Last night I watched Matewan. It is a good movie. Chris Cooper gives a very effective performance as the Union organizer. But the movie is very disturbing. The mining company treated the coal miners as chattel. When the miners went on strike, the company brought Blacks in as scabs. (James Earl Jones is also very good as the leader among the Black miners, someone with real spine.) After the Black and Italian miners joined the other miners in the strike, the company brought in ruffians, dressed in suits and calling themselves the law, to terrorize the miners. There was a Judas among the strikers who worked with the company thugs. He made things even worse. All were on edge and much violence ensued. The miners learned they had to stick together and stand up for themselves collectively. But even with that, they suffered horribly and many of their brethren were killed.
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The Clinton-Obama struggle to be selected as the Presidential candidate for the Democratic Party has become emblematic of class warfare, with the working class (annual income under $50K, as represented by the electorate in Ohio) squarely in the Clinton camp and the middle and upper classes just as squarely for Obama. The party is unified against Bush, against the war in
While health insurance has been a big deal issue in the campaign, there has not been a broader discussion about social safety net and promoting worker mobility that is necessary for our economy to function efficiently. Perhaps the right answer for the unemployed in
The candidates have also been disingenuous on the issue of taxes, each calling for a middle class tax reduction, to be financed by increased taxes on the very wealthy. It sounds nice, but I don’t think it will cut it policy-wise, and it won’t unify the party. Instead, we need to abandon this Robin Hood type of thinking and move toward a vision of shared responsibility. I believe that is only possible if we voters ourselves communicate the desire to participate in that vision. In the rest of this post, I’ll draw out how it seems that should happen from my position as a taxpayer. If there are enough others who think along the same lines, those ideas will provide the source of the solution, a move toward unity in conception.
I finished doing my taxes last weekend. I used Turbotax Basic for that and based on the results from my return plus a bit of knowledge about how the marginal tax rates vary with income, I will give what I hope is an easy to understand analysis. Then I’ll draw some conclusions from that.
My family is in the bracket where the marginal tax rate is 28%. (University employees in
The biggest part of our exemptions are related to housing, the mortgage interest deduction and the property tax deduction. My sense is that both of those should be capped much more tightly than they are now. (The proposals by the Bush panel are not nearly severe enough.) If you look at the underlying rationale for these deductions (this is the same rationale for why the sub-prime loan market should exist) they are ostensibly to promote the American Dream – families should live in their own homes; we should be a nation of homeowners, not of renters. It’s a nice aspiration. Yet I learned some time ago that in the name of income redistribution ideas aimed at benefiting those of modest income, in actuality we end up redistributing income in the other direction. This is a case in point.
Champaign-Urbana is probably not the best place to illustrate this problem, since housing prices are modest relative to those prices in larger urban areas. So for illustration follow this link to find some home listings in Naperville and then mouse over some of the home icons. At these prices a million dollar mortgage seems natural, even low, and with a 6% interest rate, about the current rate for a 30-year fixed rate mortgage, that is $60,000 of deductible income. That deduction is in excess of the total income of the typical
The mortgage on our house in
The argument is that where tax breaks don’t produce some social benefit and where they are skewed toward middle and upper income individuals, they should be reduced if not eliminated outright. And in making the case for this point I’ve not yet even mentioned capital gains as income and how capital gains are (not) taxed. (This type of income is even more skewed in favor of high income earners than the mortgage deduction.)
Tax policy as a political issue has been the province of the Republicans, not the Democrats. That needs to change. But politically it can’t unless people in my bracket (and in the higher brackets too) willingly accept an increase in their average tax rates as a necessary burden to bear, to help those who are more needy.
Even if socially there has been great harm from the rising income inequality in society, people in the higher tax brackets have gotten a private gain from the tax policy changes that started with the Reagan Presidency and continue to this day. So in the jargon of the economist, the question is what is their willingness to pay to see inequality reduced? In my opinion, the candidates won’t go near this question until we in the electorate hash it out for ourselves for a while.
If the candidates are to take their lead from us on anything, this is the issue where that should happen. Otherwise, all they’ll do is pander to us. And what has been an entertaining and energizing race until now, will come to naught.