Magazine article The American Prospect

Tax Wealth to Broaden Wealth: Reframing the Debate and Mobilizing a Constituency

Magazine article The American Prospect

Tax Wealth to Broaden Wealth: Reframing the Debate and Mobilizing a Constituency

Article excerpt

I RECENTLY SPOKE AT A VETERANS' CLUB IN SUBURBAN Boston about the dangers of America's growing wealth gap and its possible solutions. I informally polled the assembled group of 150 men, all white and over the age of 60. How many had received a low-interest home mortgage from the Federal Housing Administration, the Veterans Administration or the Farmers Home Administration? About two-thirds raised their hands. How many graduated from college without any debt, thanks to the GI Bill or other public-education programs? Again, about two-thirds. How many thought that these past policies were bad investments or a waste of tax dollars? Not one.

My final question generated a lot of laughter: How many had helped their children, through a "Parental Down Payment Assistance Program," purchase a home or start a business? Almost every hand in the room went up. Here was living testimony that our country's postwar commitment to wealth building for one generation and one racial group has had immeasurable multigenerational benefits.

In the three decades after World War II, our country implemented an unparalleled program to broaden wealth ownership. Millions of families got tickets on a multi-generational wealth-building train in the form of college, housing and small-business assistance. Between 1940 and 1970, almost one-fifth of the nation's citizens transformed themselves from tenants to homeowners, thanks in large part to federally subsidized mortgages, tax incentives and highways to new suburbs. Of course, because of racial discrimination in mortgage-lending practices and housing and educational opportunities, many people of color were left at the station.

Today there is a wide support, in principle, for broadening wealth ownership. But how will we pay for the next generation of wealth-broadening initiatives?

TAXATION OF WEALTH IS SIMPLY OFF THE AGENDA. IN fact, we are rapidly reducing the tax burden on those with accumulated wealth via recent cuts in capital-gains taxes and the current push to permanently repeal the federal estate tax and eliminate income taxation of dividends.

Some argue that Americans' aversion to taxing wealth is a deep part of our national psyche, an instinctive rejection of class politics rooted in the broad aspiration to become wealthy. Polls report that 19 percent of Americans believe they are in the top 1 percent of earners, and an additional 20 percent expect to be someday. As David Brooks wrote recently in a column headlined the "Triumph of Hope Over Self-Interest," "None of us is really poor; we're just pre-rich."

But a politics of economic aspiration could also support a program of broadening wealth ownership that's funded by taxation. The main problem is the lack of a well-organized political constituency for broadening wealth ownership that could counter three decades of conservative anti-tax, antigovernment organizing.

The movement to repeal the estate tax grew during the 1990s because of a focused and well-resourced 10-year campaign to shift public opinion and line up votes for repeal. Until 2001 there was no organized defense of the estate tax. There was a movement to broaden wealth [see "Savings Incentives for the Poor," Jared Bernstein, page Al4] but no connection to tax policy.

Conservatives begin with several advantages, beyond the obvious fact that most people lack enthusiasm for paying taxes. Anti-tax organizing is funded by a small coterie of very wealthy taxpayers (and campaign contributors) who have an immediate self-interest in not being taxed. Conservatives have a long-term ideological agenda around taxation (to starve the regulatory and welfare state), a potent political slogan ("It's your money") and an economic theory (it creates jobs). Their short-term incremental program is to shift the tax burden off capital and onto consumption, off higher incomes and onto middle-income taxpayers, which in turn increases the popular resistance to taxation. …

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