Much is being written of late about the great gap between the haves and have nots to the point that it will soon be the have “everythings” and the “have nothings except debts.” There is little disagreement among economists and pundits that this growing disparity is not good for the affected people or for the country’s economy. The best selling book by a French economist predicts that the problem will only get worse as the financial markets outperform production. Since those with the most capital profit most from financial investments, one suggestion is to heavily tax capital. Another suggestion is to heavily tax high income earners and redistribute the income to the poor and/or the middle class.
I have a much simpler idea that is comprised of four changes: dramatically improve public K-12 education for every student; increase the minimum wage and therefore the wages above as well; change the tax code eliminating all itemized deductions and credits on all sources of personal income which will also be equally taxable; and lower the maximum amount not subject to inheritance tax.
Everyone surely agrees that a good education is an important factor in future success. It is also clear that many of our students are not getting a good education in part because of large class sizes as well as family socio-economic problems affecting the children. But I think another much neglected part is a lack of relevance many high school courses have for students. School curricula are no longer tailored to student needs and differences. Students are no longer tested and evaluated to find the coursework to which they are most suited.
We are not only not born or created equal, we are also not created to be the same and accomplish the same goals.
Some of us were required to take three levels of algebra and a year of plane geometry and trigonometry. Some students even took calculus. How many of us ever used them? Students are urged to take at least three years of science including biology, chemistry and physics. How many will ever use their knowledge? Students who will go on to study science, engineering, technology or math will need and enjoy these courses. But others might profit more from courses in Latin, philosophy, social science, economics or crafts. By testing students for their aptitude; by providing excellent survey courses in junior high and with smaller classes, teachers can identify student interests and talents. The result will be better educated students and better future parents and more responsible community members. More educated girls have fewer children they can’t afford.
Conservatives want to see a reduction in the amount the government spends on transfer payments to low income households and an increase in the number of households that contribute to the tax base. Liberals wants to see low income workers paid a decent, living wage. By increasing the minimum wage from its current $7.25 per hour to $10 an hour immediately and to $15 an hour in five or ten years, the average affected workers’ income would immediately rise by almost 50%. Those supervising the minimum wage earners would also see pay increases as would those above them. Companies could raise their charges for goods and services to cover their increased labor costs but would be restricted by competition and reduced demand. The companies would have to sacrifice profit which would mean reducing bonuses and dividends to investors. Stock values would decline reducing the capital worth of the very richest. The other effect would be a drastic reduction in transfer payments such as the Earned Income Credit, Food Stamps (SNAP), rent and utility subsidies no longer needed by more prosperous former recipients. The billions saved by the reduced transfer payments could be used to help the very poor find their way back into the mainstream. And more households would earn enough to pay income taxes, thus broadening the tax base.
Conservatives want to see a lowering of marginal tax rates on their personal income. Liberals want the rich to pay more and not use loopholes to lower their taxable income. The government would like to see a reduction in tax fraud and an increase in revenue. By changing the tax code to eliminate all itemized deductions and credits and replacing them with a generous standard deduction (e.g. $15,000 for individuals and $30,000 for families), it would force the wealthiest to pay more in taxes without access to any loopholes. (Currently, two out of three taxpayers uses a standard deduction.) Making all sources of income fully taxable means that Social Security benefits as well as stock dividends would be treated the same instead of taxing only a percentage of the former or at a lower rate for the latter. By so doing the maximum tax rate could actually be lowered to 35% for incomes over a million ( down from 39.5% for income over $400,000), meaning that 99.9% of all taxpayers would pay less than 30% of their income for federal income tax while many at the lower end of income would pay less than 10%, as little as 5%. While currently 47% of the population pay no income tax, under the new system more would be able to afford to pay taxes and the rich would pay almost 30% of their actual income in federal tax (in addition to state income tax and FICA). With more taxes collected involving much less paperwork and verification, the government would save hundreds of billions some of which could be used to provide better educational opportunities to the less fortunate as well as improving the infrastructure and creating needed public service jobs.
Finally, the ceiling for tax free inheritance should be lowered from the current $10 million (five per parent), to a maximum of $5 million. This would have obvious impact on the accumulation of capital and would provide yet another source of revenue that could be used for the public good.
For me the goal should be to have a land of two classes - the middle, with a two wage earner family earning a minimum of $60,000 a year ($15 per hour times 2000 hours per year times two wage earners) and upper middle with incomes up to a million but netting about $600,000. There can and should not ever be absolute income equality, but some being ten times richer than those at the bottom would be as close as it could be.
