Egalitarians Gain Ground in Washington
by Sam Pizzigati | Feb 5, 2019 | Blog | 0 comments
If you worry about inequality, and if you want an end to grand — and dangerous — concentrations of income and wealth, pinch yourself. We have entered a new political moment. Egalitarians have suddenly seized the policy momentum. They have forced onto the nation's political center stage initiatives for shearing the ultra rich down to democratic size that no major elected leader in America would have dared propose only a year ago. Maybe even a few months ago.
This stunning shift began early in January when Rep. Alexandria Olivia-Cortez from New York proposed a new 70 percent tax rate on income over $10 million.
Senator Elizabeth Warren from Massachusetts, in quick order, then put on the table a "wealth tax" on the grand fortunes of America's richest 75,000 households. Warren, an announced prime-time candidate for the 2020 Democratic Party presidential nomination, called for a 2 percent federal levy on personal assets over $50 million and a 3 percent wealth tax rate on fortune over $1 billion.
This week, just before month's end, still another stunning proposal: Senator Bernie Sanders from Vermont, another likely — and leading — 2020 presidential candidate, urged a 77 percent tax on the value of estates left behind at death over $1 billion.
These three new proposals, each one far bolder than the conventional political wisdom has deemed acceptable over recent decades, did attract some assorted jeers and ridicule. But, more significantly, the three proposals drew widespread public — and even pundit — support.
How much support?
"Something's shifting," the Washington Post analyst Jeff Stein tweeted on January's last day. "Dem pollster tells me the public is much more supportive of taxing the ultra-rich than even 1 year ago."
Would-be presidents are clearly taking notice. Any White House hopefuls who want to have a serious shot at the Democratic Party's 2020 nomination, observers now believe, will have to advance their own gameplan for taking on America's super rich.
Future historians may record, in other words, that the political discourse over America's grand private fortunes suddenly and fundamentally changed in January 2019.
This sort of thing doesn't happen every day. In fact, this sort of thing hasn't really happened since 1932, a Great Depression year that saw Herbert Hoover still sitting in the White House. We don't have to stretch much to relate to that America. Then as now, the United States had an economy that wasn't working for working people — and a political leadership class that largely genuflected before men of means.
In that troubled 1932 America, the nation's most prominent political leaders avoided at every turn any move that could jeopardize "business confidence." The American people simply had to have patience, these leaders preached, and faith in their betters. We could certainly not in any way afford, they maintained, to "penalize the successful."
Progressives at the time — fiery figures like the radical Republican New York congressman Fiorello La Guardia — chafed at the rich people-friendly political environment these attitudes nurtured.
"This tendency has resulted in the concentration of great wealth under the control of a few families in this country," groused La Guardia in 1931, "with the large masses of workers entirely at their mercy for their very existence."
La Guardia and his fellow progressives had not much hope that any of this would change any time soon. Democratic and Republican leaders alike, after all, seemed equally committed to keeping those "few families" in control, no matter how brutal the nation's economic crisis might become.
But what happened next should give progressives today considerable hope for our own future. La Guardia and his political soulmates would soon witness a stunning turnaround in the public mood — and the national political discourse — that would essentially topple America's original plutocracy and create a much more vibrant and equal nation.
The spark for all this? By late 1931, the fiscal brutality of the nation's economic crisis had become too blatant to ignore. The federal government was collecting far too little revenue for a Depression-ravaged society to function and desperately needed, White House and congressional leaders both understood, to raise more revenue. But the new revenue the government so needed, top Capitol Hill Democrats and Republicans also agreed, must not come from the rich.
Responsible people all recognized, as Democratic Senate floor leader Joseph Robinson from Arkansas would pronounce in November 1931, that the government could only tax the rich so high "without discouraging investment and production."
Another leading Democrat, Charles Crisp of Georgia, would pound home the same theme. The nation could never meet its fiscal emergency by "soaking the rich," Crisp informed his congressional colleagues. Average Americans will have to "gird" themselves for "tremendous sacrifices." A national sales tax, or some other tax that demanded "stamina" and "backbone" from all Americans, was going to have to be levied.
Lurking behind this push for a national sales tax: the powerful media magnate William Randolph Hearst, the Depression-era equivalent to today's Fox News kingpin Rupert Murdoch. Hearst had no particular philosophical affection for taxing sales. Neither did any of his fellow wealthy Americans. They simply wanted Congress to put in place an alternative to taxing income. Their income. Americans, as Hearst wrote in a nationally circulated March 1932 editorial, must "carry on a sustained crusade Morning, Evening, and Sunday against the present Bolshevist system of income taxation."
The Democratic Party majority on the House Ways and Means Committee would obediently oblige. Lawmakers on the panel passed an almost all-encompassing national sales tax, a 2.25 percent manufacturer's excise levy on everything but food.
What happened next would floor top Democrats and their calculated bid to position the party as a reliable partner for America's rich and powerful. Wall Street financier Jacob Raskob and his deep-pocketed pals in the party hierarchy had gone too far. Americans would push back. They would mount the first national political surge against plutocracy since the Great Depression began.
The surge broke out almost as a matter of spontaneous political combustion. From across the nation, average Americans began bombarding congressional offices with angry complaints about the pending new national sales tax proposal. In the face of this surprise bombardment, rank-and-file Democrats in Congress rediscovered their inner angst over America's staggering concentration of income and wealth. They joined with La Guardia and other progressive House Republicans and killed the national sales tax by a stunning 223-153 margin and then — amid shouts of "soak the rich!" on the House floor — raised the top federal income tax rate from 25 percent over $100,000 to 63 percent over $1 million.
The new higher tax rates, notes tax historian Elliot Brownlee, doubled the effective tax burden on America's richest 1 percent. And the tax bill this rank-and-file lawmaker revolt generated also raised the top federal estate tax rate, from 20 to 45 percent on bequest value over $10 million.
House Democratic majority leader Henry Rainey would not be happy about any of this.
"We have made a longer step in the direction of communism," he told his House colleagues, "than any country in the world ever made except Russia."
But Rainey remained above all else a savvy politician. He saw clearly that Americans overwhelmingly supported higher taxes on the nation's wealthy, and now he would make the best of a bad situation. The evening after the crushing defeat of the sales tax proposition, Rainey went live on a national radio hook-up and positioned the new taxes on the rich as a fiscally prudent step toward balancing the federal budget. He would also do his best to convince Americans that the rich had now sacrificed quite enough.
Lawmakers in the House, Rainey told the nation, have raised income taxes on the wealthy "to the very breaking point" and taken "the major parts of big estates." Even "the most violent advocate of 'soaking the rich' ought to be satisfied," the Democratic majority leader would argue.
In fact, the soaking had been more a quick rinse. Taxes on the nation's wealthy would remain, even after the increases, substantially lower than top rates in effect during World War I. Even so, the 1932 tax fight did mark a turning point. The rich and their political enablers had reached for their brass ring, a regressive national sales tax that would leave average Americans with the heftiest tax burden. The American people had slapped them down.
In Albany, the state capital of New York, an ambitious governor took notice. Just two weeks after the tax brouhaha in Washington, Franklin D. Roosevelt, a leading candidate for the 1932 Democratic Party nomination, would begin a remarkable series of addresses that aligned his candidacy four-square with America's grassroots push against plutocracy.
The first of these addresses, broadcast April 7 in NBC's Lucky Strike Hour, championed the "forgotten man at the bottom of the economic pyramid" and blasted away at a national administration that "can think in terms only of the top of the social and economic structure."
The next month, at a commencement address at Georgia's Oglethorpe University, still more on the same theme. Roosevelt delivered a stirring call for "bold, persistent experimentation" to aid the "millions who are in want."
"Do what we may have to do to inject life into our ailing economic order," the Presidential hopeful would explain, "we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income."
The New Deal had begun.
What can we begin?
Sam Pizzigati co-edits Inequality.org. His latest book: The Case for a Maximum Wage. Among his other books on maldistributed income and wealth: The Rich Don't Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.
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