COMMENTARY: U.S. tax code favors rich, fosters inequality

By Gary Maveal

I was disappointed to read Judge Whitbeck's diatribe against President Obama's speech in Kansas last month addressing income inequality in the United States. ("Perfect systems in an unfair world," Oakland County Legal News, Dec. 23, 2011).

I agree that President Obama's Justice Department has been scandalously unresponsive in pursuing those who caused our economic collapse. Still, Judge Whitbeck drew unwarranted conclusions from the president's remarks.

For those who haven't read the address, it can be found at the White House website:

The president questioned the value of 'trickle-down" economic policies to which we have grown accustomed. The speech also called for ending favorable tax rates for the wealthiest to fund national education and technology initiatives to restore middle-class prosperity The president also pointed out that our economic malaise was attributable in part to global competition that has resulted in the loss of millions of American jobs:

The truth is we'll never be able to compete with other countries when it comes to who's best at letting their businesses pay the lowest wages, who's best at busting unions, who's best at letting companies pollute as much as they want. That's a race to the bottom that we can't win, and we shouldn't want to win that race. Those countries don't have a strong middle class. They don't have our standard of living.

He also recounted the track record of relaxing regulations on businesses and tax rates on high-income earners. He made a case that the promise of societal economic benefits from both approaches had proven empty.

Judge Whitbeck didn't take issue with these points.

Instead he derided the themes of inequality and unfairness as improper subjects of a presidential appeal, equating higher tax rates on the rich with "cradle-to-grave" welfare policies.

Judge Whitbeck decried the envious focus on corporate CEO compensation and suggested what matters to working Americans is what they make. (I agree). He suggested those wages (if they be low) are not a product of the federal tax code and will be unaffected by it. (I disagree). He didn't talk about the shrinking role of regulation of business and wages -- as well as federal tax policies -- that are at the heart of the matter.

The federal law on minimum wage now sets a floor of $7.25 per hour. This meager wage doesn't apply to all workers -- businesses have won exemptions for all manner of employment classifications so that many laborers aren't entitled to overtime premiums or any minimum hourly rate at all. Many formerly "middle-class" families have members relegated to rock bottom wages or chronic unemployment. At the same, time, collective bargaining has been attacked and weakened as a bulwark against economic exploitation.

Remarkably, Judge Whitbeck doesn't seem to believe that federal tax policies exacerbate the gap between the rich and poor in this country. Yet who can deny that the tax code is the work product of corporate lobbyists who have occupied the halls of Congress in recent decades?

Just last week, a report of the Congressional Research Service, the nonpartisan agency for policy research, documented the connection between current tax policies and staggering income inequality.

The new study, "Changes in the Distribution of Income Among Tax Filers Between 1996 and 2006: The Role of Labor Income, Capital Income, and Tax Policy," can be found at

The new CRS report documents that preferential treatment of capital gains and dividends were key tax policies that richly benefited America's financial elites between 1996-2006. During that decade:

"The richest 1% of tax filers experienced a 74% increase in after-tax income and the richest 0.1% (one tax filer in a thousand) saw their after-tax income almost double (an increase of 96%)."

On the other hand, wage earners didn't fare well between 1996-2006: Inflation-adjusted income actually fell for the poorest 20 percent of tax filers.

Rampant income inequality deserves everyone's attention. Judge Whitbeck dismisses "tax the rich" as a mindless bumper sticker. Yet lawyers and all citizens should debate the idea's merits as a means to restore balance in our tax policy.


Gary Maveal is a professor of law at the University of Detroit Mercy School of Law and a supporter of the Occupy Wall Street Movement.

Published: Fri, Jan 13, 2012