I am changing the header because this is the real disagreement between Max and I. He argues that social democracy really should not aim to expropriate the wealthy but should instead tax the working class heavily to pay for a robust welfare state. On this we disagree, both philosophically and on the empirical possibilities.
But to the heart of the disagreement:
I wrote:
> > So from your arguments, the basic message seems to be,
> forget tax-the-rich
> > politics-- go for growth. Now you obviously favor
> Keynesian-based demand
> > side growth, but you still seem to be making the case that
> taxing the rich
> > makes little difference compared to such a growth
> strategy.
Max wrote:
> Actually in the article I posted some months ago, now part
> of the URPE reader,
> I did argue for discounting tax-the-rich politics, but in
> favor of big tax/big spending
> politics. I also provided a bunch of numbers on how little
> taxing the rich or
> corporations does for the social-democratic cause...
> Under really-existing social-democracy, the little
> people pay a heap of taxes, and get a heap of social
> insurance and
> public services in return. The lone exception is Sweden,
> which has
> the best of both worlds.
First, the emperics. Since the richest 1% already pay $300 billion per year right now, just doubling the income tax they pay yields an additional $300 billion per year, a quite healthy addition to the welfare state without having to tax the working class at all. Expanding the increased taxes to the larger class of near-rich (all of the top 5%) would yield an additional $200 billion per year for a grand total of $500 billion in additional revenue. Add in full taxation of capital gains and closing other loopholes that allow the wealthy to hide income and there is plenty of wealth to expand welfare states without taxing the working class.
Now, there is the core issue Max and I are arguing over-- whether the 1993 bill achieved any such appropriation beyond economic growth. The numbers show that the effective tax rate paid by the very wealthiest tax payers grew significantly, in the case of those making $1 million per year or more, going from 26.8% of income to 31.7% of income - an 18% increase in taxation rates. Even the just-sortof-rich from $200-$500,000 per year had a 9% increase in effective tax rates, more than Max's argument of only a 5% or so increase.
And note from the tables below, the $1 million plus folks pay more taxes than the marginally rich, so the 18% increase in effective tax rates for that group was very significant. And these numbers only go up to 1996, so the total dollar amounts continued to grow.
Effective tax rates
1992 1996 200,000 to 500,000 23.2 25.3 500,000 to 1,000,000 25.8 30.1 1,000,000 or More 26.8 31.7
Total Income Tax Paid (1996 dollars)
1992 1996 200,000 to 500,000 62.0 86.4 500,000 to 1,000,000 27.3 43.8 1,000,000 or More 57.4 97.7
The point is that the 1993 tax bill increased taxes on the very wealthiest folks to the tune of tens of billions of dollars per year. Doubling the effective tax rate on just those making $1 million per year would yield by itself over $100 billion per year.
Max's argument for taxing the workign class to pay for a welfare state seems like a rather massive retreat from socialism, even from traditional social democracy. Sure there are some goods that are better bought collectively, but charging everyone through taxes for the health care, schools and retirement does not seem like much of an advancement.
Worse, the welfare states of Europe and folks in the US enjoy the standard of living we do to even attempt such self-payment only because of massive expropriate of the labor of third world workers producing consumer goods as sub-level wages. The goal of any real socialist or even social democratic moevment has to aim for expropriation of the income (at minimum) of the first world wealthy to pay not only for a welfare state here but for redistribution globally.
Obviously, taxation is only one path to that redistribution. Strong labor unions and direct expropriation through increasing the wage share of the wage-profit split is another key part of socialist redistribution goals.
But tax-the-rich politics are key, since "tax revolts" among the working class has been a key tool of conservatives in splitting working class movements. Keeping taxes low on working class folks while soaking the rich is key to a broad range of socialist goals.
-- Nathan Newman