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Middle class: Union made Part II
By Richard Levins 6 August 2006
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In September of 2005, President Bush was quoted as saying, “Working people have had to pay a tax, in essence, by higher gasoline prices.” He surely got that one right.
In today’s economy, we pay taxes not just to governments, but also to private corporations.
In 2004, the United States government collected a total of $1.1 trillion from individuals and corporations. In that same year, however, corporations charged the public $1.2 trillion more than was necessary to pay all their operating expenses.
That’s correct – corporate profits were higher than the total collection of all federal taxes.
Income taxes, of course, are an example of how taxes reduce personal income. If I don’t see a portion of my paycheck because it is deducted for federal and state taxes, I obviously don’t have it to spend. The government does this all the time.
But when private corporations tax income, they don’t do it with payroll deductions of the common variety.
They can siphon off workers’ income by price gouging. Gasoline, natural gas, prescription drugs and health insurance are all areas where prices – and profits – have soared. What, after all, is an excessive increase in prices other than a sales tax?
Private corporations also impose taxes by working to dismantle unions and promote trade policies, both of which have the overall effect of lowering wages.
The difference between what workers would have made with and without these self-serving policies is a tax that reduces workers’ incomes. For example, Department of Commerce data show that manufacturing wages in 2003 were, in total, 12 percent lower than what they had been in 2000.
Draining away our money
While state and federal taxes are important to maintaining a vibrant society, private taxes have the opposite effect. Every dollar drained away by private taxation is one dollar less that’s available to provide the public investments in education, transportation, health care, and other services so necessary to maintaining a high quality of life.
For example, if gas taxes are charged by public agencies, they help build and maintain roads. But when oil companies charge taxes, they simply fatten up corporate profits and the bank accounts of the world’s wealthiest people.
Centuries ago, we fought the Revolutionary War over taxation without representation. The same issue is back. Only this time it is not England doing the taxing; instead, it is corporations acting without government or unions strong enough to balance their market power.
Paying less, only to pay more
The incessant drumbeat for lower state and federal taxes is understandable – but misguided. Lower public taxes will not lead to a stronger economy as long as private taxes go unregulated.
Cutting public taxes can only go so far toward keeping money in the pockets of consumers. The money saved in public taxes might be eaten up immediately by higher private taxes. Similarly, cutting public taxes may mean individual consumers must pay higher expenses for services that once were provided by the public.
A good example is higher education. Between 2000 and 2003, the cost of higher education rose 29.9 percent. In my own work as a college professor, I have seen double-digit tuition increases play havoc with the finances of both students and parents. Sadly, the increases were the direct result of university administrators scrambling to fill the void left when public monetary support became scarce.
We certainly need a dramatic new national tax policy that will substantially lower the taxes we all pay. But that policy should be aimed at the private sector. not at the public sector.
We must be prepared to heavily tax excessive wealth that builds up in spite of our efforts to prevent it, for only then will money stay in the hands of consumers who can keep it circulating in ways that lead to economic growth. We must also do more, much more, to directly address the causes of private taxation: corporate concentration and globalization.
Richard A. Levins is professor emeritus of applied economics at the University of Minnesota. This is the second in a series of excerpts adapted from his book “Middle Class/Union Made," available from Itasca Books at www.itascabooks.com or 1-800-901-3480. Reprinted with permission of the author.
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