Harold Meyerson has a great op-ed in the Washington Post examining an under-reported aspect of the Biden-McConnell tax deal: its low tax rates for capital gains and dividends that effectively reward offshoring jobs.
Meyerson's op-ed is called A tax deal only the ultra-rich could love, and in it, Meyerson lays out how the Biden-McConnell tax deal increases economic inequality, rewards the offshoring of jobs, deprives the government of needed revenue, and reinforces the redistribution of wealth from wages to profits.
Bad news for workers making $7.25 an hour, but great news for America's ultra rich...
Meyerson's op-ed lays it out clearly.
The key grafs are a stone cold description of the economy we're living in and how this tax deal actually reinforces and deepens its economic inequality:
Taxing wages and salaries at a higher rate than investment income means that the tax code is taking a bigger bite out of a steadily shrinking share of Americans’ income. Pay from work just ain’t what it used to be. As the St. Louis Federal Reserve has documented, income from wages and salaries as of July 2012 constitutes the smallest share of gross domestic product since World War II. The earned-income share of GDP peaked in 1969 at 53.5 percent. In 2012, it was 43.5 percent.
Where did those 10 percentage points of GDP — currently, about $1.5 trillion every year — go instead of to U.S. workers? It went, in significant part, to corporate profits, whose share of the economy has risen as the share going to wages has diminished. In the third quarter of 2012 — the most recent period for which there are data — after-tax corporate profits constituted the largest share of U.S. GDP since World War II: 11.1 percent.
This shift from wages to profits is called redistribution. It is the central fact of American economic life. And it is the primary reason that economic inequality in the United States has skyrocketed.
When the Republican Party comes to gut Social Security, Medicare and Medicaid over the next two months, every single Democratic activist should prepare ourselves to point out that the ultra-rich got a great deal with Biden-McConnell tax deal. If we need revenues, let's start by talking about increasing the rates on capital gains and dividends instead of a reverse Robin Hood attack on the poor and middle class.
And, if, over the next two months, some in our party seem to think we're making too big a deal of this and that we should just go along with horrible ideas that attack hard-working people like chained CPI or raising the Medicare eligibility age, we should use this information to fight back. We should be unafraid to ask Democrats in Congress or the President and Vice President how they justify a nation in which a billionaire will be taxed at only a 20% rate on capital gains, but a minimum wage worker still makes only $58 for an eight hour day?
There are 50 million Americans living in poverty, yet, as Meyerson points out, our tax code actually rewards those who offshore jobs by investing in multi-national corporations and penalizes workers who live and work and spend their money right here in our communities.
Now, some have implied that this conversation is over and done with; I wholeheartedly disagree.
We are a fact-based community, and when Meyerson points out that "globalization has completely changed the investment patterns of American corporations, but our tax breaks for investments chug placidly along as though U.S. companies still confined their work inside our borders" we should talk about it.
How did we end up with this tax code when President Obama campaigned extensively to reward those who grow jobs in the United States versus those who ship jobs overseas? Biden-McConnell, as Meyerson points out, does the exact opposite.
I have one simple explanation. We, collectively, let it happen.
Few who support a fair tax code would argue that this was a "good deal" after reading Meyerson's article. Instead, the argument for supporting this deal is that Democrats are so powerless, that everyday people have so little leverage against the wealthy few, that this was the best deal we could get given a recalcitrant GOP House and a Democratic Party that all too often talks up fighting for everyday people but then votes for legislation that lines the pockets of the ultra-rich.
If we want something different, if we have a shared agenda to build a more just and equitable society, then we have to decide that tax deals like Biden-McConnell are not good enough. We need to organize and make sure that when the fight comes next time, and it will, that we are prepared to ask hard questions and compare what our elected leaders say with the real world impact of the laws that they pass.
We need to organize around a common agenda and insist that everyday people deserve better from our lawmakers.
There are 28 million working people in America who would directly benefit from the passage of the Fair Minimum Wage Act. There are 50 million Americans living in poverty right now, many of them children.
What is needed is more than a safety net; what is needed are good paying jobs, healthcare, education and sustained investment in our communities. Simply put, we will not get there by giving tax breaks to the ultra-rich.