Dear Comrades -- as many of you know I am persuaded by the arguments of the "SSA" school that there have been waves of different "political economies" over the course of the development of US capitalism.
I believe that in the 1980s, neoliberalism triumphed and it foundered on the financial crisis of 2008. Now here comes Paul Krugman who argues (without saying it outright) that there is a NEW political economy which is based on out and out corruption and tax evasion which has beneifitted the .0001 percent (the trillionaires). Here is his argument. IF HE IS RIGHT, THERE IS a new political economy in the US which is way beyond neo-liberalism. AND --- the narrowness of the group that has benefited from basically non-enforcement of the tax laws presents a very juicy LOW HANGING FRUIT for a reformist Democratic Administration to go after --- A giant IRS enforcement budget and a few jail sentences would be a great way to stick a pin in the over-inflated incomes of the trillionaires -- THoughts? At this point, it’s almost a commonplace to say that under DonaldTrump,America has become a kakistocracy, ruled by the worst. But I don’tthink it’sfully appreciated the extent to which we’ve also become a cheatistocracy,ruled by the most corrupt. Today’s commentary is a follow-upon yesterday’s primer, which was about therole of tax evasion both in leading to or contributing to our downward spiralinto oligarchy and also as a surprisingly large factor in the budget deficit andtherefore in America’s debt problem. Before I get to tax evasion, let me say something about where I’ve beengoing in my kind of intellectual journey into understanding oligarchy. As aneconomist, normally my instinct is to think about the invisible hand, to thinkabout market forces, about technology as driving what happens to society.And even now there’s at least some extent to which the rise of kind of gardenvariety inequality, the rise of the top quintile at the expense of the middle, may be partially explained by the bias of technology towards higher formal skills, although that may be ending now with AI and all of that. But as I began to focus on oligarchy, on the very small number of people whohave enormous wealth, enormous income, but the wealth is an even biggerfactor — there are a really handful of people who have come to play such alarge role.In our society, in our economy, and above all, of course, in ourpolitics— I was forced more or less by the numbers to say this is not aboutthe invisible hand. This is not about market forces. It isn’t even mostly abouttechnology. Yeah, some technologies create winner-take-all markets that make people int he right place extremely wealthy. But the really big factor that’s driven us fromthe relatively equal society that we were 50 years ago — not obviously anywhere close to truly equal, but nothing like the dominance of a tiny elite that we have now — the really important factor is policy and above all taxpolicy. We basically stopped imposing progressive taxes that limited the growth ofenormous fortunes. And sure enough, as the tax barriers to accumulation ofexcessive wealth went away, excessive wealth began to concentrate. This is, in many ways, the fundamental story. We got rid of, we ended theGilded Age with its dominance by, as FDR said, the power of organizedmoney, largely by taxing a lot of that organized money away. And we got backto something which in many ways is worse than the Gilded Age by takingaway those taxes and allowing vast fortunes to snowball and buy themselvesenormous political power, which allows them to snowball even further. One factor in all of that is the rise of simply not paying taxes that you’resupposed to pay. A lot of it is reductionist statutory tax rates. We taxcorporate profits at a far lower rate than we did In the 1950s, we tax topincomes at a much, much lower rate than we did in the 1950s. But what’salso true is that we simply allow people to get away with not paying taxes toan enormous extent, to almost surely a much greater extent than used to bethe case. The numbers are big, and in the primer I go through the tax gap. The money owed but not in fact collected is certainly north of $600 billion a year. It is something like 40% or more of the U.S. federal budget deficit. It is a major contributing factor to the accumulation of vast fortunes. What is striking is that far from really making an effort to rein in that tax gap, for the most part politically our system has moved to let it rip, has basically tried to make America safe for tax cheats. This is something that overwhelmingly benefits people with high incomes andlarge wealth because people with really big incomes, people who areextremely wealthy, for one thing, they just have much more complicatedincome. It’s much, much harder to track down and audit someone who hasmultiple businesses, some of which are dummy businesses, some of whichmay be real, but nonetheless are conduits through which money can move. And only the very wealthy can maintain offshore accounts that enable them to hide income and so on. So tax evasion is something that overwhelmingly benefits people with veryhigh wealth and income. Not all! Not every billionaire is a tax cheat. There arelevels and levels. There are some people who just feel that’s not something Iwant to do.People who feel that it would be wrong. Morality does exist. Thereare people who feel that their personal losses, should they be caught outcheating heavily on their taxes, would be large. So they care about theirreputation. And then there are those who don’t. What’s astonishing is that we have, especially since 2010, especially sincethe hard right Republicans took control of the House of Representatives, wehave moved to largely eviscerate any attempt to control that type of taxevasion. The numbers are really startling, and the IRS has actually put out very usefulinformation. If you are someone with a very high income, the IRS stopscounting pretty much at a million or more a year, but presumably it’s evenmore true further up the scale. In 2011, before the right-wing Congress was able to do its work, more than7% of tax returns in that range were audited, which is not unreasonablebecause there’s obviously a lot of possibility for malfeasance there. It’s notsaying that 7% of people with incomes of morethan a million were sent to jail.Obviously nothing like that, but we had widespread auditing, which amongother things, encouraged people not to cheat on their taxes. By 2019, just eight years later, that number had gone from 7.2% to 0.7%. So almost nobody with high incomes was being audited for possible tax fraud. Now, why was that happening? There had been savage cuts in the funding to the IRS. Very large, at least 25 to 30% adjusting for inflation, something like a40% reduction in the staff available for enforcement. And as it turns out,auditing the taxes of a very high income person is a lot more expensive thanauditing a regular person. An ordinary blue collar worker, middle income,white collar worker who might be failing to declare some income, in manycases, it’s really very hard for them to evade taxes at all. And if they do, ittends to be relatively straightforward to pick apart what’s going on. And soaudits of ordinary people are cheap. Audits of millionaires and billionaires, sounding like Bernie Sanders, are veryexpensive. And so the IRS, with limited resources and wanting to show that itwas in fact auditing people, largely gave up on auditing the extremelywealthy. And this is a big number. The amount that we lose to tax evasion issomething like the entire budget of Medicaid. It’s something like six timeswhat we spend on food stamps. It’s something like 15 times the amount ofmoney that Elon Musk saved by destroying USAID and killing millions ofpeople in Africa. And yet it has been allowed to flourish. Notice, by the way, that this is all pre-Trump. Now, under Biden, there was a push to rectify the situation, a push to restoreenforcement, increase the resources of the IRS, and increase enforcementactions in an attempt to tilt the agency’s priorities back towards where itshould be, which is going after the big money. And that was just gettingstarted. It takes a while to ramp those things up. And you know what happened. Of course, Trump’s one big beautiful bill didsavage cuts in IRS resources for enforcement.Savage cuts in personnel.We’re now back to a situation where things are worse than they were beforeBiden started to try to fix it. So this is going to continue. What I find remarkable and interesting — I mean, I wouldn’t say that I’mbaffled, but I think it is something that takes some analysis is *why* exactly. I mean, it’s one thing to favor the interests of the uber wealthy. Okay, weknow that’s what the modern Republican Party is, whatever it may claim tobe. But it’s another thing to systematically favor the least honest. What this policydoes is It basically says if you are an honest billionaire — I’m afraid to namesomebody because who knows what may come out in some future set of files — but if you are an honest billionaire, you are disadvantaged by the fact thatdishonest billionaires are able to get away with cheating on their taxes. Youshould be opposed to that, but obviously the party that currently controlsCongress, the White House, and the Supreme Court, that party actuallyprefers dishonest men of great wealth. It’s actually a positive preference forcheaters. I can speculate very loosely. It’s often been observed of Trump, and it’s probably true of some others in his camp, that at a fundamental level, he does not believe that anyone has good motives. And that someone who appears to actually be a decent person who plays by the rules is, by that very token, someone Trump distrusts. He kind of assumes that they must be even worse than he is. Otherwise, they wouldn’t be faking having good intentions, which people like him never have. Maybe there is something going on, something deeper. But in any case,wehave developed a system where not only do we enormously favor theinterests of people who already have vast amounts of money, but we literallyfavor malefactors of great wealth, to use Teddy Roosevelt’s phrase. Weliterally favor people who not only have enormous amounts of money, butcheat, who don’t pay their taxes, who break the rules. This is not America. The general public still very much believes that peopleshould pay the taxes they owe. We are not a country that valorizes, thatrewards, or that honors people who cheat.But we have become a society thatin practice does reward people who cheat. What does that do to our social cohesion? What does that do to our sense ofourselves as a nation? I think in some ways the moral decay is worse than the numbers, which is saying a lot. (end of KRUGMAN quote) -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#43235): https://groups.io/g/marxmail/message/43235 Mute This Topic: https://groups.io/mt/121011868/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/13617172/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
