If you are tired of hearing about alleged fraud and the theft of your tax dollars, turn for a moment to tax policy. Tax policies in the United States make Medicaid fraud and the defunct Minnesota criminal enterprise, Feeding Our Future, look like pocket change.
There was a time when tax policy helped to build a thriving economy. After World War II, high corporate taxes, taxes on capital gains and estate taxes laid the foundation for equitable economic growth. The middle class was strengthened, wage inequities were a fraction of what they are today, and the nation made enormous investments in the Interstate Highway System, the GI Bill and the space program.
Economists describe this era as “The Great Compression” — despite racial and gender inequities, the United States built a strong middle class based on a progressive tax system. Importantly, tax policies were supported by a solid financial system, regulations and antitrust enforcement.
If we had kept that system while addressing racial and gender disparities, there would be no rival to the strength of the United States – a strength grounded in increased equity, freedom and economic justice.
But we took a wrong turn.
The 1964 tax cut was intended to be a slight correction, a tax cut to stimulate more growth. Close to 90% of Americans got some tax relief, but the rich pocketed the most. And the economy boomed.
But the economic theory behind the tax cut, Keynesianism, assumed a rational economic policy would pursue alternating economic adjustments to achieve stability, equity and growth. Instead, an ideology of tax cuts as an answer for everything took hold.
That led to the Reagan Revolution and the pursuit of tax cuts for the rich as an unrelenting policy regardless of economic conditions. That is where we have been, with a few exceptions, since this new era of tax cuts began in 1981.
Long story short, tax cuts largely benefiting the wealthy contributed significantly to the raging inequality that undermines our current economy — and our democracy. We now live in what is often called a K-shaped economy. The wealthy are doing well, but most Americans are struggling financially. Consumer debt is high, homelessness is pervasive, health care costs are skyrocketing and wages for the majority are not keeping up, even when inflation slows down.
Related: How’s Minnesota’s economy? The answer depends on your income bracket
The post-WWII era, which afforded economic mobility and a rising standard of living, is only a faint memory for those old enough to have experienced it. Affordability issues are a daily experience for most Americans. To maintain their standard of living in the era of tax cuts for the wealthy, Americans have relied upon debt — the famous “debt trap” where consumer debt surges and lenders build their services around encouraging debt.
This has resulted in a new economic caste system. The rich are always getting richer, those in the middle are treading water, and there is a new permanent lower class with no access to credit or, if they have access, it comes at usurious rates — payday loans and extortionate moneylending.
Economists reliably tell us whether the nation is in a recession. But the reality is that many Americans are living in a permanent recession, while some live in a permanent depression. Those economic conditions bode well for hateful populists and a financial system rooted in exploitation and immorality. They bode less well for democratic processes and a disappearing middle class.
Many Minnesotans still like to believe in North Country exceptionalism and Minnesota nice, but we are firmly embedded in these national trends.
Reporting on tax policy issues has not been a sexy beat for journalists. Pulitzer Prize-winning journalist David Cay Johnston has never been accused of being sexy. His 2003 book, “Perfectly Legal: The Covert Campaign to Rig Our Tax System–and Cheat Everybody Else,” was followed in 2007 with “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).” Both make for depressing reading and shed light on our current economic circumstances.
Related: Minnesota’s ‘most progressive’ tax state designation explained
But things in our country — and Minnesota — have worsened appreciably since those books were published.
And that is why we now live in a K-economy. The stock market is only for those who own shares of stock or mutual funds. Most Americans do not have either. What financial resources they might have, such as a modest retirement account, are often outweighed by debt.
Imagine a painting to commemorate our current social and economic environment: billionaires are dining luxuriously in the new ballroom adjacent to the White House. On the floor, millions of little people are scrambling for the crumbs that fall from overfilled plates.
Those little people have set up a system to distribute the crumbs, but some are stealing and hoarding them.
Currently, our press and many politicians are screaming that the worst scandals are about a few little people stealing crumbs from other little people — Medicare fraud and criminals like those at Feeding our Future. They exaggerate the amounts or demonize the thieves. And forget to mention the obvious: there are consequences when “little people” steal — they go to prison.
But the real story is the wholesale fraud at the heart of a tax system that shuffles money and debt around— to the tune of trillions of dollars, not measly millions — to make billionaires richer while penalizing people who get up every morning and go to real jobs for their miserly paychecks.
And there have been no adverse consequences for those who built this system of legal thievery and injustice — or those who exploit it.
I would say, “Thank you for your attention to this matter.” But no one is paying attention, and our democracy is falling apart.
Keith Luebke retired from teaching nonprofit leadership courses and has several decades of experience directing nonprofit organizations. He lives in Mankato.
