In today’s world, the tax burden has been shifted from the rich to the middle and lower classes. This has been done in the name of supply-side economics or trickle-down economics.
According to John Ralston Saul’s The Collapse of Globalism, in order to compensate for the loss of so much corporate and upper-class tax revenues, many governments are now relying more heavily upon stealth taxes. Stealth tax draws revenue from the middle to lower class in ways which aren’t as obvious to the public. One popular form is the taxation and encouragement of gambling. During the globalization period, gambling revenues in most developed countries has risen 10-15% a year. Revenues in New Zealand equal $12 billion a year, Britain is at $25 billion a year. India only spends $7 billion a year in gambling, which is still 2% of its GDP. Worldwide, $900 billion of citizen money is gambled and taxed.
Countries support this trend. The tax revenue that is created by this $900 billion industry is now essential for many countries who have given up their lucrative upper-class and corporate tax base. In Britain, 9.7 billion British Pounds from gambling tax revenue was spent on public services. That is a huge chunk of public money – more than half of what was contributed to the public good through corporate tax. In oil-rich Alberta, the provincial government sometimes makes more revenue from gambling than from oil-and-gas.
Supply-side theory’s main incentive to reduce upper-class and corporate taxes is the threat that the rich will simply pull their money out if they have to pay high taxes. In the Globalist era (1970’s to present), many multinationals simply set up their headquarters and bank accounts in countries with low or no taxes. For example, the infamous Halliburton, who has made so much money off of Chaney and Bush’s government reconstruction contracts in Iraq and New Orleans – money from the public coffers – have moved their headquarters to Dubai in order to dodge paying higher taxes to the American public.
It seems inevitable that the global community will soon have to remedy the fact that companies can make so much money from a nation’s resources, consumers, and public funds and yet try to avoid having to give any of that money back. One common sense approach could be the creation of international tax laws that force these multinationals to pay a fair amount of tax to the nation(s) from which they generate so much profit and resource.
Another solution can involve fighting the supply-side economic structure. The idea, that giving tax breaks, interest-relief, and bailouts to the wealthy section of the economy is actually healthy for the whole state, has been proven false. There is an almost universal consensus that the gap between the rich and poor is widening, that the middle class is eroding, and that the median Western family is surviving on a tighter budget than in the 1970’s. This fact is plain to see: the average 1970’s family lived off of a single income (usually the man’s), while now households with fewer children require both parents to work in order to maintain a similar lifestyle.
The supply-side theory has always, hypothetically, held some water. As pure theory, it makes some intuitive sense that if the companies and investors have more money and less expenses, they will then use that money to hire more people, invest in more infrastructure, pay higher wages, provide more benefits, and so forth. Metaphorically, it’s the image of a tree. The wider and higher its branches stretch out, the more sunlight the leaves can soak in, and then the more energy the tree can share through its whole body – branches, truck, and roots.
But the actual practice of this theory has shown us that these benefits do not reach the trunk and roots of the greater public. Instead, we find more of a closed loop of money. This is illustrated through the widening gap between rich and poor. Also, the gap is seen in comparing average executive-to-worker wage ratios. In the 1970’s, in America, the average executive made 30x the salary of his average worker. Today, the average executive makes 300-500x the salary of the average worker. It seems as if supply-side economics has actually pooled at the top as opposed to tickling down.
Another compelling example against supply-side economics comes out of the American bailout. The American government (as with many other governments) choose to borrow huge sums of money to bailout the large financial institutions instead of the general public ,who were also swimming in debt. The theory was, again, supply-side. IF we keep these institutions alive, more money will be circulated, and thus more jobs and economic growth. Well what did those companies do with their bailout money?
Companies like AIG, an embodiment of the unregulated and greedy actions that directly caused the financial crisis, took the taxpayers bailout and immediately spent it on… bonuses and luxurious retreats for their executives. How is that supposed to help the public good?
Yet still, even after the bailouts and its failure, the public does little to contest supply-side economics in action. The rich still get all the tax breaks and public financing. Politicians, economists, and news pundits still argue that this is the best policy for aiding the public, but the public still gets poorer and poorer while the national debt keeps rising and rising. Rising national debt is another of the stealth taxes. The higher the national debt, the higher the interest payments. And those interest payments, along with the debt itself, is paid through taxpayer money. The corporations get taxpayer bailout money and the corporate taxes stay low, so the public is left paying the interest on these loans as well.
In opposition to the supply-side, trickle-down, theory, I’d like to suggest a Keysonian approach. You know, the type of economics that helped building the West into a financial giant after WWII with the introduction of the Welfare State, universal health care, Social Security, infrastructure projects, and the like. The type of economics like the New Deal, or the Marshall Plan, which donated money to Europe and Japan to help them rebuild, which they did in incredible fashion.
My metaphor is one of watering a tree. When you water the ground below the tree, the roots soak up the water and push it all the way through the tree so that every single cell gets some of that water. If money and wealth are invested into the lower and middle classes, that money does get shared with the upper classes in the form of spending. The more money people have, the more they consume. Especially in our current culture. If the rich get the money, there’s no reason why they have to share it with the public. They might create more jobs, or they might just spend it on themselves. If the public gets the money, then whatever they spend it on creates tax revenue and goes to companies who provide services and products. The money gets soaked up through the roots and goes through the entire tree. In this way, it’s an open loop that truly circulates the wealth.
If the bailout had injected the money into the public, perhaps that money would have more evenly circulated throughout the system. The public is still one of a consumer culture. If the public had the funds to pay off their mortgages and credit cards bills, then many of the financial institutions would have had a resurrected stream of money coming in. As well, the public would have kept up higher levels of consumer spreading, which again stimulates corporations. Instead, the money went directly to the corporations first, leaving them with the option to share with the public or no. In the end, they haven’t. Job growth remains abysmal. Homes are still being foreclosed on at an alarming rate in the US. Instead of the public getting money which they would, in turn, spend on the corporations, the public got shafted. No jobs. A rising national debt. And major financial institutions given life by taxpayer money, not to help the public, but so they can continue to call in the public’s debt through mortgages, foreclosure, and credit card bills.
All while the public gets sued for downloading mp3s because it’s called “theft”.
Sources:
John Ralston Saul’s book The Collapse of Globalism: And the Reinvention of the World. (2005)
The documentary Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders (2006) http://en.wikipedia.org/wiki/Maxed_Out
No comments:
Post a Comment