In Capitalism, Socialism, and the Promise of Democracy I wrote:
“There can be no champion surfer without the wave. As talented and gifted as the surfer may be, if there is no wave, there is no performance to praise and admire. Without a functioning societal and economic infrastructure, there can be no business, entrepreneurial, and financial success. This infrastructure is built and financed by all of society, so there must be an equitable sharing with all of society of the gains reaped from this infrastructural foundation”.
What also needs to be made clear is the necessity of that societal and economic infrastructure being made available to all citizens. If some segments of the population are not afforded the basic infrastructure on which personal economic success can be built, there can be no equality of economic opportunity and the result will be greater economic inequality.
Individuals in low income, poorer communities live with a societal and economic infrastructure that provides a deficient foundation on which personal economic success can be built. Low quality, inadequately funded schools, deteriorating and dilapidated housing, limited numbers of health care providers often without the latest technology, lack of the availability of retail shopping, and high crime are extraordinarily difficult hurdles to overcome to attain personal economic success. Add to this inadequate policing that, when it is present, is often discriminatory and predatory, and you have created barriers that make personal economic success a remote possibility.
Meanwhile, individuals living in higher income, wealthier communities have a societal and economic infrastructure that provides a very solid foundation on which personal economic success can be built. Superior, adequately funded schools, well-built, high quality housing, abundant, well-funded, high-technology health-care options, a plethora of retail shopping options, safe neighborhoods, and policing that is non-threatening and helpful provide a foundation on which personal economic success is much more attainable.
A major problem for lower income, poorer communities is that the infrastructure required for personal economic success is too reliant on local funding and therefore the financial resources of the local community. These financial resources also determine the willingness of developers, health-care providers, and businesses to invest in the community to provide quality housing, access to health-care, and retail shopping opportunities. If an adequate societal and economic infrastructure is an essential component for personal economic success, the funding of that infrastructure cannot be seen as primarily a local community responsibility. Combating lack of economic opportunity in poorer communities and the resulting income and wealth inequality will require a commitment at the Federal level. This will help to ensure all citizens are supported by a societal and economic infrastructure that creates greater equality of opportunity in the attainment of personal economic success.
The funding for the building of such an infrastructure in communities where it does not exist must come from the Federal government in the form of block or categorical grants. The money for the grants needs to be procured through increases in income, estate, and gift taxes on higher income, wealthier households, as well as an increase in the corporate tax rate. As discussed in Capitalism, Socialism, and the Promise of Democracy, these taxes are near historical lows.
We need a return to levels of taxation that reflect the tax structure that existed during the period of Democratic Capitalism in the country (1932-1980). At that time, there typically existed 24 tax brackets. From 1954 to 1963 the top marginal tax rate was 91%. In the latter part of the 1960’s and in the 1970’s it was over 70%. With election of Ronald Reagan in 1980 and the re-institution of an Oligarchic Capitalist system, both the number of brackets and the highest marginal tax rate began being reduced, greatly reducing the progressivity of the tax system. Today there are only seven tax brackets with a top marginal tax rate of only 37%. Both the number of brackets and the marginal tax rate on the highest earners needs to be increased.
The rates for the estate and the gift tax also need to be raised. The top rate for both the estate tax and the gift tax currently stand at 40%. In contrast, during the Democratic Capitalist period the top estate tax rate was 77% while the highest gift tax rate was 57.75%.
The corporate income tax rate is at 21%, its lowest rate since 1939. The corporate income tax is primarily a tax on the wealthy since 84% of stock is owned by the top 10% wealthiest households. During the Democratic Capitalist period, the corporate tax was around 50%. It now needs be raised to its historical norm of around 50%.
Finally, given the low level of income, estate, gift, and corporate tax rates over the last several decades, serious consideration must be given to the enactment of a wealth tax for the first time in our country’s history. The low tax rates of the last several decades have resulted in the build-up of enormous wealth for a small percentage of the population; wealth that to a large extent depended on the societal and economic infrastructure that was provided, an infrastructure that was denied many others. Since this wealth was built on that societal and economic infrastructure, this wealth should help fund the expansion of that infrastructure to all communities across the country.
The high-incomes and great wealth of higher income, wealthier Americans has been built on the societal and economic infrastructure that has been provided to them. Additionally, the very low tax rates of the last several decades of Oligarchic Capitalism has enabled them to amass huge fortunes. Meanwhile, individuals living in lower income communities which are often the homes to large groups of minorities, have suffered from institutionalized racism and discrimination that has obstructed the establishment of the type of societal and economic infrastructure necessary for personal economic success. As a result, these communities do not have the resources to create that infrastructure on their own. To ensure equality of economic opportunity and to reduce income and wealth inequality, the Federal government needs to provide the funding to build the necessary societal and economic infrastructure to ensure all Americans have the foundation on which personal economic success can be attained.
Do you believe the Federal government has the responsibility to ensure all citizens have access to an equitable social and economic infrastructure on which to build personal economic success? Please comment below.
