Pawar-Sanderson II: The Wealth Tax
U. of C. debate pits ‘unfettered capitalism’ against ‘disingenuous ruse’ to soak rich
Economist Allen Sanderson and former alderman Ameya Pawar debate a tax on wealth at the University of Chicago. (One Illinois/Ted Cox)
By Ted Cox
CHICAGO — A former Chicago alderman and a conservative University of Chicago economist debated a proposed tax on wealth Wednesday night, arguing the dangers of “unfettered capitalism” against what was termed a “disingenuous … ruse or con” really intended to help “government grow.”
Allen Sanderson, a senior U. of C. lecturer who’s said to have taught more students than anyone in the school’s history, attacked a wealth tax as “an impossible remedy that would not work.”
Ameya Pawar, former Chicago alderman and founder of One Illinois, countered that a wealth tax would undercut a “toxic political narrative” that greed is good, “that puts money over people, a narrative where we’ve decided to worship wealth over public institutions.”
Pawar insisted, “There is broad-based, widespread support across race, class, and geography for taxing the extremely wealthy.”
“There is broad-based, widespread support across race, class, and geography for taxing the extremely wealthy.”
Ameya Pawar (One Illinois/Ted Cox)
The wealth tax has been proposed by Thomas Piketty, a French economist and author of “Capital in the 21st Century,” and has been embraced by Democratic presidential candidates Sens. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont. Proposed variations of the plan would tax not annual income but accumulated wealth among the very rich, for instance with a 2 percent tax on fortunes of $50 million and up to 3 or 4 percent on billionaires.
Sanderson dismissed Piketty, saying the phrase “French socialist economist” is “sort of redundant,” while “French economist” may be an “oxymoron.”
“The top 1 percent on this planet have double the wealth of 6.9 billion people,” Pawar said. “Unfettered capitalism is what allows a society where nearly 70 percent of Americans don’t have $1,000 in the bank for an emergency. About half of Americans have $500 for an emergency.
“Unemployment might be low,” he later added, “but the average net worth of a black woman between 18 and 35 is $5. That doesn’t happen without the structural impediments that are put in place by society and by keeping the poor from benefitting.”
Sanderson countered that the global poverty rate had plummeted from 45 percent in 1970 to 7 or 8 percent now. “That’s staggering,” he said. Crediting “free-market economic principles,” Sanderson added, “Economic growth has been the single biggest engine for pulling people out of poverty.” He warned that a wealth tax would “retard economic growth or possibly eliminate it.”
Pawar charged that “greed is good” capitalism had created an unfair taxation system and a toxic political environment. He said no one would suggest raising children to be “selfish all the time,” yet the prevailing corporate attitude placing “profits over everything” suggests a fantasy world where “if every child is selfish there’s going to be an invisible force that will make things fair for everybody.” He called that “totally crazy” and “totally divorced from the way people perceive their lives.”
Sanderson accused reformers of holding the attitude that “if there’s anything wrong with your life, it’s somebody else’s fault, including corporations and ‘the system.’” He called the wealth tax “just a ruse or a con. The wealth tax deep down is not about helping the poor, it’s helping government grow.”
He added, “You don’t take money away from people just because you don’t like them. That’s a lot of what’s going on.” He drew ludicrous parallels with, say, taxing women, which wouldn’t be politically feasible, going on to say, “They want to take the wealth out of a very small number of people that politically isn’t enough to matter. That’s just not nice.”
“
Economic growth has been the single biggest engine for pulling people out of poverty.”
Economist Allen Sanderson (One Illinois/Ted Cox)
Sanderson insisted, “The economy doesn’t get any better than right now,” adding, “whether Trump gets credit, I don’t care.” He cited a 50-year low in unemployment and record low unemployment for African Americans.
“While we may be close to full employment, most of the jobs we’re creating are terrible,” Pawar responded. “Creating an army of gig workers and part-time employees is not a healthy indication of where the economy is.
“The way the system currently works is just not working for most people,” Pawar said. “The numbers show it. Our politics shows it.
“If things were working,” he added, “then you wouldn’t have the rancor, the discourse, the divides between race and class. You wouldn’t have the toxicity of the politics today, and you certainly wouldn’t have the man in the White House.”
Pawar charged that President Trump and his political supporters are “a natural result of an economic system that divides people at the bottom based on race and class and geography, allows wealth to cluster at the top, and allows the status quo to continue to perpetuate itself, because everyone at the bottom is fighting for scraps and nothing at the top ever changes.”
The two did agree that a wealth tax might not be the best, most effective way of addressing income inequality. As they stated two years ago in a debate on the $15-an-hour minimum wage, both backed the Earned Income Tax Credit, which Sanderson said had been inspired by U. of C. economist Milton Friedman as what he called a “negative income tax,” and Sanderson also spoke in favor of the Universal Basic Income advocated by Democratic presidential candidate Andrew Yang. Pawar had proposed UBI pilot program while an alderman, and later joined a task force that backed expansion of the EITC as a possible alternative.
“I’m very much in favor of helping the poor in this country,” Sanderson said. “If I wanted to tax the wealthy more, and I probably do, and help the poor, which I definitely do, I would take the wealth tax very quickly and make it revenue-neutral,” simply taxing the rich and giving to the poor. He charged instead it was being used as revenue for more extensive social programs. He also called it “an impossible remedy that would not work,” in pinning down wealth and taxing it equally.
“We have a wealth tax,” Pawar said. “They’re called property taxes,” where most low- and middle-income homeowners have their wealth invested: in their homes. The very wealthy, by contrast, have their wealth invested in stocks and bonds, which aren’t taxed until they’re cashed out, and then at lower rates under capital-gains taxes.
Sanderson said Europe had found that the rich can move to evade wealth taxes, and he said Illinois billionaire Ken Griffin was likely to shift his formal residence to Florida if the state passes a graduated income tax. “We’re not going to collect a dime from Ken Griffin,” he said.
Sanderson also warned about the $1 trillion deficit brought on by Trump’s tax cuts for the rich and corporations two years ago — especially at a time when the overall economy is thriving and ideally government debt should be paid down. He blamed both political parties, saying, “Republicans and Democrats alike have found that voters won’t punish them if they borrow money — even if it’s from China — but they will punish them if they raise taxes.”
Pawar backed the wealth tax as a way to address economic inequality and fund needed government programs. “Are we really going to believe that’s going to stifle economic growth?” Pawar said. “It just means they get to pass a little less on to the next generation.” He pointed out that “moving money through the economy creates a stimulative effect, it has a multiplier effect. If it’s just clustered at the top, it’s not being spent,” and not spurring additional economic growth.
Sanderson grudgingly backed a progressive income tax, like the fair tax proposed by Gov. Pritzker and set to go before voters in a referendum this fall, although he advocated a cap on the top rates, and he also backed a tax on services, in the manner of a sales tax, as a way to address income inequality. “Who buys goods? Poor people,” he said. “Who buys services? Rich people.”
Sanderson insisted that most U.S. wealth these days is in “human capital” — intelligence and skills — and that’s what needs to be addressed to elevate the poor. “If you’re unskilled in the 21st century, life is pretty much over,” he said. “It’s a high-tech world and it’s not going to get any lower-tech in the near future.”
Pawar countered that social change was being driven by government economic policy, as with the prevalence of student loans and high costs for child care driving young adults to delay raising families. Arguing that political change is required to address those issues and drive social change, he said, “It’s on us. We have the government we asked for.”