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