Building an Economy that Works for Everyone

Tax the rich: They need services too

From the Everett Herald | By John Burbank:

We’ve had a lot of talk about the privilege of the top 1 percent, and how they are grabbing more and more of our national income. Once, productivity increases were proportionally shared between corporations and workers. Now they’re mostly grabbed by companies and their top executives, while workers are left with decreased retirement savings, increased health-care costs and depressed wages.

This shift in prosperity and prospects didn’t just happen. It’s the result of conscious policy-making, including tax decreases for the wealthy, government policy that turns a blind eye to corporate union-busting, and “free trade” agreements that export jobs out of our country.

The result may appear to be manna from heaven for the wealthy, but that too is an illusion, because the wealthy need a civil society to prosper, too. They need good roads and a rail system to deliver materials to factories, and to distribute the products of these factories. They need fully functioning ports to export raw materials to factories they’ve established in China and import consumer goods to sell to Americans.

The wealthy need skilled workers for high tech and remaining industrial production — so they need good schools, community colleges and universities that are accessible to middle class students. And because workers don’t work so well when they — or their kids — are ill or injured or sick, the wealthy benefit from health coverage for the many.

Gated communities, private planes and private elite schools don’t fit the bill. The wealthy might think they can live in isolation and privilege, but the reality is, they can’t escape from the downsizing of the middle class. It hurts them too. 

Building the foundation for our economy costs money — schools, health coverage, roads, rail, public health. That’s taxes. But with total income shifting more and more to the top 1 percent, and away from the middle class, tax collections have fallen. The middle class spends most of its money — that generates sales, and sales taxes. The wealthy are more likely to invest in Wall Street, engage in financial manipulations with the latest derivatives, and enjoy trips to the Riviera. None of this generates tax revenues here in Washington.

So here’s an idea. It’s not novel or exciting, it simply makes common sense. Let’s tax the wealthy. They need a civil society and the fundamentals of government — education, health care, infrastructure — as much as the rest of us do, maybe more so. The 1 percent should pay too!

That’s the intent of a bill in the Legislature to levy a 2 percent marginal tax on incomes above $1 million. Senate Bill 6482 also establishes the paramount duty trust fund into which the proceeds from the tax are placed.

Paramount duty? That’s our state Constitution’s command that we provide basic education to all children. That’s something the wealthy should want, if not just for good citizenship, then at least for a supply of good workers. Over the past few years school districts in Arlington, Edmonds, Lake Stevens, Marysville, Snohomish, Shoreline, Sultan, Stanwood-Camano, Sultan, and South Whidbey joined with others around the state and the League of Women Voters, the PTA and the Washington Education Association in a lawsuit charging that the state is violating its paramount duty. In January the state Supreme Court found, using the Legislature’s own school improvement plan as a yardstick, that yes, the Legislature is indeed violating this paramount duty by underfunding basic education.

Yet the Legislature, in contemplating how to cut another $1.5 billion out of the budget, is again eyeballing basic education. SB 6482 begins to reverse that disinvestment and make the state move toward fulfilling its paramount duty.

How much would this 2 percent tax on income above $1 million bring in for education? About $275 million a year. That’s enough to reinstate the class size reductions in K-4 classrooms that the Legislature suspended last year. It is a start for our kids.

Who would pay? About 6,000 households in the state — that’s two out of 1,000. For example: Howard Schultz, Seattle’s coffee baron, would pay pay about $1 million from his recently announced $65 million income from Starbucks in 2011, leaving him with close to $64 million. Plus, he gets to use the company plane.

Do we continue to coddle the wealthy and violate our paramount duty toward our children’s education? Or do we begin to set the table for a society and an economy that benefits all of us, including the 1 percent, but not just the 1 percent. In a democracy, there is only one answer.

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