Never has so much been stolen from so many by so few

Americans can't benefit from the hard earned fruits of their labour because the top 10% have locked away the key that opens the door to a more equitable society.

Illustration - The Economist/Justin Metz

I could spend today writing about the self-enrichment of a convicted criminal in the White House, and I’m sure I’d get far more engagement than this post will receive, but I’ll take a pass, thanks, and leave that to others, because Trump’s corruption is just a drop in the ocean when it comes to what’s really going on in the new America.

"Tax the rich" is the cry, to which I have to ask: HOW? The real challenge is that governments have afforded the fiscal apex predators the luxury of designing a system that insulates them from the threat of having to pay their fair share. The principle of taxing them is undoubtedly sound, given the fiscal piracy they have engaged in against the American people since the 1970s. There’s no question that far from witnessing the ‘trickle-down’ we were promised, all we have seen is ‘siphon-up’. This has seen the rich effectively steal the workers’ share of economic growth for half a century. Take a look below at the shift in the share of US national income between 1980 and 2016.

As noted by billionaire entrepreneur, venture capitalist, and civic activist Nick Hanauer, who, together with Jeff Bezos, started Amazon.com. The socioeconomic sleight of hand performed by the rich, aided and abetted by government, shows that the top 1% have effectively taken a 50% haircut from the wages of every American worker over the past half century. This is the underlying source of the unsustainable and obscene wealth inequality we inherit today. Hanauer has gone on to become, some would say, a billionaire with a conscience after having had a number of successful business ventures.

His simple premise is that everything we are taught about economics is, in his words, “A pack of lies” and that if you use this flawed economic model as the foundation on which to build economic policy, the only possible end result is either a police state or a revolution. I believe he is absolutely right, and we are, as we speak, at that fork in the road. This is why we are beginning to see the rise of Democratic Socialism in response to what is fast becoming a police state. You only have to listen to the visceral response from the right to progressive candidates breaking through to understand that the battle lines in the upcoming revolution are already being drawn.

We can talk all day about the monsters in this regime and those that are bankrolling them, but they really don’t care. These are people who would, and are, burning this nation to the ground for personal gain. They have no social conscience; indeed, I doubt many of them have a conscience or a beating heart at all.

The median income of the average American worker is now around $60,000. Had wages maintained the same share of economic wealth workers held in 1975, they would now be earning $120,000. This is about the benefits of productivity and economic growth being siphoned upwards to the top 10%, but primarily to the top 1%, hence the exponential rise in the wealth gap, which today is at its highest ever. As Nick Hanauer rightly points out, that’s literally trillions of dollars that should have been wages that have been transferred to the bank balances of those at the top of the economic food chain.

To be very clear, this is not just about siphoning money from American workers; it’s also about shifting wealth from mom-and-pop and small businesses to corporate giants. These conglomerates then become so big that they can dictate tax and deregulation policies to governments, allowing them to evade paying their fair share, all while mom-and-pop have no choice but to pay up. Companies like BlackRock and the tech giants employ highly complex tax-avoidance strategies, allowing them to earn huge profits and pay little to no corporate tax. A strategy supported by the current regime and largely turned a blind eye to legislators from both sides of the aisle, other than tinkering at the edges of tax loopholes and evasion.

I would highly recommend that you take some time to watch the episode below of The Diary of a CEO in which Hanauer, along with Daniel Priestley, discusses the arguments for taxing the rich in the context of the destruction of the middle class, where the only survivors are the top 1%. It is highly informative and speaks very much to the narrative I have been attempting to articulate for months. Please use the chapter markers in the video to skip to the sections that interest you.

At the very heart of the crisis we face is one simple fact. In the US, the effective tax rate paid by a billionaire is half that of the average American worker; a similar disparity exists in the UK. This is a structural flaw in the system. Governments over the years have allowed a booming industry to emerge that provides the rich with ‘tax efficiency schemes’ enabling them to evade tax, providing a passport to avoid social responsibility. Another great example is the payroll tax cap in the US. the maximum amount of earnings subject to the Social Security portion of FICA) is $184,500, details that apply to Medicare are listed here

Governments of ALL persuasions have allowed corporations to abdicate their social and fiscal responsibilities to the societies in which they trade and generate huge profits. Some of these companies now have values greater than the GDP of many nation states. In the case of Elon Musk, he is in that position as an individual. There is no question that the system is broken. Corporations are complicit in harming the broader population, with help from a government that openly governs only for the asset class. The bottom 90% are now considered fair game for extortion and exploitation, on the grounds that they constitute acceptable collateral damage in pursuit of global economic dominance and, in the case of politicians, self-enrichment.

The argument the rich and their advocates make is that they pay the majority of the government’s tax revenues, and organisations like the Heritage Foundation are not shy when it comes to glossy graphics to show just how generous they are when it comes to paying taxes, as you can see below:

You would look at this graph and say that the demand to tax the rich is baseless; they are already contributing the lion’s share of government tax revenue. It’s because they are very good at painting a distorted picture, which I promise we’ll discuss in the next piece, because it requires more time to break it down to reveal the true picture.

Putting the fairytale graph aside for a moment, the tax revenue breakdown is what it is because the tax revenue from the wages of workers is nominal compared to profits generated from their labour, so it is totally in line with expectations that the lion’s share of tax revenue should come from profits generated, given corporations are the largest beneficiaries of profits generated. Tax on Profits, by the way, which those at the top of the food chain then seek to evade, paying as little tax as they can. There’s nothing punitive about paying your fair share of tax. The more you earn, the more you should pay; it’s a basic concept that’s easy to understand.

While it is factually correct to say that corporations and the wealthy elite contribute a larger share of the government’s tax revenue, that is wholly underrepresentative of the wealth they own. Indeed, their contribution is well below what they should pay if they weren’t allowed to avail themselves of the myriad tax-avoidance vehicles that the average American cannot. When it comes to the rich, expensive accountancy firms devise ever more elaborate tax-avoidance vehicles to ensure they retain a much larger percentage of their earnings than a firefighter, a teacher or a care worker. We’ll discuss this sleight-of-hand distortion of ‘earnings’ in the next piece because it’s a critically important factor in the distinction between earned and passive income.

Selective participation in tax collection is often a carefully choreographed fiscal dance that allows wealthy individuals to use corporations and other financial instruments to shield ‘earnings’ from tax liability. It is important to note that the Biden administration DID begin taking steps to close tax loopholes and invest in the IRS to recover the now-estimated $1 trillion a year in tax revenue that the government is losing. However, Trump soon put a stop to all that when he began his second term. We could spend a whole week just discussing the myriad tax-avoidance options available to high-net-worth individuals. To get a broad grasp of just some of the loopholes, you can take a look at the video below:

The slogan ‘tax the rich’ might be catchy and an appealing soundbite, but implementing it is a much bigger, more challenging problem. That said, there can be no argument that the tax burden requires rebalancing, and we have to start somewhere. What you have to understand is that governments of all stripes have been complicit in creating a tax model that has allowed the wealthy and large corporations to create an effective tax-code imbalance that starves the government of the revenue required to serve the many, not the few. Rest assured, addressing this imbalance will prove a huge challenge because Musk, Trump, and the corporate cabal have found a way to defang government when it comes to enforcing a tax code already rife with tax-avoidance loopholes skewed in their favour. The wealth gap transfer pipeline is now hard-wired into the system.

Where to begin is the question, and this is where the real challenge starts. To be clear, electing a few Democratic Socialists does not a revolution make; however, it does send a signal of intent, and while that’s unquestionably a good thing, it will and has already activated the right-wing narrative monster, which, after this week’s Supreme Court ruling, will have access to limitless funding even for the coming midterms.

Rest assured, each one of these progressive candidates is going to be made famous by the right as they are painted as agents of destruction, intent on instigating the fall of the Republic. When you have Democratic lawmakers openly stating, “If you are a socialist, you can’t be a Democrat”, you know you have an institutional problem. These progressive candidates WILL be the new ‘red scare’; of that there is little doubt. The good news is they don’t care about the war that will be declared on them, and they are certainly more than capable of riding the storm and giving back as good as they get.

If you take a moment to think about it, the system those at the top have built is some achievement; 35 million Americans, which equates to around 13.5 million households, have managed to seal off close to 70% of the nation’s wealth, and 306 million Americans have passively sat by and watched it happen as the rich have implemented their ‘fiscal final solution’. It’s a terrifying testament to how effective the rich have been in creating a compliant environment in which to exploit the majority. Take a look at the chart below, and one can’t help but admire how effortlessly they have fiscally anesthetised a nation into compliance

At any other time in history, this would be pitchfork time, but in modern America, the party that should represent the interests of those in the middle and at the bottom has, over the years, aided and abetted this outcome. Until there is a recognition of this indisputable fact, I don’t know how you can begin to address it. Democratic socialism is a perfectly normal counter-reaction to the facts presented in the chart above.

It’s why Americans can’t have Universal healthcare, affordable child and elderly care, affordable housing, affordable drug prices and a living wage. Those at the top of the economic food chain hold the key to unlocking these quite affordable basic rights, but they have chosen to keep it out of the reach of 303 million Americans.

In the next episode, I’ll try to unravel the solutions that the rich have chosen to bury under a mountain of disinformation and misdirection designed to keep the victims of their state-sponsored decades-long heist.

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