5 “entitlements” for the wealthy that make things worse for everyone else

From $1 trillion in subsidies to a tax system rigged in their favor, the rich are getting a bargain at our expense

Topics: AlterNet, Entitlements, 1 percent, U.S. Tax System,

5 "entitlements" for the wealthy that make things worse for everyone elseMitt Romney (Credit: Reuters/Jonathan Ernst)
This article originally appeared on AlterNet.

AlterNet The word ‘entitlement’ is ambiguous. For working people it means “earned benefits.” For the rich, the concept of entitlement is compatible with the Merriam-Webster definition: “The feeling or belief that you deserve to be given something (such as special privileges).” Recent studies agree, concluding that higher social class is associated with increased entitlement and narcissism.

The sense of entitlement among the very rich is understandable, for it helps them to justify the massive redistribution of wealth that has occurred over the past 65 years, especially in the past 30 years. National investment in  infrastructure, technology, and security has made America a rich country. The financial industry has used our publicly-developed communications technology to generate trillions of dollars in new earnings, while national security protects their interests. The major beneficiaries have convinced themselves they did it on their own. They believe they’re entitled to it all.

Their entitlements can be summarized into four categories, each of which reveals clear advantages that the very rich take for granted.

1. Income: Mocking Our ‘Progressive’ Tax System

Americans who earn millions of dollars a year feel entitled to the same maximum tax rate as those making about $400,000 a year. Progressive taxation stops at that point. In fact, it reverses itself, with the highest earners paying lower tax rates. The  richest 10% pay about 20 percent in federal taxes, and it goes down from there, with the richest 400 paying  less than 20 percent. When all taxes are included (payroll, sales, state and local), the super-rich pay  about the same percentage as America’s middle and upper-middle classes.



Corporations feel entitled to lower taxes, too, having  cut their income tax rate in half in just ten years. The companies that have benefited the most from public research have become skilled  tax avoiders.

Some corporate CEOs feel entitled to  total freedom from taxes, employing a noble-sounding strategy of a $1 per year salary to avoid federal income taxes. It allows them to defer all capital gains taxes on their stock holdings, which can be used, if cash is needed, as collateral for  low-interest loans.

2. Wealth: Trillions in Financial Gains, Zero Tax

America has gained  $16 trillion in financial wealth over the past five years, with  80-90 percent of that gain going to the richest 10%, for many of whom productive labor may have been limited to checking their online portfolios. America is gaining in wealth because of technological infrastructure and a deregulated financial industry that uses the technology to capture most of those gains.

There is no  tax on all that wealth. Capital gains can be deferred indefinitely, and then another entitlement comes into play: the lower capital gains rate, purportedly meant to stimulate new business investment, but in large part  failing to do that. The nation’s wealth needs to be distributed more equitably among productive citizens, ideally by allowing everyone to  share in the capital of companies that use our nationally developed technologies.

3. Financial Transactions: Trillions in Speculative Purchases, Zero Tax

As Forbes notes, the  hundreds of trillions of dollars of speculative financial transactions constitute “a massive financial accident waiting to happen, yet again.”

We pay a sales tax of up to 10 percent on boots and mittens for the kids, But  not a penny of sales tax is paid on U.S. financial transactions, which may be valued as high as  three quadrillion dollars annually, or over three thousand times the deficit. No sales tax is paid despite the high-risk nature of  “flash trading” that can lose entire pension funds in a few seconds.

The trading industry feels entitled to tax-free purchases, claiming that even a tiny sales tax will  decrease liquidity, or  slow the economy, or constitute a  sin tax. Yet it’s an easily administered tax that has been imposed in some of the freest economies in the world.

4. Subsidies: Alms for the Rich

About two-thirds of nearly $1 trillion in individual  “tax expenditures” (deductions, exemptions, exclusions, credits, capital gains, and loopholes) goes to the top quintile of taxpayers.

At the corporate level, tens of billions of dollars go in  subsidies to the fossil fuel, fishing, and agricultural industries. Fossil fuel subsidies may be much, much more. The  IMF reports U.S. fossil fuel subsidies of $502 billion, and according to  Gristeven this is an underestimate.

Cheated

There’s more. A regressive  payroll tax, an almost nonexistent  estate tax, the lower capital gains rate on carried interest for investment managers, trillions socked away in  tax havens – all involve tax avoidance by wealthy Americans who feel entitled to their privileged positions.

Entitlements for the rich mean cuts in safety net programs for children, women, retirees, and low-income families. They threaten Social Security. They redirect money from infrastructure repair, education, and job creation.

And the more the super-rich take from us, the greater their belief that they’re entitled to the wealth we all helped to create.

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