MANAGERS OF THE WORLD, UNITE
To the Barricades, Brooklyn Yuppies!
Sorry, folks: you’re not going to solve any of America’s very real problems by overtaxing the upper middle class.
Sometime last week, I woke up to find myself an enemy of the people.
According to a growing consensus among the smart set, I am among the verifiably cretinous, destructive, and unpatriotic group of Americans who “threaten to destroy everything that is best in our country.” We are the “upper middle class,” the new kulaks whose antisocial self-interest and lack of submission to the aims of the revolutionary vanguard must be extinguished.
You may be joining me in the reeducation camps if you have bothered preparing for your kids’ college via so-called 529 plans, which allow for tax-exempt gains on higher education savings. Or if you’re one of those “upper middle class” types who earn “well into the six-figure range yet don’t feel rich, either because of their student loan debt or the enormous cost of the amenities they consider nonnegotiable: living in well-above-average school districts for those with children or living in ‘cool’ neighborhoods for those without.”
Shit. Here I was, thinking that I was in some small way an embodiment of the American Dream. I’m the grandson of immigrants from the poorest parts of Ireland and Italy. My father fought in World War II and didn’t graduate high school and my mother didn’t even speak English until she went to first grade during the Great Depression. My family took a total of two vacations (totaling 10 days) during my entire childhood, and the one luxury afforded us was going to a cheap and undistinguished Catholic school system that was far, far worse academically than the public schools in my hometown of Middletown, New Jersey.
From such relatively humble, lower-middle-class roots—I even helped my folks cover their utility bills from time to time and paid for my last year of high school out of my own pocket—I worked and borrowed my way through state college and grad school, am helping to raise two kids, and am earning more dough than I ever thought possible (I take comfort in Babe Ruth’s assertion that “no man who works for another man is overpaid”). I was once called “a gay Elvis impersonator” after appearing on The O’Reilly Factor. “God damn America?,” as the most Rev. Jeremiah Wright once proclaimed. No, God bless America.
This new class warfare isn’t being waged by a second-generation Weather Underground terrorist or a red-diaper baby at The Nation but by the executive editor of the storied right-wing magazine National Review, Reihan Salam. Writing at Slate, Salam lays into vaguely defined upper middle class people whom he says are polite, largely liberal and Democratic in their voting habits, obsessed with status, and who are “the chief culprits behind the gentrification wave that is driving many poor families out of close-in neighborhoods in Brooklyn, my hometown.”
All we care about, he avers, is Whole Foods and Pilates studios and gourmet yogurt and getting our kids into great schools (such as New York’s elite public magnet Stuyvesant, or Cornell, or Harvard, all of which Salam attended). In best Nick Carraway fashion, Salam travels with this “tribe” but is not of them: “I can’t say I liked these people as a group,” he writes, yet “I felt it that it was inevitable that I would live among them.”
Yeah, why don’t upper-middle-class people send their kids to crap schools and drink shitty coffee and mass-produced beer? Really, just who do we think we are? Especially when it comes to taxes, says Salam, where we’re always (apparently) looking to pay less than whatever somebody somewhere ardently believes is our full tab. Sure, the Organization for Economic Cooperation and Development (OECD) rates the United States’ tax system as the most or second-most progressive system in the developed world, with the top 10 percent of households (those making over $112,000 in the mid-2000s) contributing 45 percent of all taxes. But we could—and should—always be paying more, right?
As it happens, my family left my birthplace of Brooklyn almost 50 years ago because gentrification was far less conceivable than, say, the collapse of the Soviet Union, the legalization of pot, or the election of a black president. I realize that Salam’s definition of the upper middle class is more psychographic than in any precise way objective, but it’s worth noting that as household income grows, voters trend Republican not Democratic.
The proximate cause of Salam’s heartfelt brief against wealthy-but-not-super-rich Americans was Barack Obama’s proposal to tax earnings in 529 plans as income, which the president withdrew after a brief but intense pushback from across the political spectrum. The 529 flap inspired similar complaints from The New York Times’ Josh Barro and The Daily Beast’s Monica Potts. “The upper-middle-class vote and get on the phone with their Congressperson any time a proposal like Obama’s [529 reform] comes up, ready to kill it before it gets started,” writes Potts. For such reasons, other, much-bigger tax reforms—getting rid of the deductions for mortgage interest and for state and local taxes, for example—can never happen.
Indeed, for Salam at least, the upper middle class wields power so absolute as to be unstoppable. “The upper middle class controls the media we consume,” he says. “They run our big bureaucracies, our universities, and our hospitals. Their voices drown out those of other people at almost every turn.” I’m not convinced. If the upper middle class was so effective in guarding their class interests, you’d think they’d do a better job in keeping the proletariat down. Yet researchers from Harvard and Berkeley find that even in an age of growing income inequality, intergenerational mobility is exactly as strong now as it was 40 year ago (PDF): “we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.”
Salam reluctantly confesses that he has “no idea” how to “break the stranglehold of the upper middle class” in rigging politics and economics in their favor. He meekly suggests that we can “make them feel at least a little guilty about it.”
Yeah, lots of luck with that. As a first-generation—and quite possibly last-generation—member of the upper-middle-class, let me suggest that guilt isn’t going to work, at least not on people like me. I know that I am in no way poor or even just treading water. I don’t feel rich really, but I definitely don’t feel guilty. Why should I, or anyone else who has prospered through a mix of hard work and luck? I’m confident that my success, such as it is, didn’t come at anybody else’s expense and I know I’ve never tried to shut the door behind me. The idea that I should feel bad for finally getting to the place that my grandparents and parents dreamed of for me and my kids is repellent and grossly misplaced.
As my Reason colleague Peter Suderman noted, the real message of “Obama’s 529 College Tax Plan Debacle” is that it shows the current welfare state is unsustainable (Salam mentions Suderman’s piece in passing but doesn’t engage it). As a society, we want too many things but don’t want to pay for them.
There aren’t enough super-rich people to tax in a way that will make Medicare, Social Security, and other entitlements solvent. That’s why Obama’s—and anyone else’s—plans to spend more money must start taxing more and more Americans. Obama’s 2016 budget proposal doesn’t pretend to come close to balancing revenues and outlays in the coming decade and the Congressional Budget Office (CBO) projects that the feds will be spending 22.3 percent of GDP in 2025 while pulling in just 18.3 percent of GDP in revenue.
That sort of imbalance can go on for a long time (indeed, it has already been going on for a long time). But eventually the “Golden Age of Government by Groupon,” where we buy more government than we can afford by borrowing against future taxes, will have to stop eventually. Not because anyone wants it to necessarily, but because no person and no country can spend beyond their means indefinitely.
The way to fix this problem isn’t to vilify the upper middle class as a bunch of selfish assholes and noodge them into paying higher and higher taxes. It’s to appeal to them—and all Americans—through honest accounting and a serious, adult conversation about what we can and want to afford.
Between 1965 and 2014, federal revenues averaged 17.4 percent of GDP. Occasionally we’ve pulled in less; occasionally we’ve pulled in a bit more. That includes periods when the top income tax rate was well over 70 percent and when it was below 30 percent, when capital gains were this and that, corporate taxes were higher and lower, etc. There is simply no reason to believe America will be guilted or gulled into jacking it up much more than that for any length of time. So it represents a pretty good estimate of what Americans are willing to pay for government.
How to bring spending down to that level is the conversation we need to be having, not one about how to squeeze a few more dollars out of the awful upper middle class with their Whole Foods, their artisanal cheeses, and their fancy cars. The trouble with our welfare state isn’t that the numbers don’t add up. It’s not a math problem. It’s a vision problem: There’s simply no way to be all things to all people.
Republicans and Democrats, conservatives and liberals of all income classes seem unwilling to engage in such talk, however. It’s always about spending more, whether through actual cash transfers or through tax breaks and tax expenditures for this or that preferred behavior (have more kids! buy more education! etc.) Obama’s new budget proposes spending $4.1 trillion next year. The last Republican budget proposal gets to that amount in 2018.
It’s well past time to put everything on the table, from reduced-price drugs and health care for seniors who can afford them easily to F-35 fighter jets that will be obsolete if and when they ever get built to tax deductions for people who live in high-tax states and cities to continuing a drug war that punishes blacks as badly as sharecropping did. There are obvious ways to do all of these things, but it will mean that both liberals and conservatives will have to stop trying to use government transfers to reward and punish people for their lifestyle choices.
If you want a fairer, more equitable America, the way forward isn’t figuring out how to tax hard-working, productive people more through a mix of guilt and guile. It’s figuring out how to spend less on a government that has been losing the trust of all Americans like a drunk loses his car keys.
I may not speak for many other upper-middle-class types, but I’ll tell you what: I’m happy to have the government spend less on me if I know it’s spending less altogether and is directing what money it does spend to people who need it more than I do. But if you’re simply talking about raising taxes in order to maintain the bloated status quo plus a bunch of new programs, count me out. That’s not because I’m selfish. It’s because I’m not stupid.