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Flight or Fight

Wealthy Americans are evading taxes in unprecedented numbers, and the result is class warfare -- fought by the rich, not the poor

by Jack Beatty

According to Plato, the rich have no country. This is a strikingly contemporary observation. Before he became Labor Secretary, Robert B. Reich wrote of the "secession" of the wealthy into their gated communities and the bosky defiles of their exurban retreats. This phenomenon is no secret: during the past few months The New York Times has been running a series of major articles on the flight of the wealthy from taxes.

This is class warfare, euphemistically referred to as a "flight from taxes."

In a revealing display of class interest, the only income group that Bob Dole carried in the presidential election was that in which people earned more than $100,000 a year -- the 6 percent of Americans, in other words, who stood to gain the most from Dole's proposed 15 percent across-the-board tax cut. Dole lost, but the clear winners of the election were the affluent Americans who contributed a record $2 billion to both parties and who can expect to get a continuing return on their money during the next four years.

So the picture is a complicated one. In order to preserve their effective secession from the social burdens of their countrymen, the rich maintain a golden grip on American politics. In this respect Plato had it wrong: the rich have at least one country -- ours. Although this is one of the most obvious social facts in America, to mention it is to open oneself to the charge of fomenting "class warfare" -- which by a bewitchment of language somehow applies only to the supposed (and politically invisible) resentments harbored by the poor against the rich. We lack a term to describe this current reality. There is class warfare going on, and the rich are prosecuting it. This war is fought on at least two major fronts: taxes and the public-policy agenda.

Taxes. The New York Times cited one economist's estimate that "three-fifths of the wealthiest individuals' net worth at death is never taxed by the government." The article went on to say that the estate tax is "so easy to avoid that some experts believe that much of it is voluntary, at least for those who start planning early." An earlier piece in the series detailed a comparably successful flight on the part of the wealthy from the capital-gains tax. The implications are clear: every dollar in taxes avoided by the rich must be made up for by the rest of us. Those who benefit most from this society are sticking the rest of the country with their bills. This is class warfare, euphemistically referred to as a "flight from taxes."

Consider the following: estates worth up to $600,000 are exempted from the estate tax. As a result, in 1993 only 1.5 percent of all deaths in this country -- 32,000 -- incurred estate taxes. Through loopholes described in such books as The Rich Die Richer and You Can Too, the proprietors of these estates were able to avoid paying hundreds of millions in taxes. Unless these loopholes are closed, much of the estimated five to ten trillion dollars in assets owned by the generation before the Baby Boom will pass to their children untaxed, in what will surely be the biggest transfer of wealth in history.

The Public-Policy Agenda. A balanced budget is on the agenda; tax reform is not. Cuts in the rate of growth in Medicare are on the agenda; an expansion of Medicare to cover long-term care in nursing homes is not. The so-called crisis in Social Security funding is on the agenda; cuts in the regressive payroll tax that supports Social Security are not. A renewal of the tax deduction for interest paid on even the highest home mortgages is on the agenda; a tax deduction for the rent paid by those who cannot afford to own a home is not. Control of the agenda is what the rich get for the $2 billion they invested in the most recent campaign. It's a payoff. The entire system is a smoking gun.

What did you do during the class war, Daddy? For the American middle class, I'm afraid that the answer is: We surrendered.

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