Coventry Courier Letter to the Editor 12/6/06
Growing divide between rich and poor in state
Rhode Island faces over a $100 million budget deficit this coming year. Governor Carcieri has proposed to cut state worker benefits as part of the solution to this projected shortfall. [Projo, “R.I. budget deficit pegged at $104.8 million” 11/17/06] His last major budget cutting campaign involved reducing pension benefits for teachers. You can expect to hear more about how taxes are too high, there just isn’t enough money, and we need to cut more social programs.
The question that I have is this: If our nation’s economy (GDP per capita) has tripled since the 1950’s [Reason Magazine], and our state’s economy (G.S.P.) in the last ten years, has grown 71% [Projo, “Matt Gardner: Correcting myths -- R.I.'s economic climate compares well” 5/21/06], why can’t we afford to pay living wages and provide basic social services for everyone?
Where has the money gone? A couple of places really: First, after WWII, corporate taxes accounted for 28% of federal revenue (money coming in from taxes). By 2003, corporations paid only 7%, yet corporate profits have skyrocketed. [Collins & Yeskel, Economic Apartheid in America]
Second, only a few citizens have really benefited from our growing economic pie in the last few decades. For example, the richest 10% of Americans saw their income grow 88.6% from 1970 to 2000, whereas the bottom 90% lost by -0.1%.
Moreover, the richest of the rich (top .01% or 13,400 taxpayers) gained 322% in this period. [David Cay Johnston’s Perfectly Legal]
What’s the solution to this mess that would benefit everyone? Why is it that people still believe in “trickle down” economics, even though it failed during the Reagan presidency and is failing now? Even Warren Buffet, one of the most respected investors on Wall Street has argued against Bush’s tax cuts for the wealthy. We need to start taxing the people who can afford it and putting the money in the citizens’ pockets that will drive our economy.
Contrary to what you may believe, our capitalist economy has flourished under policies of taxing the people who have the most money. For the record, the rich have also done very well under these tax programs. [Collins & Yeskel]
Consider that the first income tax, passed in 1913, taxed only the richest 5% of citizens and only what they made over $400,000. In fact, by the 1950’s, the highest tax rate soared at 91% when our economy was growing at levels higher than today. Of course, this rate was limited to exorbitant amounts of money, like CEO pay. What people realized back then was that we needed to tax those that gained the most from our nation’s infrastructure.
Presently, the economist, Edward Wolffe, has proposed a wealth tax, like Sweden’s 3%, that he projected would have produced $545 billion in government revenue in 1998. [Gar Alperovitz, “The Coming Era of Wealth Taxation”] Think about the following scenario: Given that federal, state, and local K-12 education spending amounted to $536 billion in 2004-05[NCES], this wealth tax could fully fund our schools across the country.
Moreover, since the average Rhode Islander pays around $4,000 in property taxes per year (about two-thirds or more of this money goes towards school funding), each family in RI would have about $2700 more in their pockets to spend at local businesses (this does not include additional savings in state taxes). [RIPEC]
These business owners and, of course, the companies that make the products they are selling would also have more money in their pockets due to higher demand and profits. Higher wages and profits, of course, make it less cumbersome to afford needed social programs.
Nobody likes to be taxed, especially if you are taxed at a rate that is higher than the next person. Part of our hesitancy to enact tax reform that was common years ago is that many believe they are or will be in the wealthy class.
Amazingly, “Nineteen percent of Americans say they are in the richest 1 percent and a further 20 percent expect to be someday,” according to a Time Magazine survey. I have news for you, 99% of us are not in or going to be in that richest group.
So why you listen and read about our current crisis and proposed cuts, please reflect upon what possibilities lay before us. It doesn’t have to be this way.
By Ted Mitchell