Extreme Wealth Inequality Isn't Compatible With A Healthy Democracy
I usually like Elizabeth Warren’s ideas but when she brought up an “ultra-millionaires’ wealth tax” in 2016 I thought it was a wreck— way too tepid. It was just 2% on wealth between $50 million and $1 billion, and a 3% tax on wealth above $1 billion. Towards the end of 2019, she amended it to add an additional 3% surtax on wealth over $1 billion— bringing the total annual rate to 6% on every dollar over $1 billion. Better, but not better enough.
Late this July, Rep. Barbara Lee, a candidate for the Senate, proposed a much better version, the Oligarch Act, that she introduced on July 26 with Summer Lee (D-PA), Jamaal Bowman (D-NY) and Rashida Tlaib (R-MI). Other co-sponsors include Chuy Garcia (D-IL), Raul Grijalva (D-AZ), Jerry Nadler (D-NY), Ilhan Omar (D-MN), Jared Huffman (D-CA), Bonnie Watson Coleman (D-NJ), Jamie Raskin (D-MD), Cori Bush (D-MD), Jan Schakowsky (D-IL), Valerie Foushee (D-NC), Mark DeSaulnier (D-CA) and Eleanor Holmes Norton (D-DC).
This bill would mandate a 2% tax on all wealth between 1,000 and 10,000 times median household wealth, 4% on all wealth between 10,000 and 100,000 times median household wealth, 6% on all wealth between 100,000 and 1,000,000 times median household wealth and 8% all wealth over 1,000,000 times median household wealth. Additionally, because the richest households are the most likely to evade taxes, the bill includes a requirement for at least a 30% audit rate on oligarch households and establishes penalties for substantial valuation understatements. In the unlikely event median household wealth fell below $50,000 from its current level of about $120,000, the thresholds would be fixed at $50 million, $500 million, $5 billion, and $50 billion respectively. Otherwise, the tax is not pegged to a specified dollar threshold. By design, this causes the tax to wax and wane with wealth concentration, intensifying during periods of rising inequality, but tapering off to near non-existence when median household wealth increases and inequality moderates to an acceptable level.
In an OpEd for CNN when the bill was introduced, Rep Lee and Abigail Disney wrote that “Economic inequality in America has reached heights not seen since the Gilded Age, when “robber barrons” like Andrew Carnegie, John D. Rockefeller and Cornelius Vanderbilt amassed their infamously large fortunes. America’s 735 billionaires now hold more wealth than the entire bottom half of the country. Over the course of the pandemic, America’s billionaires increased their combined wealth to nearly $4,7 trillion. And, if that’s not enough, there’s talk that America (and the world) may soon see its first trillionaire. This extraordinary concentration of wealth in so few hands is concerning to us for many reasons, but primarily because of the destabilizing effect that it has on our democracy. As the rich have gotten richer over the last few decades, they have used their wealth to dominate the campaign finance system. In the 2022 midterm elections, billionaires contributed no less than $1 billion to candidates’ campaigns and super political action committees (PACs)— more than 300 times what they spent just over a decade ago. During the 2020 election cycle, the top 20 billionaire donors spent $2.3 billion, or more than twice as much as the entire Biden campaign. They’ve gone a step further than traditional campaign finance, though. Recent reports have revealed that they’ve even tried to use their fortunes to cozy up to Supreme Court justices.”
In return for their massive political contributions, America’s wealthiest have received a system of government that caters to their every whim and wish. If a political donor calls a member of Congress, their offices are three to four times more likely to make room in their schedule than they are with their regular constituents. Consequently, public policy outcomes have come to largely reflect the interests of the wealthy and well-connected.
…This threat calls for direct action from our government, which is why we need the Oppose Limitless Inequality Growth and Reverse Community Harms (OLIGARCH) Act. Our tax code can and should play an important role in reining in runaway wealth. Strong progressive tax codes have coincided with periods of both thriving middle-class growth and lower levels of inequality.
For example, in 1978, when wealth inequality was at its lowest point in modern American history— the top 1% held less than 25% of the nation’s wealth— the federal income tax and estate tax both had top marginal rates of 70%. Today, however, the top 1% holds almost a third of the nation’s wealth, while the top marginal rates for the federal income tax and estate tax have dropped to 37% and 40%, respectively.
…Despite what our critics say, we have no interest in punishing the wealthy for hard work or ingenuity. We are also not trying to encourage them to take their fortunes and leave the country. In fact, there is no evidence to support the idea of “millionaire tax flight.” On the contrary, billionaires’ wealth is so extreme that taxes are an afterthought— if even a thought at all— when they’re deciding where to live.
In the end, there simply comes a point where obscene wealth endangers our economy and democracy. Our wealth tax aims to tackle this threat. If we allow inequality to grow to the point where a small handful of individuals hold oversized political influence in this country, the nearly 250-year-old American experiment will crumble.
The late Supreme Court Justice Louis D. Brandeis once said, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” For the past few decades, America has chosen extreme wealth concentration. The time has come for us to choose democracy again, pass the OLIGARCH Act and take a first step in taming inequality.
Much of the footwork in putting the bill together was done by the Patriotic Millionaires. Their chairman, Morris Pearl, a former managing director of BlackRock, noted when Lee introduced it that “Extreme wealth inequality has become an existential threat to our country. American oligarchs have used their wealth to accumulate an unprecedented level of political power, which they’ve then used to amass even greater wealth. Without decisive action, this vicious cycle of concentrated power and money will dismantle our system of democratic capitalism, and with it, our way of life.”
Inequality in the United States is worse in 2023 than it was during the Gilded Age, said Rep. Lee. “It is unacceptable that millions of hardworking people remain impoverished, while the top 0.1% hold over 20% of the nation’s wealth. The OLIGARCH Act is the solution we need to close the exorbitant wealth gap in America and create a tax system where everyone pays their fair share. This level of wealth is not just a source of economic injustice, but a major threat to democracy: the richest 400 people in the U.S. have 22,000 times the political power of the average American. At a time when the GOP is pushing for even deeper tax cuts, I am proud to introduce this vital bill with my progressive colleagues to hold billionaires accountable and make democracy work for the people, not the oligarchs.”
Bernie has always said that good policy is good politics. Yesterday he told his supporters that “The Republican Party, which wants more tax breaks for the rich and cuts to Social Security, Medicare and Medicaid, opposes pro-union legislation, and denies the reality of climate change, now has more support from the working class of this country than Democrats.” He dealt with that ugly reality in a speech he gave in New Hampshire a few days ago. He said that “if Democrats are serious about winning elections and addressing the major crises that we face, they must… embrace the working class of this country in a way which hasn’t been done in almost 60 years. It is absolutely absurd that, given the anti-worker ideology and policies of the Republican Party, that party now has more working class support than Democrats.”
He called on Democrats to “reject the corporate wing of the party and empower those who are prepared to create a grassroots, multi-racial, multi-generational working class party in every state in this country. Democrats, through words and action, must make it clear that they stand with a struggling working class, a disappearing middle class, and millions of low income Americans who are barely surviving. They must make it clear that they are prepared to boldly take on the powerful corporate interests who have so much power and influence in Washington and in state capitals throughout the country; that they will protect the needs of young people who, everything being equal, will end up with a lower standard of living in their parents; and that they will vigorously fight for the seniors of our country and the disabled who so often face difficult and expensive health care decisions. Perhaps most importantly Democrats must reject austerity economics and understand that, with the new and innovative technologies being developed, we now have the capability, as never before in world history, to provide a decent standard of living for every man, woman and child in this country— and create an incredibly bright future. Democrats must make clear that these new technologies and the artificial intelligence now being created must work to benefit all of our people, and not just the corporations that own that technology…Today in America, not only do we have more income and wealth inequality than we have ever had, we have more concentration of ownership than ever before. In sector after sector, whether it is finance, agriculture, energy, defense contracting, media, transportation, health care, or Big Tech, a small number of huge, multinational corporations control what is produced, distributed and sold. The idea that our economy today is based on small business startups, rugged free enterprise and competition is nothing more than a myth.”
The truth is that we are where we are today, because the people on top, the people with the power are extraordinarily greedy, dishonest, arrogant, irresponsible, and could care less about the needs of ordinary Americans.
Let’s confront the reality. It’s not, as Republicans tell us, the fault of immigrants, or racial minorities, or women, or LGBT people, or Muslims or any other minority group for the very desperate situation that too many people find themselves in. That’s just old fashioned demagoguery.
The reason so many have it so bad is that never before in the history of the United States have so few had it so good, owned so much and had so much economic power.
Never before in the history of the United States have so few, through their super PACs, campaign contributions, lobbyists and ownership of the media had so much political power.
And never before in our history has it been more necessary for all of us, standing together, to wrest that incredible power away from the few and redistribute it to the many.
Whether it is Wall Street, where three investment firms exercise incredible economic power as they control over $20 trillion in investments and, combined, are the major stockholders in the vast majority of S&P companies.
Whether it is the health insurance companies who make huge profits off a dysfunctional health care system that costs us twice as much per capita as virtually any other country.
Whether it is the pharmaceutical industry, which makes tens of billions in profits every year while charging us the highest prices in the world for prescription drugs.
Whether it is the major defense contractors who produce massive cost overruns and have jacked up our military spending to some $900 billion a year.
Whether it is the food industry, which has dramatically increased prices at the grocery store while reaping enormous profits.
Whether it is Big Tech, which intentionally addicts our kids to social media platforms and contributes to the mental health crisis facing so many young people.
Perhaps most importantly, it is the fossil fuel industry which has lied for years about the causation of climate change, and is now enjoying record-breaking profits as they raise the price of gas at the pump.
Add it all together and what we are seeing is an unprecedented level of corporate greed. In fact, over half the inflationary costs that we have seen in the United States in recent years has nothing to do with the war in Ukraine, nothing to do with broken supply chains but everything to do with the greed of corporate America, the prices they have raised and the record breaking profits they are making.
…These multibillionaires want it all, and they are prepared to step on anybody who gets in their way.
That is the kind of corporate greed we’re looking at now and the kind of greed that virtually all Americans-- whether they’re black or white or Latino or Asian American or Native American-- are increasingly disgusted with. This is where good policy is good politics. If we are looking at bringing the American people together, we have got to take on corporate greed.
And in that regard, we should take another lesson from President Roosevelt as he was fighting against the cabal of the economic elite of his era. In a 1936 campaign speech at Madison Square Garden during the Democratic Convention this is what Roosevelt said:
“We had to struggle with the old enemies of peace— business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
“They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
“Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred."
He continued:
“I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”
That is what Roosevelt said in the 1936 campaign, which by the way he won in a landslide. And that is what we should be saying in the 2024 campaign. Like Roosevelt, we should not be afraid to welcome the hatred of the billionaire class that is doing so much harm to our country.
Whether they like it or not, we must address the crisis of wealth and income inequality and demand that billionaires and large profitable corporations start paying their fair share of taxes.
Whether they like it or not, we must increase the federal minimum wage from a starvation wage of $7.25 an hour to a living wage of at least $17 an hour.
Whether they like it or not, we need to end the concentration of ownership in this country and break up giant monopolies that are strangling small businesses and keeping inflation artificially high.
Whether they like it or not, we need to make certain that every worker in this country who wants to join a union has the opportunity to do that. We can no longer tolerate the illegal, anti-union activities of Starbucks, Amazon, and other major corporations.
Whether they like it or not, we need to establish once and for all, that health care is a human right, not a privilege. We must take on the greed of the insurance companies that made over $69 billion in profits last year while tens of thousands of Americans die because they are unable to get the medical care they need. The current health care system is broken and dysfunctional. We need to fight for Medicare For All.
Whether they like or not, we need to take on the greed of the pharmaceutical industry – which has 1800 paid lobbyists in Washington – and make sure that drug companies can no longer charge us by far the highest prices in the world.
Whether they like it or not, we must take on the military industrial complex, cut military spending, and use those savings to invest in expanding Social Security benefits, affordable housing, child care, and education.
Whether they like it or not, we will save the planet by transforming our energy systems away from fossil fuels to renewable and sustainable energy.
Whether they like it or not, we will overturn Citizens United and move to public funding of elections and no longer allow billionaires and their Super PACs to buy elections.
Let me conclude by saying this. In the United States, and in fact around the world, support for the establishment and their institutions is in decline. People want change. And change will come. The question is: what kind of change will it be? Will it be the kind of change that is dominated by the wealthy and powerful? A change which bans books, denies our history, pits one group of Americans against another, and treats women as second class citizens who are not smart enough to make important decisions for themselves. That is one kind of change that could happen.
But there is another kind of change which could happen. And that is a change that would create a fairer, more just and more democratic society, based on love, solidarity and compassion. A change based on the principles of economic, social and racial justice. The choice is clear. And I know the kind of change I will be fighting for.