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The 1% and the 47%

If the rich want to know why they bear such a large share of the nation’s income tax burden to pay for so-called big government these days, they should look at how they influenced big government precisely to serve their interests to concentrate wealth and income in ever fewer hands.

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The narcissism of the few.

Liberals and others have given Mr. 01 Percent Mitt Romney a well-deserved spanking for his vicious comments on “the 47 percent” at an elite fundraiser earlier this year. I am referring, of course, to the following noxious statement we recently learned the Republican presidential hopeful made to an elite gathering of right wing election investors in the Boca Raton mansion of private equity manager Marc Leder last May:

“There are 47 percent of the [American] people who will vote for the president no matter what….there are 47 percent who are with whom, who are dependent on government, who believe they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it….That’s an entitlement. And the government should give it to them. And they will vote for this president no matter what.”

“These are people who pay no income tax. 47 percent of Americans pay no income tax. So our message of lower taxes doesn’t connect…my job is not to worry about those people. I’ll never convince them to take personal responsibility and care for their lives…”[1]

It is hard to process the moral and intellectual idiocy of this rant. Here is the fantastically opulent arch-parasite Romney – a man who made an “equity capitalist” fortune destroying working class jobs and storing his profits in overseas tax havens – mocking the elementary civilized notion (once memorably enshrined in the U.S.-signed United Nations’ Universal Declaration of Human Rights[2]) that human beings are entitled to food, health care, and shelter. Does he really believe that nearly half of all Americans think of themselves as “victims” who rightfully depend on government in a country where most support work requirements for public family cash assistance (introduced in the name of “welfare reform”15 years ago) and where 58 percent of the population believes they belong in the category of “the haves,” not “the have-nots”[3] (this even as the U.S. Census Bureau announced that half the U.S. population is officially poor or low-income)[4] Does Romney really think that close to half the population takes no personal responsibility for their own lives? And that receiving any assistance from the government (i.e., a Medicare check, Veterans benefits, Social Security payments) is an abdication from such responsibility?

For what its worth (very little in Romney and Leder’s insulated .01% world), the majority of U.S. households pay more than a quarter of their income in total taxes, including payroll, local, state, and sales levies as well as federal income taxes. This is a higher tax rate than Romney and other hyper-affluent folks pay, as billionaire Warren Buffett points out. As New York Times columnist Nicholas Kristof observed last Thursday, “the 47 percent” (actually closer to 46 percent) Romney ridiculed for not paying federal income taxes “includes many…modestly paid workers and retirees who have contributed far more meaningfully to America than some who can shell out $50,000 to attend a fund-raiser like the one where Romney spoke in May…What,” Kristof asks, “about the underpaid kindergarten teacher in an inner-city school? What about young police officers and firefighters? What about social workers struggling to help abused children?”

Did Romney really mean to denounce as indolent moochers American troops who pay no federal income taxes as they slog through deadly tours of imperial duty in Afghanistan and who depend on government benefits when they return to “the homeland”?

“One lesson,” Kristof notes, “is the narcissism of many in today’s affluent class. They manage to feel victimized by the tax code – even as they sometimes enjoy a lower rate than their secretaries and ride corporate jets acquired with the help of tax loopholes.”[5]

Deepened Inequality and the 1 Percent’s Tax Burden

That’s very well said, but let’s dig a little deeper. Do the wealthy few pay a disproportionate share of the nation’s income taxes? Yes, actually they do. As Wall Street Journal reporter and author Robert Frank notes in his latest book The High-Beta Rich:

“Just as they’ve taken over the consumer economy with their outsized incomes, spending, and wealth, America’s millionaires are also becoming the dominant funders of the federal and state governments.”

“The top 1 percent of Americans now earn 20 percent of the nation’s income and pay more than 38 percent of its federal income taxes. For many state governments, their share is even higher. In New Jersey, the top 1 percent of earners paid 40 percent of income taxes in 2008. In New York, the 1 percent pay about 42 percent, with Wall Street and the financial services business accounting for more than 20 percent of all state wages. In Connecticut, residents making more than $1 million a year (near the top half of the top 1 percent) accounted for more than a quarter of the state’s income taxes.”[6]

At both the federal and state levels, the disproportionate share of revenue coming from “the 1 percent” has risen in recent decades. Does this reflect an upsurge of progressive taxation on behalf of the supposed “47 percent” moocher mass that Romney identifies with the Democrats, the purported party of government dependency? No, it doesn’t. It’s mainly about the stunning concentration of wealth and income that occurred over the last three-plus decades, culminating the in New Gilded Age of 1990 to 2007, when the number of millionaire households in the U.S. doubled from 5 to 10 million and the number of U.S. households with more than $10 million of net worth rose from a quarter a million to more than half a million. This all took place while wages and salaries stagnated for most Americans.[7]

During the nation’s weak expansion between 2002 and 2007, the top 1 percent (3 million people) received fully two-thirds of the nation’s income growth. The other 99 percent got “one-third of the gains to divide among 310 million people.”[8]

It got worse after the Great Recession, itself very much a result of the nation’s extreme economic inequality (see below). The top 1 percent garnered no less than 93 percent of the nation’s gains during 2010, the first full year of technical economic recovery.[9]

Some states (Frank mentions Maryland, New Jersey, New York, and California) have hiked top tax rates and introduced “millionaire taxes” to enhance revenue. Still, as Frank notes:

“The bulk of the increase [in the share of income taxes paid by the top hundredth] …is driven by the growing share of the national income going to the top 1 percent. The top 1 percent of earners in the United States accounted for 20 percent of income in 2008, more than double their share in the ‘magic year’ of 1982. In California, the top 1 percent accounted for quarter of state income, up from 14 percent in 1993…If America has become a land of representation without taxation, with the bottom 40 percent paying little or no federal income taxes, it’s largely because so many Americans are now underrepresented in the country’s income pyramid (emphasis added).”[10]

“Failure By Design” in the Best Democracy Money Can Buy

Why has the income structure shifted so dramatically towards the top, making state and federal governments more and more dependent on the wealthy for revenues? That, interestingly enough, is largely a matter of government policy on behalf of “the 1%” in America, “the best democracy that money can [and did] buy.” U.S. economic growth since the late 1970s has been slow and unequally distributed thanks to a number of regressive policy choices that have served the rich and powerful at the expense of ordinary working people and nearly everyone else. The problem has not been that that “the economy” has been broken by the supposed “invisible hand of the market” or other forces allegedly beyond human control. The real difficulty is that the “human-made” U.S. economic system has been working precisely as designed to distribute wealth and power upward. This outcome has been achieved with the visible political hand of policy. As Joshua Bivens of the Economic Policy Institute showed last year in his important study Failure By Design: The Story of America’s Broken Economy, the following interrelated, bipartisan, and not-so “public” policies across the neoliberal brought this terrible outcome across the long neoliberal era:

  • Letting the value of the minimum wage be eroded by inflation.
  • Slashing labor standards for overtime, safety, and health.
  • Tilting the laws governing union organizing and collective bargaining strongly in employers’ favor.
  • Weakening the social safety net.
  • Privatizing public services.
  • Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
  • Shredding government oversight of international trade, currency, investment and lending.
  • Deregulating the financial sector and financial markets.
  • Privileging low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.

These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the Great Recession, sparked by the bursting of a housing bubble that resulted from the de-regulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings. Thanks to flat wages and weak social expenditures, the tepid expansion of the early 2000s (the weakest upward business cycle on record)[11] depended on an unsustainable upward climb of home prices. The epic collapse that followed generated millions of foreclosures and devastated savings and net worth across the working and middle classes. It brought an official unemployment rate that reached 10 percent (real unemployment went considerably higher) and the longest recession since before World War II. The crash was foreseen by many, including financial interests who failed to warn households on the dangers of taking out more debt to buy homes. It didn’t have to happen. As Bivens notes:

“Policy makers found plenty of resources to throw at tax cuts aimed disproportionately at corporations and the very rich and at wars abroad. And when partisan politics demanded it, resources were also found to enhance Medicare coverage by adding a prescription drug benefit – but only when bundled with flagrant giveaways to pharmaceutical companies and other corporations. If even a fraction of these resources had found their way into well-targeted interventions to boost the job market, the decade could have been very different, with wage growth supporting living standards instead of debt….”

But faster wage growth would have “threatened the only economic indicators that performed above-trend in the 2000s: growth in corporate profits.”[12] And that was unacceptable to the corporate and financial elites who dominate policy by virtue of their wildly disproportionate wealth and power, regardless of which of the two dominant political organizations holds nominal power in the White House and/or Congress.

Democrats are barely less prone to challenge the basic plutocratic policy mix for a number of reasons, including the ever-skyrocketing cost of elections, which serious candidates cannot hope to meet without massive backing from the filthy rich.

If Romney and their ilk want to know why the rich bear such a large share of the nation’s income tax burden to pay for “big government” these days, they should look at how they influenced big government precisely to serve their interests to concentrate wealth and income in ever fewer hands, to downgrade the middle and working classes, and to expand the ranks of the poor. As the rich never admit, they aren’t really anti-government. They are for big government that serves elite interests and punishes the rest. When their so-called free market medicine – replete with giant doses of corporate welfare (the Pentagon System is a leading example) – impoverishes the rest of us (and enriches the few) so much that we rely on them like never before for the revenue to keep government running, they mock us for thinking (in accord with the quaintly idealistic Universal Declaration of Human Rights) that we are “entitled” to food, shelter, health care, clothing, and economic and social security We are instructed to stop our “dysfunctional” thinking about “Who Moved My Cheese,”[13] take a whiff of tough-love self-help smeller salts, and scurry on to sniff out new opportunities that don’t actually exist under the rule of the nation’s unelected and interrelated dictatorships of money and empire: “Take ‘personal responsibility’ for your fate in this world we made for you, or starve and die, you bothersome little mice-people![14] You have no right to government assistance – that is reserved for the rich and powerful, like everything else.” It’s a curious command from those who have become ever filthier rich thanks in great part to big government’s role in serving and protecting the already well-off.

[1] Video link and full text of Romney’s comments at Brad Plumer, “Mitt Romney versus the 47 percent,” The Washington Post “Wonkblog” (September 17, 2012),

Article 25 of that shining document reads as follows: “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” See also Articles 22 (on the right to social security), 23 (on the right to work, just and equal compensation, and to form independent unions), 24 (on the right to leisure), 26 (on the right to education), and other key articles. Read the Declaration at

On “haves” and “have-nots” polling data see Tavis Smiley and Cornell West, The Rich and the Rest of Us (Smiley Publications, 2012), citing a late 2011 Gallup poll, 91, 215, n.56.

CBS, “Census data: Half of U.S. poor or low income,” (December 15, 2011) at; RT, “Half of America is officially poor” (December 15, 2011) at

Nicholas Kristof, “It Takes One to Know One,” New York Times, September 20, 2012, A27.

Robert Frank, The High-Beta Rich (New York: Crown Books, 2011), 181-82.

Frank, The High-Beta Rich, 9.

Hedrick Smith, Who Stole the American Dream? (New York: Random House, 2012), xv, citing Emmanuel Saez, “Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2008 Estimates),” Working Paper (Berkeley, CA: Institute for Research on Labor and Employment, University of California at Berkeley), July 17, 2010.

Emmanuel Saez, “Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2009 and 2010 Estimates),” Working Paper (Berkeley, CA: Institute for Research on Labor and Employment, University of California at Berkeley), March 2, 2012,, cited in Smith, Who Stole the American Dream, xv, 446.

Frank, The High-Beta Rich, 182.

“Typical family incomes expanded by less than half a percent between 2000 and 2007 – only about one tenth as fast as the next worst business cycle on record.” Josh Bivens, Failure By Design: The Story of America’s Broken Economy (Ithaca, NY: Cornell University Press, 2011), 13.

Bivens, Failure By Design, 13.

This was the title of a short corporate-backed “self-help” pamphlet and parable that became all the best-selling rage and a managerial favorite in the 1990s. It depicted two pairs of miniature beings who responded in different ways – one functional and the other dysfunctional in the authors’ corporate-neoliberal view – to the disappearance of “Cheese Stations” (the authors not-very-subtle metaphor for workplaces with good jobs) that had formerly provided them with sustenance and the bases of community. A dysfunctional and unhappy pair was made up “Hem” and “Haw,” two “little people, with complicated mind and thinking processes.” They felt they were entitled to keep receiving cheese (jobs and benefits) where they obtained it for many years. This bad pair of mice-people spent a lot of their energy being agitated about “Who Moved My Cheese,” and feeling ripped off and sorry for itself. “Hem” and “Haw” did not adjust and move with the times (with the moving cheese) because of their foolish cognitive and moral concern with who has and uses/abuses wealth and power to the detriment of little people. This was a reflection of their over-attachment to thinking and complexity. Things were very different with “Sniff” and “Scurry,” a highly functional pair of “mice with simple mind and thinking processes.” “Sniff” and Scurry” were unburdened by any human sense of being entitled to stability, comfort, and predictability in their lives. This good, forward-looking duo had no concern for why its old source of sustenance and community was taken away and who might have profited from the closing of their old Cheese Stations. It simply let go of its past ways of living and got back out into the great mice-person “maze” to eagerly sniff out and scurry to new sources of “cheese.” It couldn’t have much more obvious that the book was designed to speak to working Americans as if they were small children, telling them to drop any elementary human concerns for justice, equality, and respect and to purge any “complicated” notions that economic and political elites owe them anything – this as their great global-corporate overlords closed down jobs, moved plants overseas, slashed wages and reduced job benefits and the social safety net in the name of the “free market.” It might have been more accurate to title the pamphlet “Who Stole My Cheese,” since many jobs destroyed by the likes of Mitt Romney and his colleagues at Bain Capital simply disappeared into the mist of spectacular new incomes for the rich. Another title to think about in light of the encroaching eco-cide that Romney’s upper class comrades and their bipartisan friends across the political and policy class have produced is “Who Poisoned Our Cheese?” (progressives who want to produce an anti-capitalist and/or anti-neoliberal counter-parable should replace the word “my” with “our” in the title). See Dr. Spencer Johnson, Who Moved My Cheese? An Amazing Way to Deal With Change in Your Life (New York: G.P. Putnam’s Sons, 1998).

Dr. Spencer Johnson’s advice in Who Moved My Cheese? was for traumatized workers to be less human and more mouse-like, as the preceding endnote suggests.

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