Chuck Collins

Chuck Collins: America needs a 'plutocracy prevention' program

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Via OtherWords.org

BOSTON

The U.S. is suffering from excessive wealth disorder.

This isn’t your parents’ inequality influenza, but a more virulent strain of extreme disparities of income, wealth, and opportunity.

Just 400 billionaires have as much wealth as nearly two-thirds of American households combined. And just three individuals — Jeff Bezos, Warren Buffet and Bill Gates — have as much wealth as half of all U.S. households put together.

Since the economic meltdown of 2008, the lion’s share of income and wealth growth hasn’t gone just to the top 1 percent — it’s gone to the richest one-tenth of 1 percent. This 0.1 percent includes households with annual incomes starting at $2.2 million and wealth over $20 million.

This group has been the big winner of the last few decades. Its share of national income rose from 6 percent in 1995 to 11 percent in 2015. But their biggest gains are in wealth, increasing their share from 7 percent in 1978 to over 21 percent today.

That’s 210 times their share of the population.

When you have over $20 million, you’ve easily taken care of all your needs and those of the next generation of your family. You’re living in comfort, probably with multiple homes, and don’t want for anything.

It’s at this point we see the telltale signs of excessive wealth disorder. Despite being already comfortable beyond measure, segments of this 0.1 percent will often invest their wealth to rig the political rules to get even more wealth and power.

They contribute the legal maximum donations to politicians and then do an end run around campaign finance laws to siphon even larger sums through “dark money” SuperPACs, using corporate entities that don’t have to disclose donors.

When this donor class demands tax cuts, their political puppets kick into overdrive to deliver the goods.

The 0.1 percenters create charitable foundations that become extensions of their own power and privilege. They undermine the health of the nonprofit sector by controlling a growing share of the charitable giving pie.

They deploy their wealth to help their kids get into elite colleges, both through donations and, as we’ve seen recently, outright bribery.

It’s clear the rest of society needs to intervene. Excessive wealth disorder is wrecking life for the rest of us.

What can we do? We need to put forward a “plutocracy prevention program” — public policies to reduce the power of this top 0.1 percent group.

Some presidential candidates are stepping forward with bold ideas. Senator Elizabeth Warren’s wealth tax idea is a courageous step in this direction. She’s proposed a 2 percent annual tax on wealth over $50 million, with a 3 percent rate on wealth over $1 billion.

Progressive Democrats have proposed raising the top marginal tax rate to 70 percent on households with incomes over $10 million. Senators Kamala Harris and Bernie Sanders both have proposals to make the estate tax more progressive and slow the accumulation of dynastic wealth.

Polls show widespread popular support for these proposals. All of them face steep sledding in a Congress beholden to the top 0.1 percent donor class.

One first step might be a proposal that exclusively targets the 0.1 percent class. How about a 10 percent income surtax on incomes over $2 million, including capital gains?

That’s not as steep as a 70 percent marginal rate, but it would move us in the right direction. It would raise substantial revenue — an estimated $70 billion a year and $750 billion over the next decade — from those with the greatest capacity to pay.

Bringing such a proposal to a vote would require lawmakers to make a clear choice: Are you with the vast majority of voters who believe the super-rich should pay more? Or are you carrying water for the richest 0.1 percent?

Chuck Collins, who is based in Boston, directs the Program on Inequality at the Institute for Policy Studies.

Chuck Collins: Trump's shutdown putting many more people underwater

“The Drowned ,’’  1867 painting by Vasily Perov.

“The Drowned,’’ 1867 painting by Vasily Perov.

From OtherWords.org

As the government shutdown drags on, the image of federal workers lining up at food pantries has dramatized just how many workers live financially close to the edge.

By one estimate, almost 80 percent of U.S. workers live paycheck to paycheck. Miss one check and you’re taking a second look at what’s in the back of the pantry cupboard.

From federal prison guards in small towns to airline safety inspectors in major cities, the partial government shutdown has forced 800,000 federal workers — and many contractors, too — to survive without a paycheck.

The shutdown is a Trump-made disaster, with an estimated 420,000 “essential workers” required to show up for work without a paycheck. They have full-time responsibilities, which makes finding another part-time job nearly impossible.

Another 380,000 federal workers have been furloughed, including Coast Guard employees that are being encouraged to take on babysitting gigs and organize garage sales. They saw their last paycheck on Dec. 22 and are scrambling to pay rent, mortgages, alimony, and credit card bills, let alone the groceries.

The average federal employee isn’t wealthy, taking home a weekly paycheck of $500, according to American Federation of Government Employees, the union representing affected workers.

The vulnerability they feel isn’t unusual. A majority of the U.S. population is living with very little by way of a savings cushion.

One troubling indicator is the rising ranks of “underwater nation,” households with zero or negative wealth. These families have no savings reserves — they owe more than they own.

The percentage of U.S. households that are “underwater” increased from percent in 1983 to 21.2 percent today. This experience cuts across race, but is more frequent in black and Latino households — including over 32 percent of Latino families and 37 percent of black families.

The next 20 percent of all U.S. households have positive net worth, but not much. Four in ten families couldn’t come up with $400 cash if they needed it for an emergency, according to the Federal Reserve.

Black families are especially vulnerable to economic downturns or delayed paychecks.

Since 1983, the median wealth for a U.S. family has gone down 3 percent, adjusting for inflation. Over the same period, the median wealth for a black family declined a devastating 50 percent, according to “Dreams Deferred,’’ a new study I co-authored for the Institute for Policy Studies. (Meanwhile, the number of households with $10 million or more skyrocketed by 856 percent.)

Unemployment may be low, but it masks a precarious and insecure population. At the root of the problem is growing inequality.

Wages for half the population have been stagnant for over four decades, while expenses such as health care, housing, and other basic necessities have risen. Many families still haven’t fully recovered from the economic meltdown a decade ago.

After going up steadily since World War II, homeownership rates have been falling since 2004. And as with income, homeownership is also heavily skewed towards white families. While the national homeownership rate has virtually remained unchanged between 1983 and 2016, 72 percent of white families owned their home, compared to just 44 percent of black families.

Latino homeownership increased by nearly 40 percent over that time, but it still remains far below the rate for whites, at just 45 percent.

If the partial government shutdown continues for “months or years,” as President Trump threatens, there will be even more stress and hardship on our nation’s most vulnerable families. The bigger challenge is how to ensure our economy enables more people to save and build wealth.

Make no mistake: parts of our economy were on “shutdown” long before the government.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies.

Chuck Collins: Absentee rich folks are hiding wealth in real estate across America

The Boston skyline from Fenway Park. The skyscraper in the left center is the newish Millennium Tower, where much of the space is held by absentee owners, some foreign. Real estate has long been an attractive investment for money launderers.    — Photo by JJBers

The Boston skyline from Fenway Park. The skyscraper in the left center is the newish Millennium Tower, where much of the space is held by absentee owners, some foreign. Real estate has long been an attractive investment for money launderers.

— Photo by JJBers

BOSTON

From country farmland to big city skyscrapers, absentee billionaires may be hiding wealth in your town — and driving up your cost of living. rich are hiding trillions in wealth.

You’ve probably heard about their offshore bank accounts, shell corporations, and fancy trusts. But this wealth isn’t all sitting in the likes of the Cayman Islands or Panama. Much of it’s hiding in plain view — maybe even in your town.

America’s big cities are increasingly dotted with luxury skyscrapers and mansions. These multi-million dollar condos are wealth storage lockers, with the ownership often obscured by shell companies.

In Boston, where I live, there’s a luxury building boom. According to a study I just co-authored, out of 1,805 luxury units there — with an average price of over $3 million — more than two-thirds are owned by people who don’t live here.

One-third are owned by shell companies and trusts that mask their ownership. And of these units, 40 percent are limited liability companies (LLCs) organized in Delaware.

Why Delaware?

Criminals around the world set up their shell companies in Delaware, the premiere secrecy jurisdiction in the United States — where you don’t have to disclose who the real owners are. As a result, human traffickers, drug smugglers, and tax evaders all enjoy the anonymous cover of a Delaware company.

Many of these companies use illicit funds to purchase real estate in North American cities to launder their ill-gotten money.

In New York City, dozens of luxury towers have been connected to global money laundering. In Vancouver, Chinese investors disrupted the city’s housing market so badly that the province of British Columbia established a foreign investor tax and a tax on vacant properties.

With European countries now insisting on more transparency, illicit cash is now cascading into the United States. In fact, the U.S. is now the world’s second-biggest tax haven and secrecy jurisdiction, after Switzerland.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has increased its scrutiny over real estate markets in Miami, New York, and parts of California, Texas, and Hawaii.

But that just makes the rest of the country more attractive for secret cash — even far from big cities. In a small Vermont town, I met a Russian investor who lives in Dubai. He was buying up thousands of acres of Green Mountain farmland.

Our communities are being fundamentally transformed by land grabs and luxury building booms. These drive up the cost of land in central neighborhoods, with ripple impacts throughout a community. And this worsens the already grotesque inequalities of income, wealth, and opportunity.

Our communities should defend themselves.

Property ownership should have to pass the “fishing license” or “library card” test. In most communities, to get a library card or a fishing license, you need to prove who you are and where you actually live.

In Boston, they’re pretty strict — you need to show a utility bill with your name on it. Cities should require the same for real estate purchases.

At a national level, bi-partisan legislation from Senators Marco Rubio, R-Fla., and Sheldon Whitehouse, D-RI, would require that the identity of real estate owners be disclosed when buyers use shell corporations and pay millions in cash. That would be a welcome development.

Better still, cities should tax luxury real estate transactions on properties selling for over $2 million to fund local services. Such a tax in San Francisco generated $44 million last year that’s been used to fund free community college and help the city’s neglected trees.r

Communities could discourage high-end vacant properties by taxing buildings that sit empty for more than six months a year. Cities like Vancouver have created incentives to house people, not wealth.

We need to defend our communities for the people who live in them, not just store their wealth there.

Chuck Collins co-authored the report “Towering Excess’’ for the Institute for Policy Studies.

Chuck Collins: Learn a trade!

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From OtherWords.org

BOSTON


In the classic 1960s movie The Graduate, a family friend offers the recent college graduate, the the character played by Dustin Hoffman,  one word of advice in choosing a career: “plastics.”

My advice for today’s high school graduates: “Learn a trade.”

Unfortunately, there’s a historic stigma about “voc-ed,” the result of snobbery toward certain occupations.

Yes, there’s also the shameful practice of tracking low-income whites and people of color into blue-collar jobs while encouraging wealthier white students to attend college. But now there are millions of rewarding, high-paying trade jobs sitting empty.

Instead of training for those, tens of millions of high school graduates are on college autopilot, loading up an average of $37,000 in debt, and graduating without any practical skills.

Not only is our economy suffering for lack of skilled workers, but also a huge number of workers are unhappy and earning below their financial potential.

There are legions of depressed Dilberts out there in cubicle land, sitting in front of computer screens, wondering who will be laid off next. And there are millions of young people sitting in college classrooms dreaming of being somewhere else.

Put these same people in an apprenticeship with a skilled adult and they’ll thrive. Instead of wasting their intelligence in an office, they could deploy it in a bicycle or auto repair garage, woodworking shop, or on a farm or construction site.

Princeton economist Alan Blinder says the job market of the future won’t be divided between people with college degrees and those without, but between work that can be outsourced and work that can’t. “You can’t hammer a nail over the Internet,” he observed. “Nor can you fix a car transmission, rewire a house, install solar panels, or give a patient an injection.”

The value of a liberal arts college education is exposure to a wide range of ideas and knowledge, along with social networks. But college is certainly not the only path to such learning. And four-year residential college today has more in common with a party on a luxury cruise ship than a platform for learning a vocation.

True, today the lifelong earnings of college graduates exceed those who don’t attend college. But there’s no evidence this will be the case going forward. Have you paid an electrician or a plumber anytime lately? There’s a reason they’re hard to find and can command a high wage. It’s called scarcity.

Millions more “green collar” jobs are emerging in our transition to the renewable energy economy. And at some point, our nation will have to repair our aging bridges, roads, and transportation facilities and retrofit buildings to be more energy efficient.

According to the Bureau of Labor Statistics, one third of all new jobs through 2022 will be in construction, health care, and personal care. The fastest growing occupations are solar and wind energy technicians, followed by plumbers, machine tool programmers, HVAC mechanics, and iron and steel workers.

Changing attitudes about different occupations is part of the challenge.

Parents and guidance counselors can start by respectfully talking about the opportunities in trades. They can introduce students to people with satisfying careers in the trades and steer them to useful web resources on the path to trades.

Congress could help by making Pell grants available for short-term job training courses, not just college tuition. It could also restore funding for Tech-Prep, a neglected federal program that supports vocational education.

Let’s dump the old class-biased stereotypes. It takes all kinds of intelligence and advanced training to do a trade. And it can be financially rewarding and enormously satisfying.

Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies. 

Chuck Collins: Some business leaders agree that reducing inequality is good for the bottom line

For decades, big business leaders have warned that redistributing wealth is bad for business. Taxing the rich to pay for infrastructure and education, they say, will kill the goose that lays the golden egg.

But what if it’s the opposite? What if decades of stagnant wages and growing inequality are scrambling the golden egg and stifling the economy?

A growing body of research suggests that’s exactly what’s happening. And a growing number of business leaders now agree.

Jim Sinegal, the retired CEO of Costco, famously fended off Wall Street pressure to cut wages and made an eloquent case for a higher federal minimum wage. “The more people make, the better lives they’re going to have and the better consumers they’re going to be,” Sinegal told The Washington Post years ago.

“Our country needs less inequality and more opportunity,” agreed former Stride Rite CEO Arnold Hiatt in 2015. “Instead, we’re moving toward a society that will be economically and politically dominated by the sons and daughters of the Forbes 400.”

One of the clearest voices on the business risks of growing inequality is Peter Georgescu, a retired ad man from one of the world’s largest marketing firms. His new bookCapitalists Arise: End Economic Inequality, Grow the Middle Class, Heal the Nation, is a stinging indictment of the way business has been done in our country.

“For the past four decades, capitalism has been slowly committing suicide,” he writes — especially shareholder capitalism, where businesses operate for the benefit of shareholders and no one else.

 

“Shareholder primacy has become a kind of cancer that needs to be eradicated before it destroys our way of life,” Georgescu warns.

Those views were recently echoed in a letter written to CEOs by Larry Fink, chairman of the investing giant Blackrock.

In January, Fink called on the companies Blackrock invests in to “understand the societal impact of your business as well as the ways that broad, structural trends — from slow wage growth to rising automation to climate change — affect your potential for growth.”

Businesses, Fink exhorted, need a social purpose other than making money.

Reversing inequality will require robust government action at all levels. This includes boosting the minimum wage, fairly taxing big businesses and the rich, and making robust public investments in education, infrastructure, and individual opportunity.

We also need government to crack down on wage theft and discrimination, and to protect the right to organize. Unions and activists have demanded these changes for years.

So what can supportive businesses do? Everything.

They can encourage more employees to be owners. Employees already have an ownership stake at companies such as Publix supermarkets and Southwest Airlines.

They can raise their wage floor to close the monstrous pay gap between top management and average workers — a policy long supported by business guru Peter Drucker. And they can publicly speak out in favor of policies that reduce inequality.

If nothing else, they can stop paying dues to business associations that lobby against sensible taxes and labor protections — like the U.S. Chamber of Commerce and the National Federation of Independent Businesses, which tend to be much more conservative than their members.

Can more business leaders “wake up and take action,” Georgescu challenges? Or will they “continue doing business the ways it’s been done… until the whole system risks falling apart?”

Corporate leaders should stand with ordinary Americans to push for serious public policy to halt the nation’s slide towards greater inequality.

Chuck Collins directs the Program of Inequality and the Common Good at the Institute for Policy Studies. 

Chuck Collins: Stop talking about 'winners and losers' in GOP tax scam

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Via OtherWords.org

Republicans are pushing a huge corporate tax cut bill through Congress. You might’ve seen a lot of coverage trying to sort out “who wins” and “who loses.”

All that misses the point.

The driving motivation behind this bill, rhetoric and packaging aside, is to deliver a whopping $1 trillion tax cut for a few hundred badly behaved global corporations — and another half a trillion to expand tax breaks and loopholes for multi-millionaires and billionaires.

All the other features of proposed tax legislation are either bribes (“sweeteners”) to help pass the bill or “pay fors” to offset their cost.

The news media has been talking about “winners and losers” like this were some sort of high-minded tax reform process with legitimate trade-offs, as in 1986.

But this isn’t tax reform. This is a money grab by powerful corporate interests.

The key question isn’t who wins and loses, but whether we should undertake any of these trade-offs to give massive tax breaks to companies like Apple, Nike, Pfizer and General Electric — companies whose loyalty to U.S. communities and workers is historically abysmal.

These companies have been dodging their taxes for decades while small businesses and ordinary taxpayers pick up their slack to care for our veterans, maintain our infrastructure, and educate the next generation.

Apple alone is holding $250 billion in offshore subsidiaries to reduce its taxes.

For wealthy individuals, the proposed House tax bill eliminates the federal estate tax, which is paid exclusively by families with over $11 million, mostly residing in coastal states.

It eliminates the Alternative Minimum Tax, a provision that ensures that wealthy taxpayers chip in at least a few dollars after gaming all their possible deductions.

And while the top tax rate on high earners remains roughly the same, Congress is proposing to open up a “pass through loophole” that will enable wealthy people and their tax accountants to convert their income to be taxed at a lower tax rate.

We should avoid distracting debates over whether to reform one provision or another, such as the home mortgage interest deduction. The real estate industry understands the score. “These corporations are getting a major tax cut, and it’s getting paid for by the equity in American homes,” said Jerry Howard, chief executive of the National Association of Home Builders.

Reforming the home mortgage interest deduction makes a lot of sense — the current tax break mostly benefits the already wealthy and fails to expand homeownership. But we shouldn’t restructure housing tax incentives to pay for a massive tax cut for billionaires and badly behaved global corporations.

Nor should we eliminate the deductibility of student debt, eliminate the deduction for state and local taxes, or require families with catastrophic health expenses to pay more to reduce taxes on big drug companies and Jeff Bezos of Amazon. This tax bill would do all of those things.

The good news is people aren’t falling for the marketing baloney that this tax cut will help the middle class. Fewer than 30 percent of voters support these tax cuts, and solid majorities believe that the wealthy and global corporations should pay more taxes, not less.

But this won’t stop Republicans who care more about their campaign contributors than they do about voters.

If the GOP majority in Congress were responsive to voters, they’d invest in updating our aging infrastructure and in skills-based education, as we did after World War Two. Instead of saddling the next generation with tens of thousands in student debt, real leaders would be figuring out how to lift up tomorrow’s workers and entrepreneurs, just as we did in previous generations.

Under this tax plan, small business and ordinary taxpayers will be the big losers. That’s the only score that matters.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. 

Chuck Collins: A guide to the coming tax heist

-- Bundesarchiv, Bild 102-12762 / CC-BY-SA 3.0

-- Bundesarchiv, Bild 102-12762 / CC-BY-SA 3.0

 

Via OtherWords.org

For 40 years, tax cutters in Congress have told us, “we have a tax cut for you.” And each time, they count on us to suspend all judgment.

In exchange, we’ve gotten staggering inequality, collapsing public infrastructure, a fraying safety net, and exploding deficits. Meanwhile, a small segment of the richest one tenth of 1 percent have become fabulously wealthy at the expense of everyone else.

Ready for more?

Now, Trump and congressional Republicans have rolled out a tax plan that the independent Tax Policy Center estimates will give 80 percent of the benefits to the richest 1 percent of taxpayers.

The good news is the majority aren’t falling for it this time around. Recent polls indicatethat over 62 percent of the public oppose additional tax cuts for the wealthy and 65 percent are against additional tax cuts to large corporations.

Here’s the independent thinker’s guide to the tax debate for people who aspire to be guided by facts, not magical thinking. When you hear congressional leaders utter these claims, take a closer look.

“Corporate tax cuts create jobs.”

You’ll hear that the U.S. has the “highest corporate taxes in the world.” While the legal rate is 35 percent, the effective rate — the percentage of income actually paid — is closer to 15 percent, thanks to loopholes and other deductions.

The Wall Street corporations pulling out their big lobbying guns have a lot of experience with lowering their tax bills this way, but they don’t use the extra cash to create jobs.

The evidence, as my Institute for Policy Studies colleague Sarah Anderson found, is that they more often buy back their stock, give their CEOs  massive bonuses, pay their shareholders a bigger dividend, all the while continuing to lay off workers.

“Bringing back offshore profits will create jobs.”

Enormously profitable corporations such as Apple, Pfizer and General Electric have an estimated $2.64 trillion in taxable income stashed offshore. Republicans like to say that if we give them a tax amnesty, they’ll bring this money home and create jobs.

Any parent understands the folly of rewarding bad behavior. Yet that’s what we’re being asked to do.

When Congress passed a “repatriation tax holiday” in 2004, these same companies gave raises to their CEOs, raised dividends, bought back their stock, and — you guessed it — laid off workers. The biggest 15 corporations that got the amnesty brought back $150 billion while cutting their U.S. workforces by 21,000 between 2004 and 2007.

For decades now, those big corporations have made middle class taxpayers and small businesses pick up the slack for funding care for veterans, public infrastructure, cyber security, and hurricane mop-ups. Let’s not give them another tax break for their trouble.

“Tax cuts pay for themselves.”

Members of Congress who consider themselves hard-nosed deficit hawks when it comes to helping hurricane victims or increasing college aid for middle class families are quick to suspend basic principles of math when it comes to tax cuts for the rich.

The long discredited theory of “trickledown economics” — the idea that tax cuts for the 1 percent will create sufficient economic growth to pay for themselves — is rising up like zombies at Halloween. As the economist Ha Joon Chang observed, “Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are — a simple upward redistribution of income.”

“Abolishing the estate tax will help ordinary people.”

This is the biggest whopper of them all. The estate tax is only paid by families with wealth starting at $11 million and individuals with $5.5 million and up. There is no credible economic argument that this will have any positive impact on the economy, but it would be a huge boon for billionaire families like the Trumps.

This tax cut plan is an unprecedented money grab. Whether the heist happens, is entirely up to the rest of us.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. 

 

Chuck Collins: Rich folks in overalls seek to kill estate tax

 

Via OtherWords.org

After this summer, President Trump and the Republican Congress have one big item on their agenda: taxes. Specifically, cutting them for the rich.

One tax they’ve got in their crosshairs is the estate tax — which they malign as “the death tax.” But it’s nothing of the sort.

Passed a century ago at the urging of President Theodore Roosevelt, the estate tax is a levy on millionaire inheritances. It puts a brake on the concentration of wealth and political power, and raises substantial revenue — over a quarter of a trillion dollars over the next decade, if it’s kept — from the richest one tenth of 1 percent.

Yet lobbyists are trying to put a populist spin on their effort to abolish this tax, which is paid exclusively by millionaires and billionaires. Puzzlingly, they’re deploying farmers as props and claiming that the tax means the “death of the family farm.”

The accusation is pure manure.

Only households with wealth starting at $11 million (and individuals with wealth over $5.5 million) are subject to the tax. “This hurts a lot of farmers,” claimed Treasury Secretary Steven Mnuchin. “Many people have to sell their family farm.”

But a new report by President Trump’s own U.S. Department of Agriculture shows this claim is bull. Only 4 out of every 1,000 farms will owe any estate tax at all — and the effective tax rate on these small farms is a modest 11 percent.

Of those few farms, most have substantial non-farm income, according to the report — think billionaire Ted Turner’s ranch in Montana. And estate tax opponents haven’t been able to identify a single example of a farm being lost because of the estate tax.

Still, the rodeo continues.

When the House Ways and Means Committee staged a July hearing against the estate tax, they summoned South Dakota farmer Scott Vanderwal to talk about the woes of the estate tax. The problem was, as Vanderwal himself revealed, his farm wouldn’t even be subject to the tax.

In 2014, right-wing election groups ran $1.8 million worth of ads featuring farmer John Mahan of Paris, Ky.  “For our family farms to survive, we’ve got to get in this fight” to end the death tax,' he said.

What the ad fails to disclose is that Mahan is the 15th biggest recipient of farm subsidies in Bourbon County, taking $158,213 of taxpayer money between 1995 and 2014. While some farm subsidies promote price stability and conservation practices, the bulk of funds go to the richest 1 percent of farmers and corporate agricultural operations.

Farm organizations  such as the National Farmers Union and the American Family Farm Coalition support retaining the estate tax. They believe the concentration of farmland and farm subsidies has created unfair corporate farm monopolies across rural America.

“The National Farmers Union, through its grassroots policy, respects what the estate tax represents,” said union president Roger Johnson in testimony to the Treasury Department. “We are not opposed to the estate tax.”

When defenders of the estate tax have proposed a “carve out” to exempt any remaining farms, the anti-tax crusaders oppose it. They don’t want to lose their fig leaf.

All this farm talk mystifies who actually pays the tax. Most estate taxpayers live in big cities and wealthy states such New York, Florida, and California. Few have probably ever driven a tractor.

Instead of farmers in overalls, picture Tiffany Trump. If Congress abolishes the estate tax, the president’s children stand to inherit billions more.

In the coming tax debate, watch out for the advertisements and sound bites about farmers and the estate tax. The tax lobbyists for billionaires will be pulling the strings.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base.

 

 

Chuck Collins: America's crumbling infrastructure and the very rich

 

Via OtherWords.org

If you find yourself traveling this summer, take a closer look at America’s deteriorating infrastructure — our crumbling roads, sidewalks, public parks and train and bus stations.

Government officials will tell us “there’s no money” to repair or properly maintain our tired infrastructure. Nor do we want to raise taxes, they say.

But what if billions of dollars in tax revenue have gone missing?

New research suggests that the super-rich are hiding their money at alarming rates. A study by economists Annette Alstadsaeter, Niels Johannesen, and Gabriel Zucman reports that households with wealth over $40 million evade 25 to 30 percent of personal income and wealth taxes.

These stunning numbers have two troubling implications.

First, we’re missing billions in taxes each year. That’s partly why our roads and transit systems are falling apart.

Second, wealth inequality may be even worse than we thought. Economic surveys estimate that roughly 85 percent of income and wealth gains in the last decade have gone to the wealthiest one-tenth of the top 1 percent.

That’s bad enough. But what if the concentration is even greater?

Visualize the nation’s wealth as an expansive and deep reservoir of fresh water. A small portion of this water provides sustenance to fields and villages downstream, in the form of tax dollars for public services.

In recent years, the water level has declined to a trickle, and the villages below are suffering from water shortages. Everyone is told to tighten their belts and make sacrifices.

Deep below the water surface, however, is a hidden pipe, siphoning vast amounts of water — as much as a third of the whole reservoir — off to a secret pool in the forest.

The rich are swimming while the villagers go thirsty and the fields dry up.

Yes, there are vast pools of privately owned wealth, mostly held by a small segment of super-rich Americans. The wealthiest 400 billionaires have at least as much wealth as 62 percent of the U.S. population — that’s nearly 200 million of us.

Don’t taxpayers of all incomes under-report their incomes? Maybe here and there.

But these aren’t folks making a few dollars “under the table.” These are billionaires stashing away trillions of the world’s wealth. The latest study underscores that tax evasion by the super-rich is at least 10 times greater — and in some nations 250 times more likely — than by everyone else.

How is that possible? After all, most of us have our taxes taken out of our paychecks and pay sales taxes at the register. Homeowners get their house assessed and pay a property tax.

But the wealthy have the resources to hire the services of what’s called the “wealth defense industry.” These aren’t your “mom and pop” financial advisers that sell life insurance or help folks plan for retirement.

The wealth defenders of the super-rich — including tax lawyers, estate planners, accountants, and other financial professionals — are accomplices in the heist. They drive the getaway cars, by designing complex trusts, shell companies, and offshore accounts to hide money.

These managers help the private jet set avoid paying their fair share of taxes, even as they disproportionately benefit from living in a country with the rule of law, property rights protections, and public infrastructure the rest of us pay for.

Not all wealthy are tax dodgers. A group called the Patriotic Millionaires advocates for eliminating loopholes and building a fair and transparent tax system. They’re pressing Congress to crack down on tax evasion by the superrich.

Their message: Bring the wealth home! Stop hiding the wealth in offshore accounts and complicated trusts. Pay your fair share to the support the public services and protections that we all enjoy.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base. 

Chuck Collins: Healthcare costs, not taxes, are the big hit on businesses

Members of the House GOP were in a hurry on May 4 to pass their bill to gut Obamacare. They rushed it through before anyone even had a chance to check its cost or calculate its impact on people’s access to insurance.

Their urgency, however, had little to do with health care. The real reason for the rush? To set the table for massive tax cuts.

Indeed, the House health plan would give a $1 trillion boon to wealthy households and pave the way for still bigger corporate tax cuts to come, as part of the so-called “tax reform” they’re pushing.

Meanwhile, dismantling the Affordable Care Act will cause up to 24 million people to lose their health coverage, according to the non-partisan Congressional Budget Office. (Though even that estimate is based on the less extreme version of the bill that failed to pass in April. The new plan may be even worse.)

Why would a GOP politician support an unpopular bill that fewer than 20 percent of voters think is a good idea? Why risk angry constituents showing up at town hall meetings?

Put simply, to please their wealthy donors and Wall Street corporations. For complex legislative reasons, repealing Obamacare’s taxes on the rich first will make it easier for them to slash corporate taxes next.

As the “tax reform” debate begins, prepare for sermons about how cutting taxes for rich and global corporations will be great for the economy. Slashing the corporate tax rate, we’ll be told, will boost U.S. competitiveness.

But if Congress were really concerned about the economy, policy wouldn’t be driven by tax cuts. The real parasite eating the insides of the U.S. economy isn’t taxes, billionaire investor Warren Buffett explained recently, but health care.

In fact, taxes have been steadily going down, especially for the very wealthy and global corporations. “As a percent of GDP,” Buffett told shareholders of his investment firm, the corporate tax haul “has gone down.” But “medical costs, which are borne to a great extent by business,” have increased.

In 1960, corporate taxes in the U.S. were about 4 percent of the economy. Today, they’re less than half that. As taxes have fallen, meanwhile, the share of GDP spent on health care has gone from 5 percent of the economy in the 1960s to 17 percent today.

These costs are the real “tax” on businesses. As any small business owner can tell you, health care costs are one of the biggest expenses in maintaining a healthy and productive work force.

Yet the GOP bill will weaken healthcare coverage and regulation, which will increase costs and hurt U.S. companies.

U.S. employers, remember, must compete with countries that have superior universal health insurance for their citizens and significantly lower costs. While health care eats up 17 percent of the U.S. economy, it’s around just 11 percent in Germany, 10 percent in Japan, 9 percent in Britain and 5.5 percent in China.

No wonder Buffett concluded that “medical costs are the tapeworm of American economic competitiveness.”

Buffett observed that the House healthcare bill would give him an immediate $680,000 annual tax cut, a break he doesn’t really need, while only allowing that tapeworm to bore deeper.

For all its limitations, the Affordable Care Act has expanded coverage and the quality of life for millions of Americans. It’s also put in place important provisions to contain exploding health care expenses, slowing the rise of costs.

The GOP plan to reduce coverage and deregulate health care will take us in the wrong direction. That’s a pretty poor bargain for yet another tax cut for the richest Americans.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base. 

 

Chuck Collins: Welcome to underwater nation

"The Drowned,'' by Vasily Perov (1867).

"The Drowned,'' by Vasily Perov (1867).

Via OtherWords.org

Are you or a loved one having trouble staying afloat? You’re truly not alone.

While the media reports low unemployment and a rising stock market, the reality is that almost 20 percent of the country lives in “Underwater Nation,” with zero or even negative net worth. And more still have almost no cash reverses to get them through hard times.

This is a source of enormous stress for many low and middle-income families.

Savings and wealth are vital life preservers for people faced with job loss, illness, divorce, or even car trouble. Yet an estimated 15 to 20 percent of families have no savings at all, or owe more than they own.

They’re disproportionately rural, female, renters, and people without a college degree. But the underwater ranks also include a large number of people who appear to be in the stable middle class. Health challenges are a major cause of savings depletion for these people, both in medical bills and lost wages.

Plenty more Americans could be vulnerable.

A financial planner will advise you to put aside three months of living expenses in financial reserves, just in case. So if your living expenses are $2,000 a month, you should try to have $6,000 in “liquidity” — money you can easily get to in an emergency.

But 44 percent of households don’t have enough funds to tide themselves over for three months, even if they lived at the poverty level, according to the Assets and Opportunity Scorecard.

Even having a positive net worth doesn’t mean you can always tap these funds, especially if wealth takes the form of home equity or owning a car.

A Bankrate survey found that 63 percent of U.S. households lack the cash or savings to meet a $1,000 emergency expense. They’d have to borrow from a friend or family, or put costs on a credit card.

Seven percent of U.S. homeowners are underwater homeowners, with mortgage debt higher than the value of their homes. And more and more people have taken on credit card debt to pay the bills. Meanwhile, student debt is rising rapidly and is projected to become one of the biggest factors in negative wealth.

Conservative scolds will blame individuals for “living beyond their means” and being financially irresponsible. And individual behavior is important. But the financial stresses facing millions of families are more likely the result of four decades of stagnant incomes.

Half the workers in this country haven’t shared in the economic gains that have mostly gone to the rich. Their real wages have stayed flat while health care, housing, and other expenses continue to rise.

So not everyone is on the edge at this time of dizzying inequality, after all. The 400 wealthiest billionaires in the U.S. have as much wealth together as the bottom 62 percent of the population.

This is only possible because of the expanding ranks of drowning Americans.

Some politicians will scapegoat immigrants or other vulnerable people for this suffering. When this happens, hold on tight to your purse or wallet. They’re trying to distract you from the rich and powerful elites who are rigging the rules to get more wealth and power.

They want to deflect your attention away from the reality that your economic pain is the result of deliberate government rules that give more tax cuts to the super-rich and global corporations, keep wages down, push up tuition costs, and let corporations nickel and dime you for all you’re worth.

Congress and the Trump administration are proposing to cut health care, pass more tax cuts for the rich, and give global corporations even more power over you. They promise benefits will “trickle down.”

Unless we speak up, the only trickle will be the expansion of Underwater Nation.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base
 

Chuck Collins: Wall St., Trump hope that you've forgotten 2008

This first ran in OtherWords.org

Remember 2008 — the bank bailouts, the spiking unemployment rate, the stock market free fall?

Maybe you lost a job, got a pay cut, or saw your retirement savings or home value evaporate. Maybe you even lost your home altogether, or saw your small business wither and die.

It’s a hard thing to let go. But Wall Street is hoping you’ve already forgotten it.

That’s because their allies in Congress and the Trump administration are poised to scrap the reforms that lawmakers put in place to prevent another meltdown.

For starters, they’re trying to gut the Consumer Financial Protection Bureau, the first independent agency with the sole mandate of protecting consumers against scam artists, predatory lenders, and bad actors in the financial sector.

The agency proved its mettle last year, when it caught Wells Fargo — the second biggest bank in the country — creating millions of bogus accounts without their customers’ permission. The bureau exposed that cheating and put an end to it.

Dodd-Frank, the law that created the bureau, also made rules to keep banks from making risky bets with your money.

For instance, it requires banks to keep some skin in the game by maintaining a 5 percent stake in loans they originate, so they have a stake in the success of the borrower and the loan. It also encourages banks to keep some cash on hand in case of emergencies, just like the rest of us try to do at home.

Yet lately, bankers have been complaining that financial regulation is hurting the economy. Gary Cohn, a former Goldman Sachs president — and now a Trump economic adviser — whined recently that banks are being forced to “hoard capital.”

If maintaining a prudent reserve is hoarding, then yes. And that’s a good thing.

Bankers like Cohn say abolishing these rules will help ordinary consumers. When you hear things like that, hold tight to your wallets and purses.

The truth is, cheap credit is abundant. The commercial and industrial business industries are booming. Credit card and auto lending are at record highs, and mortgage loans are almost back to their pre-2008 crisis high.

If that’s not enough for Wall Street lenders who want to gamble, they should go to the casino. And if venture capitalists want to take great risks in search of great rewards, blessings upon them. But they shouldn’t expect the rest of us to bail them out after their next binge.

What about Donald Trump? Will he protect us?

Trump campaigned as a champion for the “little guy,” beholden to no one because of his independent wealth. He smeared opponents like Ted Cruz and Hillary Clinton for being “puppets” of big banks like Goldman Sachs.

My advice? Watch what Trump does, not what he says.

After all, Trump just installed the most pro-Wall Street team our nation has ever seen. Three of his senior advisers — including Treasury Secretary Steven Mnuchin — have a combined 40 years at Goldman Sachs.

Now they’d like to remove the sheriff from the financial sector. If they get their way, I’ll give you better odds than Vegas that they’ll crash the economy again — and stick you and me with the bill.

Lock up your treasure. Call your lawmaker. Don’t go back to sleep.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base.

 

Chuck Collins: The rest of us pay for rich, show-off philanthropists' gifts

Via OtherWords.org

It’s the season of giving.

When you hear about a billionaire “giving back” — like Nike founder Phil Knight’s $400 million gift to Stanford, or hedge funder John Paulsen’s $400 million donation to Harvard — do you feel a warm glow?

They could’ve kept their money and bought another house or private jet, you might think. But what if you heard that the tax write-offs billionaires claim for gifts like these force the rest of us to shell out more?

Suddenly that glow doesn’t feel so warm.

Compare that generosity to what you’ve probably seen in your own community. In every small town in America — at the local convenience store or diner — there’s “the jar,” a special collection for someone who needs an operation or has faced one of life’s misfortunes.

Everyone who can chips in. No one writes it off their taxes.

Keeping score that way would be as unseemly as asking for a tax break for coaching a neighborhood youth sports team, volunteering at a shelter, or making a casserole for someone coming home from the hospital.

Unfortunately, this is the wave of the future. More and more, our country’s charitable giving is dominated and controlled by billionaire mega-donors, their foundations, and donor-advised funds, according to a report I coauthored for the Institute for Policy Studies.

Between 2003 and 2013, itemized contributions from people making $10 million or more increased by 104 percent. The number of private grant-making foundations, mostly established by wealthy individuals and their families, has doubled since 1993. Today there are over 80,000.

Meanwhile, charitable giving by low and middle-income donors has steadily declined, reflecting stagnant wages, declining homeownership, and growing economic insecurity by low- and middle-income families. From 2003 to 2013, itemized charitable deductions by donors making less than $100,000 declined by over a third.

This top-heavy philanthropy poses a danger to charities, too. It makes their funding less predictable and pressures them to focus on wooing a finite, relatively small number of mega-donors, rather than on doing the important work many of them do.

But the largest peril is for our democracy. Unchecked, private foundations can become blocks of concentrated, unaccountable power with considerable clout in shaping our laws and culture. They can become extensions of the power, privilege and influence of a handful of rich families.

In this season of giving, we’ll hear plenty about billionaires “giving back” through donations to education, the arts, health, and medicine. But let’s not lose sight of the fact that you and I are subsidizing the charitable choices of the wealthy.

Maybe we’d all be better off if these billionaires just paid their fair share of taxes.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base.

 

Chuck Collins: In New England and elsewhere, anti-gas-pipeline activism picks up

Thousands of Native Americans at Standing Rock in North Dakota are protesting a pipeline project that puts their water supply at risk, threatens to plow up their sacred sites, and would worsen climate change.

Their rallying echoes hundreds of local struggles across the U.S. that question the prudence, safety, and necessity of thousands of new gas pipeline projects.

The gas industry tells us these projects promote energy independence and meet local gas needs. But the driving force behind most of these billion dollar infrastructure projects? Gas export.

Big gas is desperate to get their cheap shale gas to global export terminals — and they’ve dug up millions of backyards to do it. Fortunately for the industry, they have a subservient federal agency that grants them the power of eminent domain to take those backyards.

The anti-pipeline movement brings together mayors, state officials, and engaged neighbors concerned about health and safety, unnecessary rate increases, and the environmental irresponsibility of constructing new fossil-fuel infrastructure. They’re fed up with a system that allows the profits of private energy corporations to override local concerns and dictate our future.

Many politicians remain stuck in the “gas as a bridge fuel” perspective. But growing scientific evidence shows that methane from gas extraction and transportation poses a greater short-term climate change risk than burning carbon fuels like coal and oil.

We should be rapidly shifting away from all new fossil-fuel infrastructure projects, and investing in fixing existing gas leaks and using renewable energy like wind, hydroand solar. This shift will create millions of high-paying jobs in the new energy economy.

The anti-pipeline movement is gathering steam. Residents have mobilized to stop pipeline projects in Massachusetts and New Hampshire, and have stalled others in Kentucky.

But not all anti-pipeline efforts have been successful.

In the Boston neighborhood of West Roxbury, residents have vigorously opposed a high-pressure pipeline that arcs into the heart of a densely populated neighborhood and terminates across from an active blasting quarry. All of Boston’s elected officials unanimously oppose this project — but big business is still winning.

The Texas-based Spectra Energy sued the city and took their streets by eminent domain. The city of Boston is still trying to block the project in court, but construction is almost complete. In the last year, almost 200 neighbors and religious leaders have been arrested for blocking construction.

How is this possible in a democratic society?

The answer lies with a little-known and unaccountable agency called the Federal Energy Regulatory Commission (FERC). Under the Gas Act of 1938, FERC may grant private corporations the power of eminent domain over local jurisdictions.

Maybe this was necessary in 1938 to build a modern energy system. But today, we need an energy agency that’ll balance a wider set of considerations, not just the interests of a politically powerful gas industry.

In the last few years, FERC has rubber-stamped just about every project the natural gas industry has sought to build. These include high-pressure pipelines running next to nuclear power plants, across fragile water supplies, and across traditional Native American lands.

In the words of Robert F. Kennedy Jr., FERC is a “rogue agency.” The U.S. Senate should convene oversight hearings to examine FERC overreach. Congress must modernize the Gas Act to protect communities and reduce carbon and methane emissions. And an independent agency should assess our nation’s real energy needs.

Decisions about our energy future shouldn’t revolve around a self-interested gas industry and investor-owned utilities. For the sake of the planet and our democracy, other voices must be at the table.

Chuck Collins is a senior scholar at the Institute for Policy Studies, where he co-edits . He is author of Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home and Committing to the Common Good. Distributed by OtherWords.org.

 

Chuck Collins: The American Dream has moved to Canada

Via Otherwords.org

Does your family aspire to the American Dream of a decent paying job, a few weeks of paid vacation, a home of your own, and the hope of retiring before you die?

Maybe try Canada.

Our country has historically prided itself on being a socially mobile society, where your ability is more important than the race or class you’re born into. Indeed, during the three decades after World War II, social mobility increased — particularly for the white working class.

That mobility became part of our self-identity, especially when juxtaposed with the old “caste societies” of Europe and their static class systems. Today, however, that story has been turned on its head.

If you forgot to be born into a wealthy family, you’re better off today living in Northern Europe or Canada, where social safety nets and investments in early childhood education have paid big dividends for ordinary citizens. In fact, Canada now has three times the social mobility of the U.S.

Young people in the U.S. face huge inequalities of opportunity, in large part based on the wealth — or lack of wealth — of their parents. Researchers call this the “intergenerational transmission of advantage,” referring to the dozens of ways that affluent families boost their children’s prospects starting at birth.

Affluent families make investments that give their kids a leg up through childhood enrichment activities, including travel, music lessons, museum visits, and summer camp.

As they grow older, wealthier kids have better access to college guidance, test preparation, financial literacy skills, and debt-free or low-debt educations.

Then, as they enter the workforce, wealthy young adults have access to their parents’ social networks and are able to take unpaid internships to help them develop job skills. Meanwhile, children in families unable to make these investments fall further behind.

Combined with the 2008 economic meltdown and budget cuts in public programs that foster opportunity for middle- and low-income families, we’re witnessing accelerating advantages for the affluent and compounding disadvantages for everyone else. And once inequalities open up, research says, they rarely decrease over time.

The U.S. could rise to this challenge, as we did in the years after World War II and in the 1960s, by resolving to make robust public investments in policies that include everyone.

But in our increasingly plutocratic political system, the very wealthy — who have oversized political influence along with oversized bank accounts — have less stake in expanding opportunities for the rest of us, as their own children and grandchildren advance through privatized systems.

We can’t stop well-off families from passing advantages to their children, but we can give everyone else a fair shot.

High-quality early childhood education, universal access to healthcare and nutrition, resources for those with learning disabilities and special needs, and tuition-free higher education for first-generation college students are key initiatives that would help level the playing field.

We could make this possible by taxing wealth. Revenue from a steeply progressive estate or inheritance tax could capitalize an education opportunity trust fund.

If we don’t take action, the United States will further drift toward a caste society fractured along class lines, where opportunity, occupation, and social status are determined by inherited advantage.

By then, our presidential race won’t be the only thing tempting people to move to Canada. 

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of inequality.org. His forthcoming book is Born on Third Base. 

Chuck Collins: A commencement address for the most indebted graduates ever

 

Congratulations, college graduates! As you enter the next phase of life, you and your parents should be proud of your achievements.

But, I’m sorry to say, they’ve come at a price: The system is trying to squeeze you harder than any previous generation.

Many Baby Boomers, perhaps including your parents, benefited from a time when higher education was seen as a shared social responsibility. Between 1945 and 1975, tens of millions of them graduated from college with little or no debt.

But now, tens of millions of you are graduating with astounding levels of debt.

This year, seven in 10 graduating seniors borrowed for their educations. Their average debt is now over $37,000 — the highest figure for any class ever.

Already, some 43 percent of borrowers — together owing $200 billion — have either stopped making payments or are behind on their student loans. Millions are in default.

This debt casts a long shadow on the finances of graduates. During the last quarter of 2015 alone, the Education Department moved to garnish $176 million in wages.

There’s no economic benefit to this system whatsoever. Indebted students delay starting families and buying houses, experience compounding economic distress, and are less inclined to take entrepreneurial risks.

One driver of the change from your parents’ generation has been tax cuts for the wealthy, which have led to cuts in higher-education budgets. Forty-seven states now spend less per student on higher education than they did before the 2008-2009 recession.

In effect, we’re shifting tax obligations away from multi-millionaires and onto states and middle-income taxpayers. And that’s led colleges to rely on higher tuition costs and fees.

In 2005, for instance, Congress stopped sharing revenue from the estate tax — a levy on inherited wealth exclusively paid by multi-million dollar estates — with the states. Most state legislatures failed to replace it at the state level, costing them billions in revenue over the last decade.

In fact, the 32 states that let their estate taxes expire are foregoing between $3 to $6 billion a year, the Center on Budget and Policy Priorities estimates. The resulting tax benefits have gone entirely to multi-millionaires and billionaires — and contributed to tuition increases.

For example, California used to raise almost $1 billion a year in revenue from its state-level estate tax. Now that figure is down to zero. And since 2008, average tuition has increased over $3,500 at four-year public colleges and universities in the state.

Florida, meanwhile, lost $700 million a year — and raised tuition nearly $2,500. Michigan lost $155 million a year and hiked average tuition $2,200.

But it doesn’t have to be this way. Washington State went the opposite route.

Washington taxes wealthy estates and dedicates the $150 million it raises each year to an education legacy trust account, which supports K-12 education and the state’s community college system. Other states should follow this model, and students and parents should take the lead in demanding it.

Presidential candidate Bernie Sanders said at a Philadelphia town hall that there’s one thing that he’s 100 percent certain about:

If millions of young people stood up and said they’re “sick and tired of leaving college $30,000, $50,000, $70,000 in debt, that they want public colleges and universities tuition-free,” he predicted, “that is exactly what would happen.”

Sanders is right: Imagine a political movement made up of the 40 million householdsthat currently hold $1.2 trillion in debt.

If we stood up and pressed for policies to eliminate  tax breaks for millionaires and dedicate the revenue to debt-free education, it would change the face of America.

Graduates, let’s get to work.

Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies.