The makers are the takers
When it comes to tax policy, the wealthy make the political rules and pocket the spoils
President Trump celebrates passing a trillion-dollar tax cut that largely benefited the rich in December 2017 along with Senate Majority Leader Mitch McConnell, then-House Speaker Paul Ryan, and Vice President Mike Pence. (White House)
By Ameya Pawar and Ted Cox
We’re still trying to get our heads around Cindy Neal’s neatly drawn distinction that all taxpayers are divided into the “makers” and the “takers”: those who make a lot of money, the so-called job creators, and those who make considerably less money only to “take” from the system.
Neal, chairwoman of the National Federation of Independent Business’s Illinois Leadership Council, made the remarks in a TV interview that aired last weekend in which she tried to argue against the fair tax proposed by Gov. Pritzker and already endorsed and passed on to voters by the General Assembly. If Illinois voters pass the Fair Tax Amendment by a supermajority of 60 percent this fall, that will alter the state constitution to allow a graduated income tax in which it’s already been established that 97 percent of Illinoisans will pay the same or less in taxes, while the top 3 percent of earners making more than $250,000 a year pay slightly more, up to a top tax bracket of just under 8 percent for millionaires.
“You know, I think that the people that are in those higher income brackets tend to be who I call the makers, and the folks that are in the lower income brackets tend to be what I call the takers,” Neal told “Capitol Connection” host Mark Maxwell. “And I do believe that as somebody starting out in life and trying to raise your family, sometimes you need help from different programs and agencies and that’s why we all pay into our tax system to help those folks. But I don’t want to take away from the makers or make them pay more because those are the folks, technically, that are reinvesting in businesses, providing employment opportunities for those people that are working their way up the career ladder and are trying to support their families locally.”
That’s a pretty stark distinction, between the haves and the have-nots, and Neal seemed to recognize right away that she was painting herself into a corner. Neal said she called workers “takers” “because they are still needing assistance,” immediately granting that “maybe that’s not the greatest terminology, but it rhymes with ‘makers.’”
But you know what? We’re willing to grant she has a point. And it should be clear to anyone who’s studied U.S. economic policy over the last four decades, since at least the days of President Reagan, that it’s the makers who are the takers. They’re one and the same. They make a lot of money, it’s true, but then they use much of that money to influence government economic policy — especially since the Citizens United ruling by the Supreme Court in 2010 allowing corporations the same political funding rights as a person — with the end result that they either pay less in taxes, or take more in readily handed out government benefits.
Or, increasingly under President Trump, both. Those who make a lot of money also make the government rules on monetary policy, and they pay less while taking from the system with impunity.
Look at the trillion-dollar tax cut passed by a Republican-controlled Congress and signed into law by President Trump at the end of 2017. A study by the U.S. House Committee on the Budget just over a year later found that, over a decade, 83 percent of the tax law’s benefits would accrue to the top 1 percent of earners, while the top 20 percent would enjoy 20 percent of the benefits. The rest of U.S. taxpayers — 80 percent — would actually be hurt by the so-called tax reform, in effect subsidizing the rich.
According to the study, the law greased the way for $1 trillion in stock buybacks, which benefited the rich and corporations but did little for working Americans and Main Street businesses, and it sped the shift of U.S. factories and jobs overseas. As the study stated: “One year after enactment of the GOP tax law, evidence is mounting that it increased inequality, worsened the U.S. fiscal outlook, and did not supercharge the economy as promised. The tax cut showers benefit on the rich and profitable corporations and provides little benefit to everyday working people and small businesses.”
Or look at “The Triumph of Injustice,” a book released late last year by economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley, which found that in 2018, for the first time in U.S. history, capital was taxed at a lower rate than labor — again, a product of that 2017 tax cut and prevailing trends in tax policy.
That is a direct result of shifts in U.S. federal tax policy over the last few decades — a policy increasingly formed by the so-called makers to serve their own benefit.
That trend has extended right into the present day with the federal coronavirus relief packages passed by Congress and signed by Trump. It’s been estimated, again, that 82 percent of the benefits stemming from the CARES Act went to millionaires. Or, as a ProPublica study put it: “The CARES Act sent you a $1,200 check, but gave millionaires and billionaires far more.”
Just this week, the Associated Press reported that loans under the Paycheck Protection Program — loans intended for small businesses that “would be forgiven if most of the money was used to keep employees on payroll” — went first and foremost to big companies obtaining loans of up to $10 million.
“Larger companies with connections to major national or regional banks got priority treatment in the program’s initial phase, the data show,” according to AP, “while many smaller businesses said they were turned away because the banks required them to have a checking account, a credit card, and a previous loan to be considered.”
It seems pretty clear, at this point, that the so-called makers have succeeded in making a system they can freely take from.
Look at one of the most nettlesome aspects of the federal government’s COVID-19 relief policy: when the coronavirus pandemic sent the economy and stocks crashing, the Federal Reserve immediately stepped in to backstop bond funds, hedge funds, and banks with penalty-free no-interest loans. It bought debt as a way to secure big businesses, resulting in a debt frenzy in the corporate sector.
Yet states and other local governments needing a cash infusion to make up for lost revenues in the COVID-19 economic collapse were forced to borrow from the Fed’s Municipal Liquidity Facility. Illinois became the first state to do just that in early June, drawing on $1.2 billion from the fund — but at an interest rate of 3.82 percent.
At what point does the American government provide some sort of backstop to the American people? Something more than a one-time payment of $1,200.
We’re in a situation now as a society where we’re about to ask students and teachers to go back to school — President Trump has made it abundantly clear he wants schools open this fall — without giving them the resources to do so safely: the additional funding for cleaning, testing, and protective equipment, for spacing out students, potentially in shifts, which will only require more teachers, as well as the computers, broadband access, and training that will be necessary if remote learning has to be reinstituted, whether as a “hybrid” with classroom instruction or with classes going back entirely online like last spring.
Republicans representing business interests in Congress have been reluctant to agree to additional education funding, just as they’ve been reluctant to grant another $1,200 stimulus payment, and they’ve been especially resistant to extending the $600 a week in additional unemployment insurance that has enabled many idled workers to pay their bills and rent.
Those, they argue, are the takers, not entitled to the taxpayer-provided revenue that is better spent on propping up stock prices or backstopping corporate debt. States, counties, and cities struggling to pay for police and fire protection and, yes, those needy teachers again — they’re takers, too.
And now, those same forces are arguing that a progressive income tax, calling for the top 3 percent of earners making more than $250,000 to pay up to almost 8 percent in taxes, as compared to the just under 5 percent paid by the 97 percent of the rest of all taxpayers — a proposal that would increase state coffers $3 billion a year, for schools and police and firefighters and, yes, pensions — well, that’s just the takers taking advantage of the makers again.
What we know — those of us who’ve examined government economic policy — is that spending on the federal level combined with progressive taxation at the local level is the best way to attack an economic crisis and set the stage for a just and robust recovery.
But the main question, the enduring question is what do we want to pay for — as a state and as a society — and how do we want to pay for it? On that score, we should all take the time to make the clearly correct decision on the Fair Tax Amendment this fall, to make the makers pay their fair share, so that we can all take satisfaction in the benefits of a more equitable society.