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DAVIDSON: Will the New Gilded Age bring another Great Depression?

• Dec 1, 2017 at 2:00 PM

The holiday season is upon us, and the new year is approaching with record speed. It seems impossible that another year has passed and that we are only one month away from 2018.

In my house, this season is met by excitement from my kids about Christmas break and holiday parties. The compilation of a wish list has become an art form in the Davidson house. Over the years, we have tried to moderate our gift giving and give more to charities at the end of the year rather than fill our kids’ rooms with more trinkets and treasure.

Our family has been fortunate that, through hard work on the part of my wife and I, we have always had what we needed and rarely felt that we had to go without. It is therefore our job, as parents, to provide for our kids without spoiling them. We have been mostly successful in this endeavor, even if their grandparents subvert our efforts at every chance.

I am keenly aware of the lucky cards I have been dealt. My parents were small-business owners from 1979 through 2009. They never made a lot, but they made enough to put my sister and I through college in the ‘80s and ‘90s. They never graduated college, but they held that as an important goal for their kids. Through their dedication, I was put in a situation where the only barriers to my success were my work ethic and my study habits. Likewise, my own children are in a family where we have saved for college, and we will be able to provide that for them.

But, as we try to place limits on the wants of our kids and focus on the needs of them and others, our Congress and president seem to be on the brink of fulfilling every wildest dream of the ultra-rich and corporate class who fund their campaigns. In what is being touted as the largest tax-cut in our nation’s history, they are about to sell out generations of kids to come in order to ensure the perpetuation of unprecedented generational wealth and a system of aristocracy against which our Founding Fathers fought in order to establish this “more perfect union.”

We are in the midst of a disturbing reality with regard to wealth in our country. As of 2016, the top 1 percent controlled 39 percent of the wealth, the top 10 percent controlled roughly three-quarters of the wealth, and the bottom 90 percent controlled less than one-quarter. Not since the Gilded Age of the late 19th and early 20th centuries has the disparity in wealth and income achieved such heights. The culmination of the first Gilded Age resulted in the Great Depression.

This disparity of wealth and income has been growing since the late 1970s, and has been accelerated by reckless tax cuts on the rich in the 2000s under President Bush 43, and would be further exacerbated by the proposed tax cuts on the wealthiest Americans and large corporations. The Great Recession of 2007-12 was a warning that such policies were unsustainable.

The poor and middle class in this country cannot depend on the richest 0.1-1 percent of Americans to trickle their riches down upon the masses. In fact, time and again, history has proven the opposite to be true. When the already wealthy get more money, they save it in order to maintain their power in the system and guarantee that power will be alive for generations to come.

The non-partisan Congressional Budget Office and Joint Committee on Taxation both show that the current House and Senate tax bills would increase deficits by roughly $1.4 trillion over the next decade. They would significantly lower taxes on the top 1 percent by repeal of the estate or inheritance tax, repeal of the alternative minimum tax (AMT) and decrease of the corporate tax rate from 35 percent to 20 percent.

The inheritance tax only affects estates valued in excess of $5.45 million per individual or nearly $11 million per couple. This tax only affects 100 estates in Michigan each year. The AMT was designed to tax wealthy individuals who took an extreme number of deductions, ensuring that a fair amount of tax was paid by all individuals. We know from the leaked page of President Trump’s 2005 tax return that, if not for the AMT, he would not have paid any federal income tax.

The cornerstone of the tax plan is the cut in taxes on business. First, they wish to cut the tax on “pass-through” income. This is income generated by small businesses that is currently taxed as personal income. The problem with their math is that 87 percent of small businesses already pay less than 25 percent. On top of this, it treats “passive” pass-through income more favorably than active pass-through income. Not surprisingly, President Trump is a passive owner of a pass-through business.

The biggest cut being offered, however, is the most non-sensical of all. The proposed cut in the business tax rate from 35 percent to 20. The average tax paid by large corporations is already lower than 20 percent at 18.9. Furthermore, we are at a point where the unemployment rate is at historic lows, there are over 6 million unfilled jobs and corporations are sitting on unprecedented mounds of cash. The only thing a large tax cut will do for those corporations is result in bigger compensation packages for their CEOs and bigger payouts to shareholders. At a recent Wall Street Journal interview with White House economic advisor Gary Cohn, less than 10 percent of over 100 CEOs in attendance said that tax cuts would result in investment in their companies and hiring.

Congress needs to invest in the workers of this country with job training, universal health care and affordable college education.

As we start the Christmas season, the wishes of the wealthiest few can be set aside. A much more important list of needs for the many needs to be fulfilled.

The next Gilded Age has begun. If our Congress acts irresponsibly, our fate and the reality of a second Great Depression may not be far away.

— By Dr. Rob Davidson, Tribune community columnist

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