Why Would Anyone Foment Class Warfare?

by Burt on May 3, 2012

It is very puzzling. The rich, in order to get rich, had to sell us stuff we all wanted. Bill Gates, the wealthiest man in the U.S., is estimated to have created 10,000 millionaires from those who worked with him or invested heavily in Microsoft. Steve Jobs at Apple may have rivaled that figure. Their rising tide lifted a lot of boats and also gave us affordable computers and iPhones, which have transformed the way we live and do business.

But what about taxes? Shouldn’t these millionaires pay more to the government? Not unless you have a warped sense of fairness. The top 1% of earners currently pays almost 40% of all revenue to the the U.S. government from income taxes; the bottom 50% of earners pays about 2% of all revenue received by the government. The current U.S. corporate tax is now the highest in the world and the income tax, at a 35% rate on top earners, may already be so high that we are chasing future Bill Gates and Steve Jobs out of the country to tinker on their inventions elsewhere.

During prosperous times, some people complain, the rich seem to get way too rich. During the Reagan prosperity of the 1980s, for example, the top 20% of wealth earners grew their wealth by 20% (adjusted for inflation), but the poorest 20% of wealth earners only increased their wages by 5%. Two points here. First, the rich people were the ones who usually took the risks; they deserved the greater gains. Second, even the poorest 20% in the 1980s, with their paltry 5% increase, did better than any group of earners during the 1970s. According to Arthur Laffer and Stephen Moore, from 1973 to 1981, the bottom 20% of wage earners lost 5% of their income (adjusted for inflation). In other words, poor people lost income during the 1970s, and gained 5% in the 1980s. During the 1980s, the rising tide of computers, fax machines, cell phones, microwaves, and walkman radios made jobs better for the poor, and gave all of us new products to make our lives easier.

Perhaps Franklin Roosevelt, the greatest class warrior in U.S. history, can give us insight into why someone would pit one group of Americans against another. In 1937, to attack the rich, he goaded Congress into establishing the Joint Committee on Tax Evasion and Avoidance. He wanted to nail rich people who were sheltering income from the government. When Senator Pat Harrison (D-Miss.) and Congressman Robert Doughton (D-N.C.) asked him why he was doing this, FDR responded that this new committee would bring the Democrats “at least 10,000,000 [votes].” FDR’s explanation is illuminating. Class warfare doesn’t bring prosperity, but may bring 10,000,000 votes. And in the minds of some, that makes class warfare worth doing.

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