The recent Bush tax cut proposal posits that the way to stimulate our economy is to eliminate the taxation of dividends paid by corporations. The "justification" for this approach is that corporations pay taxes "the first time" when they earn a dollar. Shareholders then pay taxes "the second time" when they receive corporate dividends. The notion of a "tax cut" to eliminate the "second bite" at taxation is one core of the new Bush proposal. I'd like to skip over how much this supply-side relief differs from my own more monetarist view of how economies should be handled, and let's also skip over how countries which simultaneously intend to fight wars on one to two fronts should not be giving tax relief to the richest few. We'll even skip the debate about how much more good a middle class payroll tax relief bill would be, and how a capital-rich slow economy does not need to increase investing capacity by dividend relief.
What strikes me tonight about the Bush proposals is not that my own economic views differ substantially from the Bush proposal or the tepid Democratic counter-proposal (though they do). What strikes me tonight is that noplace is the difference in class so apparent as when we discuss stock ownership while ignoring the mundane fact that equity ownership is still a class distinction in our country.
A bit under half of all Americans (during the former bull market, it was roughly an even half) own any stocks at all. Most of those who do hold stocks in mutual funds as part of their company pension plans. For most of these persons, a "tax cut" on dividends will have little impact, as their stock investments already "sit in" tax deferred structures such as 401ks, 403bs or IRA accounts. Only a real minority of all Americans hold any stocks outside a pension fund at all. It's not that stock ownership is an "impossible dream". A mutual fund program can be set up for relatively modest sums, and, taking a long term view, such funds have historically turned in very respectable financial results. I wish we were more a nation of savers and investors. But the reality is that most Americans are worried about things other than the size of their non-pension stock portfolio. The Democratic party trumpets that it is a "tax cut for the rich", but the thing that interests me is not the sheer politics of the thing, nor the complex economics of encouraging capital investment at the cost of short term tax dollars, but the ways in which a "tax cut on stock dividends" is such a defining part of our class divide.
Let's think about a few more pertinent facts--44 million people, that's roughly 1 in 6 Americans, lack health insurance coverage. 1 in 3 Americans don't own their own home. As to families which have at least one credit card, the family credit card debt averages 8500 dollars or so.
Our enlisted service people, in this era of tax cuts, often raise families which live at or below 130 percent of the federal poverty line. We're cutting taxes at a time in our country when we pay those who defend it bare subsistence wages. The state of other government workers' compensation is not much better.
But what interests me is not the left/right politics of it. What interests me is just how out of touch the media and the politicians seem to be about main street. I'm a huge believer that consumer spending, small businesses, and increased personal savings and investment are what matters in keeping this country healthy. What made the 90s boom so significant was not the overblown venture capital and .com IPO flurries, but instead a resurgence of small business to new heights.
The current President Bush's father arguably lost his campaign with Mr. Clinton when he went through a grocery store checkout and had to receive a demonstration of the price checking machinery. He just didn't get how people live.
The current problem is not limited to our current president and his hapless supply side advisers. It's a bipartisan failing. We have people without health coverage driving decaying roads, sending their children to public school systems which cannot get the kids' schoolbooks distributed.
That people who live in the "not quite rich" and the upper classes who don't realize that we have more important things to work through than whether to give a few people dividend tax breaks just show me that class distinction is alive and well, and getting stronger in this country. I'm a fan of our mixed economy, and have no problem at all with a profit-based economy. But it seems to me that the class divide in this country is again increasing, and it is not a divide of home size and income levels alone, but also a divide of how people look at everything in their world. Most of us live in a decent home, can afford consumer electronics and amenities, and drive reasonable autos. Within broad parameters, one could argue that most of us are "doing reasonably fine". But when I see our national dialogue diverted onto dividend tax cuts while soldiers preparing to fight a war must put their families on food stamps, I wonder if we'll ever overcome our class-based society.