K Shaped Recovery Calls For K Shaped Tax Structure
by John Lawrence, January 4, 2021
It has been well documented that the rich have gotten richer during the pandemic while the poor have gotten poorer. Over a roughly seven-month period starting in mid-March – a week after President Donald Trump declared a national emergency – America’s 614 billionaires grew their net worth by a collective $931 billion. Although the CARES Act led to a diminution of poverty in the early stages of the pandemic, poverty rates have risen since then to around 17% of the population. Among blacks and Hispanics the poverty rate is closer to 25%. The one thing that has benefited minority groups is the fact that for the first time many of them were able to vote by mail because of the pandemic. Before the pandemic many poor voters were not likely to stand in line on a week day to vote thus losing a day's pay. While the many techniques of voter suppression used by the Republican party kept the votes of blacks and Hispanics to a minimum, the last election proved that voting by mail allowed many more poor and especially black voters to cast a ballot
After Joe Biden is finally in office, we will see an increase in programs that will benefit poor and minority communities many of whom are essential workers who sacrificed in many ways to keep the economy going. While the rich got richer during the pandemic, it became clear that poor essential workers should be making more money while rich inessential workers deserve less. However, the results were the opposite of that. People invested in financial assets and people who could work from home by and large did well economically during the pandemic while those workers, without whom the economy would have come to a grinding halt, were working for minimum wage in many cases. Signs went up at nursing homes "Heroes work here", but what they forgot to add was the phrase "at minimum wage." Nursing homes are staffed with CNAs, Certified Nursing Assistants, who make little more than the minimum wage.
The K shaped recovery refers to the fact that the rich got richer while the middle class working from home did well while the bottom half of the economy, the lower half of the K, did worse financially. In any event the tax structure should reflect that fact in order to diminish economic inequality. The rich should be taxed more while the poor and lower middle class should be taxed less and actually subsidized. This is the enlightened purpose of taxation - to reduce economic inequality. According to Modern Monetary Theory, taxes are not important for raising money for government expenditures because the Federal Reserve can make any amount of money available to the government by means of a few keystrokes on a computer. Stephanie Kelton writes:
"But taxes are important in other ways. As the World Inequality Report notes,'the income-inequality trajectory observed in the United States' is partially explained by 'a tax system that grew less progressive.' Taxes can be used to curb astronomical accumulations of wealth. That's important precisely because the wealthy use their money to amass power and influence over the political process: they've rigged the tax code in their favor; they've rewritten labor laws, trade agreements, rules governing patents and protections, and much more. They've made public policy serve their economic interests."
This accumulation of economic and political power by the wealthy has been somewhat redressed recently by mail voting which tends to serve the interests of the poor and lower middle class. If it remains in effect, the voter suppression techniques of the past, used mainly by Republicans to suppress the African American vote, will have been counteracted with the result that the interests of the poor and lower middle class will have been elevated at the expense of the rich.This is what Donald Trump is so mad about - that the pandemic caused a revolution in mail in balloting at his expense. This is largely why he lost, and he's mad as hell about it. So what. The Republicans had it coming. Maybe the pandemic was a blessing in disguise at least in this respect.