1
percent.
For several generations after the introduction of a
federal income tax at the end of the nineteenth century, our progressive
federal tax system was moderately effective in reducing concentrations
of wealth. As we briefly described, during the 1950s wealthy individuals
paid significantly more taxes than they do today. Since 1980, however,
we’ve lived through a great tax shift as lawmakers moved tax obligations
off the wealthy and onto low- and middle-income taxpayers, off
corporations and onto individuals, and off today’s taxpayers and onto
our children and grandchildren.
This program would reverse these tax shifts and set up signposts to help with the transition to the new economy.
Published with permission from Berrett Koehler, copyright 2012. From the new book
99 to 1: How Wealth Inequality Is Wrecking the World and What We Can Do About It.
