Home > The Economics Profession, The Economy > Revolt of the rich? (2 graphs)

Revolt of the rich? (2 graphs)

from David Ruccio

Mainstream economists and politicians don’t like to talk about it. But Mike Lofgren is willing to admit, in the pages of the American Conservative, that what we’re witnessing is a revolt of the rich.

Stephen Schwarzman, the hedge fund billionaire CEO of the Blackstone Group who hired Rod Stewart for his $5-million birthday party, believes it is the rabble who are socially irresponsible. Speaking about low-income citizens who pay no income tax, he says: “You have to have skin in the game. I’m not saying how much people should do. But we should all be part of the system.”

But millions of Americans who do not pay federal income taxes do pay federal payroll taxes. These taxes are regressive, and the dirty little secret is that over the last several decades they have made up a greater and greater share of federal revenues. In 1950, payroll and other federal retirement contributions constituted 10.9 percent of all federal revenues. By 2007, the last “normal” economic year before federal revenues began falling, they made up 33.9 percent. By contrast, corporate income taxes were 26.4 percent of federal revenues in 1950. By 2007 they had fallen to 14.4 percent. So who has skin in the game?

I’d put it a bit differently: what we have before us is a revolt of the corporations. And it’s been going on for most of the postwar period:

source

At the same time that corporate income taxes have been falling, the taxes paid by workers have been rising:

source

In other words, throughout the postwar period (with notable jumps, such as during the Reagan income tax cuts and social insurance tax hikes), corporations have managed to shift the federal tax burden from their surpluses to workers’ incomes. For example, corporate income taxes, which were 42 percent of total federal revenues in 1952, had fallen to 10 percent in 2012. Meanwhile, payroll taxes rose from 10 percent in 1952 to 34 percent in 2012 (individual income taxes have, during the same period, risen slightly, from 42 percent to 47 percent).

This revolt of the corporations has, since the mid-1970s, also involved an attack on workers’ wages, thus putting a further squeeze on workers, who are both yielding up more surplus and feeling the after-tax pinch on the wages they take home.

Now, corporations are demanding further tax decreases, in order to play their role as “job creators,” while their right-wing political representatives propose to cut back exactly the social security and Medicare benefits workers have been hoping they’d been granted access to through payroll deductions (which only recently have been lowered, and only temporarily).

The revolt of the corporations has created the fiscal and economic mess we’re in right now. And, as long as people target their wrath at the politicians in Washington and not at the corporations themselves, that mess will continue.

  1. September 4, 2012 at 7:55 am

    Rich revolt is certainely a fact of the last years, and a very dangerous one as according to my belief the second great economic crisis (2007-) should be attributed to it. The article is very good. I suggest, also, to whom is interested in the problem, the reading of my electronic book (translated in english from greek)trying to explain this crisis through the out of control inegalities in distribution.
    http://www.lulu.com/shop/search.ep?keyWords=THE+MURDEROUS+CRISIS+AND+THE+GREEK+TRAGEDY%22&categoryId=100501
    by Maria Negreponti-Delivanis

  2. robert r locke
    September 4, 2012 at 12:29 pm

    Nothing new under the sun. Just before the French Revolution 1789, there was a revolt of the rich and the privileged to stop the state from taxing them. That sparked the uprising that fed into the overthrow of the Old Regime. So watch out your rich and privileged, if you don’t understand that elites can only remain in power if they look out after the general welfare, then there will be hell to pay.

  3. September 4, 2012 at 8:50 pm

    Yes, Louis XVI was the good guy who has been written out of history as a baddie. He was also unlucky with the volcano in Iceland blowing up in 1783. Had he succeeded would have set an entirely different model for constitutional monarchy.

    As it was, there were two decades of war, Prussia became a formidable military power and the rest is the history of the past 200 years.

  4. Alice
    September 4, 2012 at 11:41 pm

    No nolthing new here except that the voters are going to want to start hearing about raising the taxes on the rich, and closing loopholes.
    Inequality is out of the box where conservatives attempted to bury it using phrases like “its not equality of incomes that matters, its equality of outcomes” or “you need to consider the 2nd and third round effects”, “redistribution is a zero sum game” and so on along with the derision of and attacks and stripping of funding from those economists who actually were studying the rise in inequality from the 1980s on
    Trouble is inequality in the US just got too big to stay in the box and now the world knows about it.

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