By Steve Max
Do you find yourself having arguments about public policy with your loved ones or relatives you might see once a year? “Kitchen Table Socialism” is here to help. When you gather around the table, these talking points could be useful, especially at tax time. —Ed.
Many of us have seen the Disney film about Robin Hood and heard the villain, King John, rant, “Double the taxes. Triple the taxes.” With this message imprinted on young minds and old, it seems logical to read all of human history as one long tax revolt. Indeed, that is how the right would like us to think of it and how the history of our own country is often presented. Remember that tea dumped in Boston Harbor?
Then why do we—democratic socialists—defend the federal income tax? Why are we not for the flat tax that would reduce the current 73,954-page tax code to one single paragraph? Why, in fact, do we want the rich to pay more in taxes, when entrepreneurs are the “job creators” upon whom most of our livelihoods depend? The short answer is that we believe that workers are the true wealth creators and deserve a share of it. The rich got rich by paying low wages and taking advantage of taxpayer-funded projects (roads, the internet, bridges, schools that prepare an educated workforce, tax breaks) that allow them to turn handsome profits. They do not want to share those profits. We think they should.
Yes, some parts of the tax laws actually do transfer some wealth from higher to lower income people. The Earned Income Tax Credit—a program geared toward families—distributes $69 billion a year to lower wage workers who pay no other federal income tax. It goes to 28 million people annually, and a family with two children received about $5,572 in 2016.
And yes, there is some redistribution in the form of government spending on services compared to how much an individual pays in taxes. Here is what the conservative Tax Foundation (taxfoundation.org) says, but remember that the Foundation hates the income tax and tends to exaggerate:
American’s lowest-income families receive $5.28 worth of government spending (federal, state, and local) for every $1 they pay in total taxes. Middle-income families receive $1.48 in total spending per tax dollar, while America’s highest-income families receive $0.25 cents in spending for every dollar of taxes paid.
Of course, the fact that Walmart and McDonald’s workers must often rely on food stamps or Medicaid is never seen by corporations as a government subsidy of their own businesses. You and I are paying for those low prices through our taxes, which could be going to programs that don’t enrich corporations.
In addition, the above calculations include far less progressive state taxes and sales taxes. Socialists oppose sales taxes, use taxes, and tolls because they aren’t progressive (that is, increasing as income increases) and fall more heavily on lower-income and working people. The left-leaning Institute for Taxation and Economic Policy finds that, as a share of family income, low-income families pay a sales tax rate of 7%, middle-income families 4.7% and the wealthiest families 0.8%.
For years, Bernie Sanders has campaigned to have corporations pay their fair share of taxes. Confronted with such effrontery, the right claims that the corporate income tax takes away money that would otherwise be invested to create jobs. This is a downright lie. Writing in the NY Times Magazine of January 20, 2016, Adam Davidson points out that “American businesses currently have $1.9 trillion in cash, just sitting around. . . . If the companies spent their savings, rather than hoarding them, the economy would instantly grow, and we would most likely see more jobs with better pay.”
Davidson queries economists about this “unsolved mystery” and comes up with various answers, from tax avoidance (surprise, surprise) to appearing more attractive to investors to stockpiling money for the “next big thing.” To socialists, the answer is clear. Why would corporations invest in more production when they can’t sell what they make now because they won’t pay workers enough to buy all that stuff? Meanwhile, their executive salaries are secure.
Corporate tax breaks aren’t the answer, higher wages are.
Steve Max is a vice chair of DSA and hosts webinars on socialist issues. You can find the webinar schedule at dsausa.org.
This article originally appeared in the Spring 2017 issue of the Democratic Left magazine.
Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership. Democratic Left blog post submission guidelines can be found here.