Losing Even More Ground

Workers, anti-fascists, and laboring people! Rise as one man! Prepare to defend the Republic, national freedom and the democratic liberties won by the people!
Dolores Ibárruri (1895 - 1989), politician and journalist

I have to say again that the House of Representatives is out of control. Who are they representing? Surely not the majority of the working class, unless that group as a whole naively believes parking tickets disqualify one from voting. The House is voting on Wednesday to ensure that the estate tax exemption continues to help the wealthy. As the Washington Post says in an editorial today:

Under the convoluted, dishonest plan Congress approved in 2001, the estate tax was to be gradually reduced and eliminated by 2010, only to spring back the following year to its 2001 level: a tax of 55 percent on estates of $1 million or more. Tomorrow the House is set to vote to keep full repeal in place after 2010.

This is unnecessary, irrational and unaffordable. Those who inveigh against the "death tax" point to the travails of family farmers and other small-business owners whose heirs are supposedly forced to liquidate enterprises to pay the tax bill. In fact, even if the estate tax were to revert in 2011 to its 2001 level -- and no one believes that the exemption will remain at $1 million -- it would affect the estates of only 2 percent of those expected to die that year. At $3.5 million (and $7 million for a couple) -- the level proposed in a Democratic alternative sponsored by Rep. Earl Pomeroy (N.D.) -- a mere three-tenths of 1 percent of estates would be covered. In other words, no one but the richest Americans would be asked to pay estate tax.

The true cost of repeal is far higher than $290 billion, an amount that covers only the first few years of making repeal permanent. The bill for a full 10 years without estate tax would be $745 billion -- close to $1 trillion if you throw in increased interest payments. In contrast, raising the exemption level to $3.5 million and setting the tax rate at 47 percent would cost less than a third of that; $21 billion in 2015 compared to $71 billion for full repeal. The effective rate would be far less than 47 percent, because the tax is levied only on the amount above the exemption and state payments and charitable bequests also reduce the tab.

As Paul Krugman said in the February issue of The Nation magazine:
Suppose that you actually liked a caste society, and you were seeking ways to use your control of the government to further entrench the advantages of the haves against the have-nots. What would you do?

One thing you would definitely do is get rid of the estate tax, so that large fortunes can be passed on to the next generation. More broadly, you would seek to reduce tax rates both on corporate profits and on unearned income such as dividends and capital gains, so that those with large accumulated or inherited wealth could more easily accumulate even more. You'd also try to create tax shelters mainly useful for the rich. And more broadly still, you'd try to reduce tax rates on people with high incomes, shifting the burden to the payroll tax and other revenue sources that bear most heavily on people with lower incomes.

On the spending side, you'd cut back on healthcare for the poor, on the quality of public education and on state aid for higher education. This would make it more difficult for people with low incomes to climb out of their difficulties and acquire the education essential to upward mobility in the modern economy.

And just to close off as many routes to upward mobility as possible, you'd do everything possible to break the power of unions, and you'd privatize government functions so that well-paid civil servants could be replaced with poorly paid private employees.

We, the working class, are in serious trouble.