Taxing Our Credibility

Whatever else can be said about America, our political process is broken, democracy has taken a distant back seat to power elites, our representation in the Congress is subject to the influence-shifting power of incumbents to realign congressional districts in their favor and the harsh reality that whether a state has 37 million (like California) or 1 million people (like Montana), it only gets two U.S. Senators, hardly the one person, one vote mythology that hovers around the concept of “America.”

We further treat entire classes of people with statutes that impose inequality in the system. You don’t think that a student, who may have received a bad education but who can never discharge student debts through bankruptcy, is treated equally to a major U.S. corporation that can always resort to bankruptcy to restructure its debt? Or a senior manager at a private equity firm whose pay is based on percentages of upside generated for clients – and taxed at half the rates of other people making the same money from other forms of commission income – is treated fairly in comparison with other workers? What are the long-term impacts on our country from these unequal practices? The demise of the middle class?

Not only is America polarized politically and economically (repeating that difficult-to-accept fact that 1% of this nation owns 42% of its wealth – the widest gap in the developed world), but as you can see above, our laws are actually constructed to widen the gap between rich and poor with literally two parallel legal systems. The middle class, which is built around the notion of pay for hard work, is penalized in another way. The more money you make, the more loopholes you get in the tax code to benefit your income stream. The less you rely on labor income and the more you move into investments, your tax rates drop like a stone, and if you can use some clever corporate structuring to generate and keep money overseas, you might be able to avoid U.S. taxes altogether.

Adding the 2010 Citizens United vs. Federal Election Commission Supreme Court decision to this volatile mix, allowing “corporations and unions could spend unlimited money on elections… has contributed to a flood of money for groups such as the conservative Crossroads GPS and liberal Priorities USA that fund political ads and activities but do not have to disclose their donors. The key distinction for the IRS [in determining tax-exempt status] is whether politics is a group’s ‘primary purpose,’ which has come to be sketchily defined as 50 percent or more of a group’s budget.” Washington Post, July 25^th. If you are rich enough to spend enough money to advertise widely in support of your particular opinion, and you don’t want folks to know who you are but prefer to hide behind a catchy patriotic-sounding name, America’s the place! If you are poor, talk to your neighbors and go to the ballot box, because that’s all the power you will ever have. And if you are in the middle, don’t worry because your way of life is moving rapidly downwards, and you don’t even have a voice in the process.

This profound distortion of our purported democracy will eventually lead to more than the rhetoric-driven cacophony all around us into protests, desperate acts, violence and perhaps someday armed insurrection. The great the number of people with little to lose, the greater the probability of political upheaval. Remember, the Arab Spring started because of harsh economic times and clear schisms between the haves and have nots. Are we so arrogant that we believe “that couldn’t happen here”? History tells us such regime changes are routine and inevitable. The ancient Roman and Ottoman Empire, the Ming Dynasty, all existed for hundreds of years before they were relegated to the history books. The U.S.S.R. was gone in under a century, and the sun sets on the British Empire every day.

If we want to preserve this country, we need to disassemble the structures of inequality we have embedded into our system. We need to level the playing field and empower the people who have lost their voice to power elites. One small ray of hope may come in the deductibility of contributions to the SuperPacs born of Citizens United: “In July last year, the Campaign Legal Center and Democracy 21 watchdog groups submitted a petition challenging the IRS regulations, calling them over-broad and in defiance of congressional intent and court rulings. Nearly a year later, on July 17, the IRS responded with a three-paragraph letter suggesting that the agency might consider reviewing its rules.

“‘The IRS is aware of the current public interest in this issue,’ wrote Lois G. Lerner, director of exempt organizations at the IRS. ‘These regulations have been in place since 1959. We will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department’s Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance.’” Washington Post. But there may be less than meets the eye here, since the Treasury Dept has to approve the change, and if legislation is required from Congress, we can forget about it.

If we do not address the underlying issues that foster inequality in the system, the power elites may face the millions of guns protected under the Second Amendment that they seem to have embraced and recall the fate of one member of the power elite who a long time ago is purported to have said of the bread-deprived masses, “Let them eat cake.” The rest, they say, is history.

I’m Peter Dekom, and it sickens me that so many Americans are unwilling to change the flaws in the system that are slowly strangling it to death.