EMPOWERMENT: The Fundamental Human Rights of the Rich

[Mbindnerdc@aol.com]

Defining the limits of item 3 from the CESJ is probably the best thing we can 
do to define what is acceptable and what is not in terms of the policy debates 
of the day.

Clearly, seizing both financial assets and land without compensation would be a 
violation of fundamental human rights.  

On the other side, it would seem that taxes which effectively tax the rich at a 
lower rate, such as sumptory taxes for cigarettes and alcohol - or sales taxes 
on goods, are wrong.  Regressive payroll taxes, because they are capped at a 
certain income level, might also be considered wrong.

The question I'd like to raise is, are progressive income taxes a violation of 
the fundamental human rights of the rich?  What if the purpose of those taxes 
is to impose a higher tax rate to collect those monies which would otherwise be 
collected save for a cap in payroll taxes?

The wealthy own the majority of the national debt, thereby receiving the 
majority of the net interest on the debt.  The payment of such interest, unless 
offset by deficit spending, represents a transfer to the wealthy, unless tax 
rate structures are progressive so that the sector which collects the net 
interest payments contributes the same amount - avoiding contraction - or 
unless money is distributed for capital investment to stimulate the economy.

Currently, the American Social Security system is collecting more money through 
regressive payroll taxes than it collects.  Because the budget excluding social 
security is in surplus, these funds are being used to retire the debt held by 
the public - mostly by upper income individuals or by institutional investors.  
Such debt is now held in trust by the government for future retirees.  Because 
the wealthy did not contribute a proportional share in taxes, should they be 
liable for redeeming this debt through higher tax rates?  And if not, why not?

Are progressive tax rates justifiable if they are temporary and linked to the 
retirement of the national debt, both that portion held by the public and by 
the social security system?  

If proportional taxes are used to retire debt rather than progressive taxes, it 
seems that what results is a redistribution of wealth from middle and lower 
income individuals to upper income individuals - making the rich richer and the 
poor poorer through governmental means.  It would seem that, given the choice 
between the two, progressive taxation is the only justifiable means.

As I understand it, the other option is to issue credit or scrip to these 
individuals, without reference to taxation.  I do not believe that the rich 
would find this acceptable, and would themselves prefer payment from a 
progressive income tax.

Because the wealthy hold U.S. debt instruments, any distribution of capital 
credit which did not compensate them for holding these instruments at a higher 
rate than those who do not hold these instruments would be considered 
unacceptable to them.  However, such a redistribution favoring debt holders 
would increase the ownership gap between the rich and the non-rich. 

In conclusion, once the government began to borrow money from wealthy citizens 
to finance operations, it becomes inevitable that some form of progressive tax 
system must result in order to preserve economic growth - especially when a 
large component of the tax system is a regressive payroll tax which exempts all 
funds above a certain income.

A related question is the current privatization proposals for social security.  
Currently, taxes are collected proportionate to income subject to taxation 
while benefits are distributed based on income with more benefits paid 
proportionately to those with lower incomes.  The current leading privatization 
schema would roll back tax rates evenly for all incomes, so that the resulting 
privatized accounts would also be proportionate to income rather than to 
expected benefits received of the system.  To account for this, benefits for 
participants would have to be reduced.  To preserve progressivity, this would 
lead to a benefit scheme of the remaining funds which is even more 
redistributive, which leads to still further calls for privatization, until 
what was once a social insurance program becomes a direct, rather than an 
indirect, subsidy for the poor.  Such a development would add the stigma of 
welfare to the system and reduce participation, leading senior citizens into 
poverty.

There are, of course, alternatives.  One of these would be to transition to a 
system where each citizen receives self-financing capital debt, though it would 
seem that current retirees would stay locked in the current system, which would 
require that payroll taxes continue.

The other alternative, which is less radical, is to shift the responsibility 
for taxation from individuals and employers entirely to the employers, to 
remove the income cap on the program, adjust gross wages accordingly (and net 
wages for income formerly above the income cap), and then distribute 
contributions for retirement to fund current retirees and accumulate capital 
assets for current employees - not in assets which are unaccountable mutual 
funds as is currently proposed, but in employee held stock.  Distributions 
could be equal for each employee, regardless of income - or could at least 
reflect the proportional distribution of benefits in the current system.  (I 
would favor the former).  A certain percentage of these funds could go to 
diversified investments, such as investment in public utilities or in other 
firms with which the employee is a customer (though the majority of the 
distribution should be to voting stock in the employer).  The 
distribution/payment of these retirment taxes and assets can 
then be considered a contingent liability of the firm, rather than of the 
government - so that firms could be given an option to fully capitalize all 
current and past employees with stock (distributing retained earnings) and in 
so doing be exempted from the future payment of taxes for current retirees.  To 
facilitate this, the social security surplus could be capitalized and 
distributed to firms based on the number of current and imminent retirees the 
firm has employed.  Additional debt could also be issued to do this, as could 
self-financing captial credit.  Capitalizing the current social security 
contingent liability will involve the distribution of many assets and the 
rechannelling of many payments, so I assume that several sources of capital 
must be tapped.

Now, some of the rich regard as a fundamental right the ability to continue to 
benefit from the maldistribution of capital.  I think we all reject this.

The impact of any capital distribution, either based on social security 
privatization or binary economics, will eventually lead to flatter incomes, a 
more equitable distribution of training and educational resources, and a 
redistribution of profits to the new share holders - including the possibility 
that "accounting profit" might be distributed to non-capital factors of 
production (i.e., labor) in proportion to their employment.  The impact of all 
of these things will be that, in real terms, the amount of income the rich 
receive from both labor and capital assets will decrease, resulting in either 
the liquidation of such assets or a decline in consumption by the rich.  

As time passes, most firms will end the use of external financing through 
capital markets.  Additionally, as capital is more equally distributed, access 
to consumer credit by the non-rich will increase, including credit provided by 
employee-owned firms.  This will lessen the role of banks and mortgage brokers 
in society, and will decrease the availability of these investment assets. 

Banking volume and the income from capital invested in the home mortgage market 
will decrease and possibly end.  
Employees will seek lines of credit accounts through the firms which they own, 
backed by their incomes, their home assets and their stock accumulations.  This 
will lead to a decrease in the use of revolving credit accounts - and will end 
the predatory marketing of credit - as employee-owned firms will intervene to 
treat pathological uses of credit (addictions to drugs, alcohol, gambling, 
debt, sex) through employee assistance programs.  This will further contract 
the banking sector and decrease income from such debt.

Taken together, all of these things will cause the indirect redistribution of 
wealth.  The repayment of the public debt by the income level which 
predominantly holds it will be a small part of this redistribution.  The 
largest part of it will be the lack of opporunities for investment and the end 
of the consequent income streams.  Additionally, as educational opportunity 
opens to all qualified without reference to their financial condition, the 
children of wealth will see their opportunities decrease to those available to 
the non-rich.  Little by little, and without violence, revolution will be 
engaged more effectively than the marxists were ever capable of.

Michael Bindner