I grew up outside of Detroit, "the Motor City." Every presidential election, the Democratic nominee gave a Labor Day speech highlighting such party triumphs as Social Security, unemployment insurance and minimum wage standards. A union movement that had enabled steady improvement in wages and working conditions took pride of place. John Kerry is often admonished to avoid nostalgia for those days. Children of the Depression era may have needed a safety net but this generation rejects "class war" and merely wants the opportunity to get rich. Yet if the battle cry "soak the rich" won't work for Kerry, the interest in individual riches still offers an opportunity to advance major reforms.
Business leaders portray taxes as taking money from the wealthy to give it to the poor. Yet both sides of this picture are exaggerated. The federal income tax is progressive, but the Social Security tax is regressive. Most discussions of taxation also fail to acknowledge the impact of state and local taxes. In April, Citizens for Tax Justice reported that when state, property, and sales taxes are considered, the entire tax code is only very modestly progressive. The wealthiest 1% pay around 32% of total income in taxes and the bottom 80% average slightly under 30%.
Those who aspire to wealth may rest easy about future taxes, even if Kerry succeeds in repealing the Bush tax cuts for the most wealthy. Net taxation is still likely to become even less progressive in coming years. As more functions are dumped on lower levels of government where concern for business flight is most severe, heavier reliance is placed on regressive sales and property taxes. The rich are not being soaked. They are hardly being sprinkled.
Those who hope to climb the social ladder have more to fear from government policies than from "confiscatory" taxes. Federal rules, enforcement mechanisms, and budgetary priorities all provide a leg up to established business interests.
Consider two darlings of the stock market, drug companies and media conglomerates. Pharmaceutical firms patent new drugs and thereby hold monopoly marketing rights. This privilege is supposed to finance costly research. Nonetheless, as former New England Journal of Medicine editor Marcia Angell points out, patent restrictions have produced inordinate revenues that are then committed to dubious purposes. Drug companies spend more money on slick advertising campaigns to expand markets -- often inappropriately -- than as on research. Many of the wonder drugs touted by the industry were an outcome of government sponsored research. Government surrendered its discoveries to private firms, which then proceeded to patent them and charge top dollar. The new Medicare drug benefit pours more money into this system, but it prohibits any government effort collectively to negotiate lower drug prices. Drug companies enjoy protection against competition, but consumers can't pool their resources.
The media are another area where collusion rules. Television and radio stations and major networks benefited from an initial monopoly grant of space on a finite electromagnetic spectrum. In return, they were supposed to meet a fairness requirement by presenting alternative views. Today, that fairness doctrine has been eliminated, virtually unlimited combination in radio allowed and the FCC is working to further relax remaining restrictions on media consolidation. And these giants have already been given more space on the finite spectrum for HDTV broadcasts, a gift so lavish that even that Kansas socialist, Bob Dole, once objected.
Corporate insiders enjoy the best returns on many of these deals. Business judgment and exculpation statutes make it virtually impossible to hold corporate directors accountable for decisions that benefit privileged executives. In addition, the auditing firms expected to monitor corporate books still offer other services, such as tax avoidance schemes, thereby creating conflicts of interest.
While executives and privileged owners collude, employees can't collaborate to protect their own interests. Corporations routinely -- and illegally -- discharge employees who express an interest in unionization. They treat any resulting fines as just a trivial cost of doing business.
In the last three decades, the average pay and compensation for a corporate CEO has gone from about 30 times the compensation of the bottom level employee to around 300 times. Corporate performance, and working class wages, have hardly kept pace, but why would we expect otherwise when corporations receive lavish gifts and CEOs face little accountability to workers or even ordinary stockholders.
John Kerry can show that he is serious about equal opportunity for all Americans by promising to enforce existing labor law and by challenging government largess to the corporate sector. He should also lend vocal support to proposals in Congress that would certify unions as workers' bargaining agents as soon as a majority of a firm's workers sign cards indicating support for the union.
Class war in America today is not being carried on through the tax laws but in the one-sided rules and regulations that govern corporate life. Without a change in those rules, rags to riches stories will become even more rare.
John Buell lives in Southwest Harbor, Maine. Email jbuell@prexar.com.