Tax Analysts Blog

Rising Class Warfare

Posted on Oct 6, 2010

In today's Washington Post Steven Pearlstein puts the spotlight on rising income inequality. The main source of his information is a new study using new data through 2008. More recent data are not yet available but it's a safe bet that the distance between rich and poor has only increased since then. We know that since the end of 2008 corporate profits have rebounded sharply--largely due to cost-cutting layoffs--and now the Dow is approaching 11,000. The financial sector has been saved by government. Bonuses are back. Meanwhile, unemployment hovers stubbornly at 9.6 percent. and the poverty rate is at a 15-year high.

As noted in a prior post, despite popular beliefs to the contrary, the U.S. income tax is not progressive at the top end. The current debate about the Bush tax cuts is not really about the deficit. It is about tax fairness. It is about redistributing (a dirty word!) some of the tax burden from the increasingly poor to the increasingly rich. It's about restoring progressivity to the tax system.

Democrats have generally shied away from bringing up this type of class-warfare (another dirty word) argument. But it looks like this is changing. In the home stretch leading up to the midterm elections it looks like President Obama is trying to frame the debate in terms of rich vs. poor. Given the growing travails of the working-class Americans, it is hard to see why this is not good politics.

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