I have been scathing in my criticism of Western governments for serving the interests of the ultra-wealthy, to the detriment of more than 75% of their citizens – who have seen their own standards of living falling steadily for the last thirty years. I have been especially critical of the U.S., and now a new article has been released which confirms my analysis, in every respect.
Wikipedia provides a very interesting definition for the term “plutocracy”:
Plutocracy is rule by the wealthy or power provided by wealth. The combination of both plutocracy and oligarchy is called “plutarchy”.
I must confess that the term “plutarchy” is new to me (or I would have already used it on a number of occasions). Clearly, the former U.S. democracy is now a plutarchy, and the following numbers demonstrate this with devastating detail.
An article from AOL's Daily Finance provides a breakdown of how those at the top have been given a “free ride”, which actually started at the beginning of the 1990's – long before George Bush Jr. made hand-outs to the ultra-wealthy his second highest priority (behind only invading Afghanistan and Iraq):
The 400 wealthiest Americans have seen their incomes skyrocket over the last two decades, while their tax rates have decreased dramatically according to newly-released data from the Internal Revenue Service. In fact, between 1992 and 2007, the annual incomes of this tiny club of uber-rich increased seven-fold to a whopping $345 million on average, while their effective tax rate dropped by more than one-third from a 1995 peak of nearly 30%.
How many average people saw their incomes rise by 700% from 1992 to 2007? How many average people had their effective tax rate nearly cut in half since 1995?
When I talk about the filthy-rich getting a "free ride" from the tax system, keep in mind that most of the increased wealth for the ultra-wealthy comes from the (un-taxed) appreciation of assets - not from income. Thus, the fact that they are grossly under-taxed on the tiny portion of their wealth which is (at least theoretically) subject to taxation is a(nother) despicable betrayal of the American people by their morally bankrupt leadership.
At the same time that the insolvent U.S. economy is plummeting toward bankruptcy, it has slashed taxes for its Billionaires' Club (see "Fiscal Straitjacket Pushes U.S. Toward Implosion"). The pathetic excuse used by the wealthy to 'justify' their under-taxation is that because their numbers are so small, even if they were taxed fairly, U.S. debts are so hopelessly unmanageable that forcing them to pay their fair share of taxes would not make any difference.
Let me turn that 'logic' around, just a little. With the average fortunes of this Billionaires' Club amounting to several billion apiece, this means these plutocrats are sitting on at least a trillion dollars of wealth. Thus, confiscating their entire, ill-gotten fortunes would provide the U.S. government with $1 trillion of badly-needed revenue - while only hurting a totally insignificant number of people. This is in contrast to two decades of economic policies which harmed the vast majority - while only benefiting the small minority at the top.
Of course, what would be much more important is the symbolism: showing the plutarchs that if you ruthlessly pillage an economy year after year after year (instead of contributing to that economy like responsible citizens) that there will be consequences...and using taxation to make this point is so much less-messy than pulling out the guillotines.
Still not convinced that such dramatic measures are necessary? Let me provide more information on the plutarchs' free-ride.
Since 1995, the effective wealth-rate for the plutarchs has plummeted from over 30% to 16.6%. In other words, with taxation only touching a tiny portion of their wealth (i.e. "income"), the filthy-rich have been paying-out only one of every six dollars in income. This free-ride has allowed the plutarchs' share of total U.S. wealth to triple over that same period of time.
This is a very important point, so let me expand upon it. Our system of income taxation is supposed to be "progressive": that is, those at the top (supposedly) pay more in taxes - in order to either shrink the gap between rich and poor, or (at least) to prevent it from expanding.
As I have pointed out in a number of previous commentaries (see "Income Taxation is a Failed System"), "income tax" is a hopelessly flawed system - which can never achieve tax-equity (i.e. preventing the gap between rich and poor from widening). The reason for this (as I mentioned earlier) is that the vast hoards of wealth of the plutarchs is immune from taxation - and it is the appreciation of that wealth which produces most of the new wealth of the ultra-wealthy.
However, what we are dealing with here is not a government which is trying to do its best with a flawed system of taxation. What we have in the U.S. (and to a lesser extent in other Western societies) is a government which started with a system which totally favors those on top - and then warped that tax-system to produce even bigger windfalls for the plutarchs.
As I have known since I studied economics more than two decades ago, a flat wealth-tax is the only method of taxation which can/could ever provide something close to tax-equity. It is the wealthy themselves who have been demanding a "flat tax" for decades. Now they can have it, but they can no longer hide (and hoard) vast fortunes which currently provide zero benefit to society.
The message to the plutarchs would be clear with respect to their obscene fortunes: "use it" (i.e. invest those countless billions in productive, wealth-producing activities) or "lose it" - see the tax-man chip away a small portion of those vast fortunes each year.
Our economies currently devote (i.e. waste) vast amounts of time/energy/capital to a nearly infinite number of "tax avoidance" gimmicks. None of this wasted energy contributes to either GDP or the general well-being of society.
Switching to a wealth-tax eliminates all this waste, since nothing can be hidden from taxation. Conversely, with no income tax, no sales tax, no capital-gains tax, and (perhaps) no corporate tax the enormous gains in efficiency once corporations seek to maximize profits - instead of seeking to maximize after-tax profits, is almost unfathomable. Beyond the internal gains in efficiency, the improved efficiency in capital markets (once capital-gains tax is totally abolished) would provide another powerful stimulus to our economies - without requiring governments to incur a single dollar of added debt.
For much more analysis of how tax-fairness stimulates an economy, I would refer readers to another recent, related commentary: "A U.S. Value-Added Tax: Suicide not Salvation".
It is criminal that the people running our economies (along with private-sector "experts" and media talking-heads) are so abysmally ignorant of a concept as important as taxation, since a fair and efficient tax-system costs nothing but produces more and healthier stimulus for our economies than recklessly spraying-around billions (and trillions) of new debt, like a fire-hose (or "helicopter-drop"). It should surprise no one that the only people who benefit from these (literally) bankrupt, economic policies are the banksters.
For older readers, I will refer to the mantra of an old, "Fram" oil-filter commercial: "you can pay me now [i.e. buy a new oil-filter for your car], or pay me later [pay for an engine-overhaul]." The plutarchs have a very clear choice. They can become responsible citizens, and contribute to U.S. society today, through paying their fair share of taxes - every year - or they can "pay later".
For those who want to know what "paying later" actually means, history is unequivocal on this subject. Please refer to my prior remark about "guillotines".