What If?
Imagining a more equal America

Suppose We Taxed the Rich Like Ike

Worried about the $354 billion deficit in the federal budget for 2007 that the White House has proposed? Gnashing your teeth about this budget's billions of dollars in cuts for education and the environment?

No need to gnash. One simple step could cut that deficit by well over half — or triple federal spending for better schools and a sustainable world. That one step, to be sure, would take a radical in the White House, someone as radical as Dwight D. Eisenhower.

Back in 1957, at the midpoint of the Eisenhower administration, Americans who earned over $750,000 — the equivalent of about $5.2 million today — paid 51.6 percent of their total incomes in federal income tax.

In 2007, notes the Brookings/Urban Institute Tax Policy Center, the taxpayers with America’s highest 0.1 percent of incomes will take home an average $5,505,607. These taxpayers, under current law, figure to pay about 26.7 percent of those incomes in federal income tax. Total income tax revenue to the U.S Treasury from America’s super-rich: about $218 billion.

If we were to apply the Eisenhower-era 51.6 percent rate to today’s top 0.1 percent of incomes, the IRS would collect $420.5 billion from America’s super-rich in 2007, $203 billion more than the IRS will collect under our current tax rates.

This $203 billion would equal nearly three times what the Bush administration is proposing to spend in 2007 on education and the environment — and well over half the $354 billion federal budget deficit the White House forecasts for 2007. We have more details on this striking tax contrast between Ike's tax rates in the 1950s and George's today.

Making the Minimum Wage Matter

Members of Congress, notes Knight Ridder/Tribune columnist Holly Sklar, have raised their pay seven times since 1997, the last time the minimum increased.

Just the increase in congressional pay since 1997 alone, Sklar adds, amounts to more than the total earnings of two minimum wage workers. Members of Congress, as of January 2005, now make $162,100 a year, up from $133,600 in 1997.

“At the time of the 1963 March on Washington, members of Congress earned nine times the pay of minimum wage workers,” Sklar points out. “Now, they earn 15 times as much.”

How could this widening gap be narrowed — and a bit of justice be restored to the minimum wage? Sklar has a novel solution: “To reverse that growing gap, Congress should tie their pay raises to raises in the minimum wage.”

Time for a Maximum Wage?

Is your labor valued? Not likely. Not if you work in the United States. Corporate employers have never, not in the lifetime of any American currently alive, valued labor as little as they do today.

What can we do about that? How about a maximum wage? Too Much editor Sam Pizzigati explains why in a Labor Day 2004 reflection published by the Chicago Federation of Labor, AFL-CIO.

Narrowing the Racial Wealth Divide

A century and a half ago, newly freed slaves in the United States were promised “40 acres and a mule” to get a new start on life. That promise was never kept, and the racial wealth gap in the United States has been a deeply inequitable fact of life ever since.

How much would keeping that original promise cost today? University of North Carolina economist William Darity estimates the current value of “40 acres and a mule” at $1.5 million.

For a great deal more on race and wealth, check United for a Fair Economy’s new Racial Wealth Divide Education Project.

A Catholic Case for Caps

In 2003, the pay package that Cisco Systems CEO John Chambers took home topped the pay package that went to the typical Cisco employee by over 2,000 times.

Daniel Steininger thinks that gap just might be a tad too wide.

"This kind of pay inequity," says Steininger, who chairs the Milwaukee-based Catholic Funds investment family, "creates a class warfare within the company."

This spring, the Catholic Funds will once again be taking shareholder resolutions on CEO pay before the annual meetings of top U.S. corporations. Previous Catholic Funds resolutions have proposes limiting executive pay to 100 times the pay of average workers.

Should Unions Bargain CEO Pay?

CEOs in Australia don't make nearly as much as their American counter-parts. But they're doing everything they can to catch up, with some success.

In 2001 Australia's top 100 execs pulled in incomes that averaged 67 times the country's minimum wage. Last year, Aussie executive pay topped the nation's minimum wage by 89 times.

To keep that gap from expanding, Australian labor leaders like John Robertson, the top labor official in New South Wales, now want to "actually link executive pay to wages."

A direct link between executive and worker pay, notes Robertson, "would build in an incentive for CEOs to actually increase wages rather than cut them."

Fighting Inequality, Title IX-Style

In 2002, Title IX turned 30 years old, and, to mark the occasion, men and women who care about equality and fairplay — on and off the athletic field — took time out to take notice. That's because Title IX may well be the most successful federal equalizing legislation of the past half-century.

Before Title IX, over a quarter of men, but less than a fifth of women, completed college. That gap is now gone. Before Title IX, less than 4 percent of young women played on a college varsity team. Today, almost 50 percent of college women play sports.

What's behind this massive transformation? Our tax dollars. Title IX leverages federal tax dollars to spur change in nongovernmental institutions. Title IX sends colleges and universities a simple, direct message: You can, if you wish, run programs that discriminate against women and girls. But if you do, you won't receive federal aid dollars.

Colleges and universities took that message to heart, mainly because most couldn't survive a semester without federal aid. They took steps to become more equal — and all Americans benefitted.

Colleges and universities, of course, are not the only important institutions in American life that couldn't survive without tax dollars. Almost every major corporation in the United States depends on tax dollars, too.

Some of this dependence is obvious. Lockheed Martin, a weapons maker, would shrivel without federal contracts to manufacture military hardware. Other corporate dependencies are less obvious. McDonald's, for instance, gets millions in export subsidies to hawk burgers overseas.

All these government contracts and subsidies, totaling in the trillions, come essentially with few if any strings. Corporations can engage in all sorts of horrific behavior without any fear of losing the sweet federal dollars they do so desire.

Companies can, for instance, slash health care benefits for their workers at the same time they compensate executives at unconscionably high levels — and still merrily collect our tax dollars.

Why should we let them?

A decade ago, Rep. Martin Sabo from Minnesota started introducing legislation that would deny tax deductions for executive compensation to companies that pay their CEOs more than 25 times the pay of their average workers.

What if Sabo's idea were expanded, Title IX-ized? What if federal contracts and subsidies were denied to companies that pay their executives over 25 times what their average workers receive?

If this ban were the law of the land, companies would still be free, if they so chose, to pay their executives whatever they wanted. They just couldn't use our tax dollars in the process.

Think a Title IX-style pay limit for corporate America might make an equalizing difference in American economic life? The next time you find yourself sitting in the bleachers, cheering on your daughter, your grandchild, or your sister, why not give that question a little thought?

Source: Too Much, Summer 2002