by Brian T. Lynch, MSW
Reaction to a previous blog post provoked a dialogue about wealth inequality which I am sharing here in the hope of generating a broader conversation. The post, which you can read in full here, lays out the premise in the initial paragraph:
In an Intelligencer article entitled, “AOC Thinks Concentrated Wealth Is Incompatible with Democracy. So Did Our Founders,” Eric Levitz writes, “ [Alexandria] Ocasio-Cortez’s second argument against the existence of billionaires — that concentrated wealth is incompatible with genuine democracy — was something close to conventional wisdom among the founders.”
ANON: Brian, this is debatable.
ME: So, what are your views?
As I see it, one of the main thrusts of the American Revolution as a rejection of the enormous inequality of wealth and power between the colonists and their land-owning aristocracy. The founders did not want there to ever be such a large inequality here so they created a democratic republic. Every initial sale of property in the settlements involved payment to the royal aristocracy who literally owned everything in the new world. And unlike the wealthy landowners within the English system, colonists who managed to purchase large land holdings here had no voice within their own Parliament in London.
Today we tend to forget that the wealthy landholders in the colonies were clearly not considered wealthy or powerful within their own country, England.
ANON: Brian, wealth inequality is not in and of itself immoral. What is immoral is when people gain wealth through a rip-off of other people.
ME: Your point about wealth inequality no being immoral is also debatable (see Mark 10:25 for an example), but that would be a complete change of topic that we need not go into here.
The question here is whether or not extremes of private wealth is incompatible with a democratic form of government, and the answer to that question is yes, they are incompatible.
As a way to think about this, imagine how radical it would be if corporate governance adopted a system of one vote per shareholder rather than one vote per share of stock to reflect an ownership stake in the company. This is sort of the situation we are faced with today in our republic. The vote per shareholder method of corporate governance is a democracy, and the basis of our republican form of government, the latter and usual method, one vote per share of stock, would result in a plutocracy if it was applied to nations. That is what we very much want to avoid, and have always wanted to avoid from our founding. The wealthiest individual in this country should have no more influence over government decisions, theoretically, than their one citizen vote. We are already very far from that democratic ideal.
ANON: Brian, why should wealth be taken from people who created it and redistributed to people who have done nothing to deserve any right to it?
ME: I have seen commentary similar to yours in response to a discussion of wealth inequality. It is a familiar conservative talking point, and not a very good one. It is more of a dodge using a dog-whistle reference to higher taxes on high-income earners while pitting them against the “undeserving” poor who don’t materially contribute to our GDP.
But we aren’t discussing the redistribution of income here, nor are we discussing the fair distribution of income wages generally. We are discussing wealth inequality and extreme accumulations of private wealth. We are also not talking about you or me or almost anyone else. The extremes of private wealth are concentrated in less than a thousand families, wealthiest elites who own nearly all of the equity in this country.
There are two primary methods to redistribute wealth and neither one benefits the poor. In fact, the poor, the working class and almost have of the middle-class have no wealth at all, so it isn’t being redistributed to them.
The first wealth redistribution scheme is property tax. Owners of personal property are taxed on the estimated sales value of their property. But even here homeowners are not taxed on their equity stake in their homes, but on the value of their houses as if they owned them free and clear. It is really a tax on their future equity if they can hold on to it for 30 years. This is a very regressive wealth tax and a steep price to pay for new membership into the property-ownership club.
The second method of wealth redistribution is estate taxes that are paid once in a lifetime after you die. The vast majority of citizens will never pay a penny in estate taxes after they die because, again, they have no wealth. Estates that have at least a few million dollars or more may pay some small percentage in estate taxes, but most of the wealth and assets of the very rich, when they die, end up in the hands of their children and named beneficiaries.
The vast majority of estates — 99.9% — do not pay federal estate taxes. While the top estate tax rate is 40%, the average tax rate paid is just 17%. The estate tax is only paid on assets greater than $5.3 million per individual ($10.6 million per couple). https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/
Most of the wealth passed along after death goes to children and beneficiaries who never earned any of it, and therefore are “underserved” in the exact same context as your meaning of that word in your comments above. Inheritance is the direct transfer of wealth and power by right of succession.
So, the short answer to your question is that there is no redistribution of wealth from those who (may have) earn it to the “undeserving” poor you referenced above.
[Please feel free to add your comments to this discussion]