After my first few weeks in this class, I have grown very frustrated with the system we are in. I have always doubted that the American government had the people’s best interests in mind, but now I know that they completely do not. I had never really understood economics and how our economy works. All I knew was that we were in a partially controlled, partially free market economy. Reading the graphic novel Economix helped me understand more of how our system works, and how it has also wronged the American people in the past and present. I was very frustrated learning about Reagan and his economic policies, as I felt like they were completely backward and just did not make any sense. I will never understand why we have such low tax rates for the wealthiest people in the country. The idea of trickle-down economics just does not make any sense and does not work. Why do we have such high tax rates for the poorest people in the country and low tax rates for the rich? If we taxed the rich a fair amount, our country would be so much better off, as we could provide more services in the public sector to those who need them. However, in this country, we prioritize the top 1% and not the rest of the country.
You may remember my lecture on taxes based on IRS reports. I point out that the wealthiest Americans pay about 26% to 30.5% of their income in federal income taxes, Social Security taxes, and Medicare taxes, whereas persons earning $75,000 to $100,000 pay about 24% in income and payroll taxes (I include the employer portion as well as the employee portion of the payroll taxes). Persons earning $30,000 to $50,000 tend to pay 19% to 20.5% in combined federal income and payroll taxes (if we include the employer portion of payroll taxes). In Illinois, the wealthiest pay about 7.3% in state and local (sales/income/property) taxes, so their total would be 33.3% to 37.8%. People in the middle pay about 12.1% (so, the total they pay in all taxes federal/state/local/payroll would be about 36.1%). People near the lower end pay about 14.8% (so, their total might be 33%). Of course, people near the bottom income distribution would get a significant of their federal and state taxes back in Illinois through Earned Income Tax credits, Child Tax Credits, and benefits such as SNAP and the monetary value of Medicaid, but if we just look at the raw taxes paid before benefits and deductions, we see poor paying about a third of their income, people in the middle of the income distribution paying about 36%, and the wealthiest paying 33% to 38%. Perhaps you think we would have a fairer tax burden if the total of all taxes on the low income households was closer to 10%, and persons in the middle of the income distribution were paying about 35% to 40%, and people at the wealthiest end of income distributions were paying 40% to 50%.
The people in Congress who have been writing the tax code over the past decades certainly do prioritize the well-being of the wealthiest persons with the highest incomes. There has been a long tendency through generations of governing elites to think that the country “belongs” to the people who own the most. You can see this sentiment expressed at the Putney debates (1647) in opposition to the positions of the Levellers. It was also an opinion expressed by some delegates at the Philadelphia Constitutional Convention in the 1780s. I think there would be broad support for a simplified reform of the tax code to reduce its complexity and make it fairer. That should not be a partisan issue.
I have been a strong believer in Universal Healthcare and providing more social welfare systems to the American people. I thought that maybe the government was not supplying this because it costs too much money, but again this is not the case. The United States government spends outrageous amounts on things such as our defense budget. We can supply the American people with quality Universal Healthcare, and we simply choose not to, as this would completely kill the private healthcare industry and the private insurance companies. The concept of insurance already upsets me, as I feel like it is doing the American people completely wrong. Insurance companies kill people by denying their claims for life-saving procedures, medications, etc. Yesterday I went to the doctor and got a medication prescribed to me, but I could not afford to pick it up. My medication was not covered by insurance and would have been $70 if I wanted to pay for it out of pocket. I simply do not have the funds to pay for this. Luckily, I can go without the medication, but this is the reality for so many people where they NEED medication and cannot afford it. I do not know what I would do if I needed the medication and could not pay for it. Would I bite the bullet and pay for it or go without and risk my health declining?
Private insurance still exists in the UK and Germany and other places with universal health care insurance. In places with universal health care, standard contribution rates tend to be about 16% of income. That is, if we had universal health care in the USA, it might be paid for by an earmarked tax of 16% paid by everyone on their incomes. We could pay an old-age pension tax of 13% and a health insurance tax of 16%, with the federal income tax averaging about 8% on top of that, and state and local taxes averaging about 11%, so that average people were paying about 48% of their income in all taxes to local/state/federal systems. But, in that situation, private out-of-pocket spending on health care would drop from about 5% of household budgets to less than 1%, and spending on health insurance paid through employers or bought directly by households would also drop significantly. Although taxes would have increased from about 33% to nearly 50%, reductions in other costs would leave spending budgets in most households fairly similar to what they are now.
Reading the novel Poverty, by America made me so angry. Hearing about the Walmart employees who are on SNAP and Medicaid because they do not earn enough is so frustrating. Walmart promoting the EITC to its employees and even lobbying for it to get expanded is just pure corporate greed. These people only qualify for these programs because the corporation they work for does not pay them enough. People could work a full-time job here in America and still not be able to afford necessities. It is not like these corporations can’t afford to raise wages for their employees. They make plenty of profit, and they raise the wages for the executives, so why can’t they raise wages for their employees? The only answer is that it is not in the best interest of the company. When Walmart raised its minimum wage around the recession, the company saw its largest single-day loss of profits in the stock market on record. People were dumping their stocks because they raised wages. This resulted in the company losing millions of dollars.
The government wants to create an economic climate in which there is very little unemployment, and investment in creating more jobs is an attractive way for rich people and banks to invest savings. This could be achieved by regulation and a generous welfare system that forced employers to pay good wages to their workers, so that poverty was reduced, and the resulting wealthy population would stimulate demand and create an economic boom. Or, it can be done by allowing business to pay low wages and have the general public step in to supplement the purchasing power for households in the bottom third of the income distribution, allowing business to collect higher profits, but forcing the rest of us (the top two-thirds of the income distribution) to pay taxes to support the low-paid workers and prop up the profits of those companies with low-wage employees. It's not just an economic question, since designing a system that inflicts poverty and scarcity on a third of the population is creating crime, despair, anxiety, stress, health problems, and misery on a large minority of our country.
The American people have to pay the lost wages for these people because their corporations won’t, and this should never happen. These corporations and CEO’s keep getting richer and richer and the American people are paying for it. The wealth gap keeps expanding every day and nothing is being done about it. There needs to be some serious reform within the systems, and I think the first step is to finally tax the rich a fair amount. We need to stop letting these billionaires and their greedy corporations swipe us by barely paying taxes.
I think there is a good case to be made for a system in which spending and taxation reflects the situation in the 1960s and early 1970s, when productivity gains were shared more equitably among the working population, and capitalists and the higher income earners gathered wealth that was not so wildly different from what everyone else was doing. It's this class of about 100,000 American households with extreme wealth that seem to be perverting our society and democracy, and I'd rather that these households were merely somewhat wealthy, with tens of millions of dollars, rather than obscenely wealthy, with hundreds of millions or billions of dollars.
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