Inequality is hazardous to your physical and mental health, your community life, and your budget. Wherever you are in the status hierarchy — top, bottom, or middle — it takes its toll on you. And while it is inevitable under capitalism, its effects can be accentuated or mitigated by public policies.
One key policy mechanism to address inequality is taxing the rich. And one place that would benefit from taxing the rich is New York. New York City is the capital of the world financial system, and New York State is the most unequal state in the nation: 1 percent of households take home 31 percent of all income in the state, whereas the top 1 percent of households nationally capture 21 percent of all income. That is because the very wealthy in the state are exceptionally wealthy. While the top 1 percent in the United States has an average annual income of $1.3 million, New York’s top 1 percent makes $2.2 million.
The Invest in Our New York (IONY) coalition — made up of New York City Democratic Socialists of America (NYC-DSA), the Working Families Party (WFP), New York Communities for Change, and local community and political organizations across the state — is proposing to challenge this obscene inequality by raising taxes on the superrich and investing in housing, public transportation, education, and the environment.
Taxing the rich would allow us to publicly fund these desperately needed goods and services. But it has another benefit: it would chip away at the corrosive effects of inequality in our lives. Such inequality has massive impacts across our society, including in some surprising areas you might assume have little to do with the rising concentration of wealth. The effort to raise taxes on the wealthy in New York will not erase these social problems, but it can address some of inequality’s worst impacts.
Inequality Is Out of Control
Inequality has escalated out of control in the United States since the 1970s, as an increasing share of national income has gone to corporations in the form of profits. The numbers are familiar to us by this point but they bear repeating: CEO pay in the three hundred fifty largest US corporations increased by 1,460 percent between 1978 and 2021, while the average worker’s pay grew during the same period by only 18.1 percent. In 2021, the average CEO was paid 399 times as much as the average worker (compared to 59.1 times as much in 1959).
The already rich are walking away with most of the gains of our growing economy. In the boom following the financial crisis of 2007–8, the top 1 percent in New York State took 51.4 percent of the income gains between 2009 and 2015, and the rise in the number of billionaires since the pandemic shows that the trend has continued. At the same time, many working people are not seeing their pay keep up with inflation.
Meanwhile the tax structure has grown more regressive: Congress reduced the top federal income tax bracket from 94 percent in 1945 to 35 percent in 2012; it stands at 37 percent today. The wealthy, moreover, have access to a combination of legal, illegal, and questionably legal dodges that make massive tax evasion possible. In 2021, the Treasury Department estimated that the top 1 percent of taxpayers were underpaying by more than $160 billion.
In the wake of Occupy Wall Street in 2011 and Bernie Sanders’s two presidential campaigns, mainstream politicians have paid more attention to inequality, including President Joe Biden. The budget presented by the Biden administration to Congress in March calls for significant increases in the corporate tax and in income and capital gains taxes for wealthy taxpayers (though the proposal is unlikely to survive the Republican-majority House of Representatives and the narrowly Democratic-controlled Senate).
The Social Costs of Inequality
Inequality has corrosive effects in almost every area of social and political life, even in societies where everyone enjoys relative prosperity. Conversely, societies of relative equality enjoy many advantages: greater political democracy, less crime, better public health, and less stress and anxiety. These costs and benefits affect the whole population, not only the worst off — rich people in more equal societies reap these social gains too.
The benefits of greater equality derive from social cohesion. When cooperation rather than competition prevails in a society, individuals are more likely to believe that they owe solidarity to others and are themselves entitled to solidarity. Mutual solidarity underlies policies that both ameliorate social conditions and prevent deterioration.
Inequality inhibits democracy by financing capitalists’ campaign contributions, lobbying, and control of the media, giving them the power to impose policies that favor their interests at the expense of others. The Supreme Court’s 2013 Citizens United decision allows corporations to make unlimited campaign contributions. They can support lobbyists in Washington and in state capitals, working day in and day out, maintaining continuous personal contacts, providing information, incentives, and pressure to persuade legislators and regulators to support their interests. Their think tanks promote junk science, attack environmental regulation, and hamstring responses to climate change.
Inequality also exacerbates social and public health problems: not only are these greater in unequal societies, but they are greater in every group within the socioeconomic status order in such societies. In societies of greater inequality, social problems affect people across the class spectrum more heavily than in less unequal societies. High-income people in societies of greater inequality are more likely to suffer problems ranging from cardiovascular diseases to asthma to crime than high-income people in more equal societies. The same goes for those of medium income and, of course, for those of lower income.
More unequal societies rarely provide universal support mechanisms. Private provision of basic necessities inevitably means that support will be inadequate for the poorest and least-protected segments of the population. This harms them, but it also harms everyone else, as the COVID-19 pandemic showed clearly. Universal provision, as exists in all the advanced countries of the world except the United States, provides better care at lower cost than our system.
Conspicuous consumption becomes more important to our standing in an unequal society. But spending on goods purchased to symbolize superior status can crowd out spending on goods that would enhance welfare. Important among such underproduced “goods” is leisure. Workers in more equal societies have shorter work hours, more holidays, and longer vacations. The average worker in the United States works at least 20 percent more hours annually than workers in Germany or Sweden, for example.
Excessive consumption of goods used by the superrich and the nearly superrich to display their wealth raises the cost of living for everyone, because the price of high-end goods affects the costs of midscale and cheaper goods. Consider real estate: the $150 million price of condos on 57th Street in Manhattan cascades downward to the rest of the market, raising the price of housing for the moderately wealthy, the middle class, and the poor, and consigning tens of thousands to living on the street.
Inequality in the real estate market intersects with inequality in education. The irrational, decentralized financing of education in the United States creates extreme variability in the perceived quality of schools, which drives up suburban real estate prices as families choose to live in communities with schools that will put their kids on track to get into a university that will in turn prepare them for a high-paying career. Again, the high prices cascade their way down through the housing market, raising prices for everyone.
Unequal societies also suffer greater environmental degradation. Capitalism exploits the environment as it exploits workers; rapacious resource extraction and planned obsolescence of goods to be discarded as waste fatten profits that feed the hyperconsumption of the rich. On a world scale, the consumption of the richest 10 percent of the population is responsible for 50 percent of carbon emissions. High-inequality areas, moreover, devote fewer resources to environmental protection, because the rich resist taxation and can choose locations or insulate themselves from harmful environmental conditions.
While the excessive consumption of the rich makes them the worst polluters by far, mass consumption contributes too. The capitalist economy raises demands for its products through fast fashion, product obsolescence, and similar devices to promote consumption for its own sake.
Finally, people living in societies of relative equality are happier. Released from the stresses of insecure access to basic needs (for some) and status competition (for others), they can better enjoy life. According to international surveys, the happiest countries in the world are the five Scandinavian countries, which have among the most equal distributions of wealth and income among industrial nations.
We Need to Tax the Rich
The Tax the Rich campaign proposes to increase revenues by $20 billion. A corporate income tax increase was enacted in response to IONY’s 2021 Tax the Rich campaign, raising the corporate tax from 6.5 percent to 7.25 percent for corporations making over $5 billion per year and a smaller increase on the next tier of corporations. The current campaign seeks to make that increase permanent.
A second revenue bill would equalize the tax rate on employment earnings and capital gains. Presently, at both state and federal levels, when an owner of a security sells it at a profit, the gain is considered taxable income, but it is taxed at a lower rate than earnings from labor. In other words, you pay lower taxes on the money you make by sitting at home watching your assets grow than by actually working. The IONY proposal would tax capital gains at the same rate as other income.
The campaign is also about how the increased revenue should be spent. Revenue sources are not legally designated for particular expenditures. But Tax the Rich calls for increases in spending in a number of specific areas. The Build Public Renewables Act, which would enable the New York Power Authority to build renewable energy plants. Spending on public transportation would fund freezing of Metropolitan Transportation Authority (MTA) fares at $2.75, more frequent bus service, and the phasing in of fare-free buses. On the housing front, vouchers would provide rental subsidies for New Yorkers who are homeless or at risk of homelessness, while the good cause eviction rule would give renters the right to renew a lease and enable them to fight unconscionable rent hikes.
These programs offer a balance among meeting the urgent needs of the most desperate New Yorkers (the homeless), serving the interests of middle- and working-class people whose budgets are squeezed by rising prices (housing security for renters and the MTA fare freeze), and keeping the planet healthy (public renewable power and the buildup of public transportation).
Taxing the rich in New York will not magically transform the state into a paradise of equality. IONY’s proposal would make only a small dent in inequality and a small contribution to solving associated problems. Though New York is the most unequal state in the United States, achieving a more equal distribution would still leave vast landscapes of inequality throughout the country. Tax reform at the federal level, where the greatest tax burden falls, is needed to seriously attack inequality.
A second limitation is that equalizing incomes through taxation merely treats a symptom of the problem of inequality, rather than its source in the capitalist system that determines and allocates rewards. Fundamental change would require democratizing ownership and control of the economy, rather than leaving decisions about investment, production, and incomes to private, for-profit corporations.
Still, taxing the rich along the lines proposed by IONY would not only begin the badly needed task of redistributing wealth, but it would also educate the public about the need to reverse our current course of mounting inequality. If we can enact this legislation, much of New York might start to look very different.