On February 10, 2014, Paul Buchheit writes on Nation of Change:
The word “entitlement” is ambiguous. For working people it means “earned benefits.” For the rich, the concept of entitlement is compatible with the Merriam-Webster definition: “The feeling or belief that you deserve to be given something (such as special privileges).” Recent studies agree, concluding that higher social class is associated with increased entitlement and narcissism.
The sense of entitlement among the very rich is understandable, for it helps them to justify the massive redistribution of wealth that has occurred over the past 65 years, especially in the past 30 years. National investment in infrastructure, technology, and security has made America a rich country. The financial industry has used our publicly-developed communications technology to generate trillions of dollars in new earnings, while national security protects their interests. The major beneficiaries have convinced themselves they did it on their own. They believe they’re entitled to it all.
Their entitlements can be summarized into four categories, each of which reveals clear advantages that the very rich take for granted.
1. Income: Mocking Our “Progressive” Tax System
Americans who earn millions of dollars a year feel entitled to the same maximum tax rate as those making about $400,000 a year. Progressive taxation stops at that point. In fact, it reverses itself, with the highest earners paying lower tax rates. The richest 10 percent pay about 20 percent in federal taxes and it goes down from there, with the richest 400 paying less than 20 percent. When all taxes are included (payroll, sales, state and local), the super-rich pay about the same percentage as America’s middle and upper-middle classes.
Corporations feel entitled to lower taxes, too, having cut their income tax rate in half in just 10 years. The companies that have benefited the most from public research have become skilled tax avoiders.
Some corporate CEOs feel entitled to total freedom from taxes, employing a noble-sounding strategy of a $1 per year salary to avoid federal income taxes. It allows them to defer all capital gains taxes on their stock holdings, which can be used, if cash is needed, as collateral for low-interest loans.
2. Wealth: Trillions in Financial Gains, Zero Tax
America has gained $16 trillion in financial wealth over the past five years, with 80-90 percent of that gain going to the richest 10 percent, for many of whom productive labor may have been limited to checking their online portfolios. America is gaining in wealth because of technological infrastructure and a deregulated financial industry that uses the technology to capture most of those gains.
There is no tax on all that wealth. Capital gains can be deferred indefinitely, and then another entitlement comes into play: the lower capital gains rate, purportedly meant to stimulate new business investment, but in large part failing to do that. The nation’s wealth needs to be distributed more equitably among productive citizens, ideally by allowing everyone to share in the capital of companies that use our nationally developed technologies.
3. Financial Transactions: Trillions in Speculative Purchases, Zero Tax
As Forbes notes, the hundreds of trillions of dollars of speculative financial transactions constitute “a massive financial accident waiting to happen, yet again.”
We pay a sales tax of up to 10 percent on boots and mittens for the kids, But not a penny of sales tax is paid on U.S. financial transactions, which may be valued as high as three quadrillion dollars annually, or over three thousand times the deficit. No sales tax is paid despite the high-risk nature of “flash trading” that can lose entire pension funds in a few seconds.
The trading industry feels entitled to tax-free purchases, claiming that even a tiny sales tax will decrease liquidity, or slow the economy, or constitute a sin tax. Yet it’s an easily administered tax that has been imposed in some of the freest economies in the world.
4. Subsidies: Alms for the Rich
About two-thirds of nearly$1 trillion in individual “tax expenditures” (deductions, exemptions, exclusions, credits, capital gains, and loopholes) goes to the top quintile of taxpayers.
At the corporate level, tens of billions of dollars go in subsidies to the fossil fuel, fishing, and agricultural industries. Fossil fuel subsidies may be much, much more. The IMF reports U.S. fossil fuel subsidies of $502 billion, and according to Grist, even this is an underestimate.
Cheated
There’s more. A regressive payroll tax, an almost nonexistent estate tax, the lower capital gains rate on carried interest for investment managers, trillions socked away in tax havens—all involve tax avoidance by wealthy Americans who feel entitled to their privileged positions.
Entitlements for the rich mean cuts in safety net programs for children, women, retirees, and low-income families. They threaten Social Security. They redirect money from infrastructure repair, education and job creation.
And the more the super-rich take from us, the greater their belief that they’re entitled to the wealth we all helped to create.
Paul Buchheit has written an excellent overview of the impact that concentrated ownership of wealth-creating, income-producing physical productive capital assets has had on widening economic inequality.
Buchheit references the provisions of the proposed Capital Homestead Act (http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm) and the necessity to ensure that research and contracts resulting from tax-payer supported and obligated debt be issues to private sector companies ONLY that are broadly owned by their employees and other Americans. Buchheit states: “The nation’s wealth needs to be distributed more equitably among productive citizens, ideally by allowing everyone to share in the capital of companies that use our nationally developed technologies.”
The crux of the economic inequality problem is the reality that our system of finance and taxation perpetuates concentrated ownership among the same wealthy ownership class, fundamentally excluding the vast majority of ordinary Americans who are propertyless, non- and under-capitalized. A prime reason is that the system has been structured on the notion that the only way to finance new capital formation is with past savings: the requirement that people set aside something they don’t have––savings out of inadequate consumption income.
As my colleague Michael Greaney at the Center for Economic and Social Justice (www.cesj.org) states:
Of course, the whole problem (and others) would go away if the United States would go with a Capital Homesteading program as proposed in the Capital Homestead Act. There is no need to restrict consumption in order finance new capital formation. New capital formation assets can be created not by decreasing consumption in the past, but by increasing production in the future, while simultaneously broadening private sector personal productive capital ownership.
This makes sense. If, as Adam Smith insisted, the purpose of production is consumption, then diverting current income into saving for financing new capital diverts production (supply/income) from its proper purpose. Further, reducing consumption means there is less demand, and thus less need of new capital, and fewer if any new jobs created.
As Harold Moulton explained quite a few years ago in The Formation of Capital (1935), consumer demand drives the demand for new capital. The demand for new capital drives the demand for new jobs. If people stop consuming, or even if they reduce consumption by what seems like a moderate amount in order to save, the economy stalls, and can even go into a tailspin.
If every child, woman, and man became an owner of new capital financed out of future increases in production instead of past reductions in consumption, no one would have to worry about reducing consumption in order to save for financial security in retirement, nor would those concerned with economic growth have to worry about the rate of past savings. Both could be taken care of out of future savings, and by the same operation.
Own the Future or Be Owned!
It’s really very simple: the vast majority of Americans will either own the future or be owned. Either people will be empowered to take care of themselves by means of their own productive capital and labor, or somebody takes care of them. In the former case, people own. In the latter case, people are owned.
http://www.nationofchange.org/how-entitlements-rich-cheat-rest-us-1392045898
