Wealth Gap in the USA: A Warning for the ROC

Wealth Gap in the USA: A Warning for the ROC
China Times editorial (Taipei, Taiwan, ROC)
A Translation
October 31, 2012

Summary: George Soros and Warren Buffett have persuaded hundreds of wealthy individuals to participate in a patriotic millionaires tax increase program. Hopefully tycoons and entrepreneurs on Taiwan will show similar boldness and responsibility. The wealthy should pay more in taxes. Corporations should pay employees more in salaries. They should immediately reduce the gap between the rich and the poor. They should provide additional fuel for tomorrow's economic recovery.

Full Text below:

The U.S. presidential election looms. Americans are about to go to the polls. The main reason the candidates election prospects remain in a state of flux is the economic situation. The economy has tanked. Trade and budget deficits have ballooned. The wealth gap has widened. These facts are highly detrimental to the election prospects of the incumbent. The most serious problem is the gap between the rich and the poor. The problem did not arise overnight. But its consequences have been tearing the United States apart, and will continue doing so into the future. This issue is far more important than who will inhabit the White House. As we hold a mirror up to the U.S., we see how similar the situation is on Taiwan. We have no choice but to be more vigilant.

The wealthiest one percent in the United States owns 40% of the nation's wealth. Over the past three decades, the incomes of the wealthiest one percent of Americans have doubled. The assets of the wealthiest 0.1 percent of Americans have doubled. The income of the middle class on the other hand, has remained stagnant. The American Dream, with its emphasis on class mobility, in which everyone has the opportunity to succeed, has become a myth.

The United States has the most inequality of any nation on earth. People with insight, such as Nobel laureate Joseph Stiglitz, have warned that if the government allows the gap between the rich and the poor to increase, America will become a divided society. It will resemble the economies of the Third World. The problem of unequal distribution of wealth will eventually lead to a reaction against the rich.

Inequality in America has been increasing for decades. The increase in inequality began with the Reagan administration, when it loosened controls on the financial sector. It originated with the decline of the progressive tax system. Reagan's successors continued along the same path. As a result, today's richest one percent pay only 15 percent in income taxes. Their average tax rate is far lower than for middle-income earners. Also, the capital gains tax rate is lower than the payroll tax rate. So-called capital gains are often windfall profits. In other words, the U.S. tax system helps the rich make more money. It hinders the middle and lower classes in their attempt to earn money.

When wealthy conglomerates make money, they scream that government regulations should be relaxed. But during a depression or recession, they call upon the government for relief. This is truly a case of "privatizing the profits while socializing the losses." It is the epitome of injustice.

Now consider Taiwan. In recent years, the gap between the rich and the poor has been widening. Widespread unemployment, including unpaid leave, involuntary part time employment is common. People on Taiwan have yet to join Occupy Wall Street type movements. The rich and the poor have yet to clash head on. But if the problem is not addressed today, we will regret it tomorrow.

Narrowing the gap between the rich and the poor is a problem with many facets. This article will not try to address them all. But we urge the government to reform the tax system. We urge businesses to increase salaries. Help yourself by helping others.

Taxes account for only 12 percent of the ROC's GDP. This is far lower than the United States and Europe. It is also lower than South Korea. The USA boasts that it is the showcase of capitalism. Yet its income tax to GDP ratio is higher than the ROC's, which pursues the Three Peoples Principles. Now consider the ROK. Its economic structure and development pattern is similar to the ROC's. Before 1995, the South Korean income tax to GDP ratio was lower than the ROC's. In 1996, the situation was reversed. The South Korean government imposed a higher income tax to GDP ratio. The world was impressed with its boldness. By contrast, the ROC government, with its low income tax to GDP ratio, seems indecisive, inadequate.

ROC tax rates are low and getting even lower. This may have something to do with frequent elections. Political parties compete for votes by promising tax cuts. The government fails to balance its powers and responsibilities with social justice. Quadrennial elections began in 1996. This matches the cycle of declines in tax ratios. It gets worse. Taxation of income has a redistributive effect. This effect should be greater than the effect of government wealth transfers. But in recent years, income redistribution on Taiwan has relied mostly on government transfer payments, rather than taxes. Under democracy, issuing money is easy, raising taxes is difficult.

The capital gains tax will not take effect until New Year's Day next year. Recently legislators proposed merging it into stock transaction taxes. Their pretext was the lackluster stock market and the downturn in the economy. But large numbers of families are unemployed. Anyone still able to invest in the stock market is among the lucky ones. The level of taxation is unrelated to prosperity and competitiveness. Consider the high tax rates in the Nordic countries. Their economies remain vital. The gap between the rich and the poor remains small. Addressing unemployment is more urgent and more essential than adjusting capital gains tax rates. After all, the capital gains tax has yet to be imposed. The Ministry of Finance has finally managed to get the capital gains tax passed. It must not be abandoned.

Business owners must take the long view. They must take the initiative to reduce profits and increase employee salaries. This will motivate staff productivity. It will also increase domestic demand. Many years ago U.S. auto magnate Henry Ford paid employees higher salaries to inspire them to work harder and enable them to buy Ford automobiles.

George Soros and Warren Buffett have persuaded hundreds of wealthy individuals to participate in a patriotic millionaires tax increase program. They said, “Our country has been good to us. It provided a foundation through which we could succeed. Now, we want to do our part to keep that foundation strong so that others can succeed as we have.” 

Hopefully tycoons and entrepreneurs on Taiwan will show similar boldness and responsibility. The wealthy should pay more in taxes. Corporations should pay employees more in salaries. They should immediately reduce the gap between the rich and the poor. They should provide additional fuel for tomorrow's economic recovery.
   
中時電子報 新聞
中國時報 　2012.10.31
社論－美國貧富對立帶給台灣的警惕與省思
本報訊

    　美國大選即將投開票，經濟狀況仍是左右選局主因。景氣低迷、外貿預算雙赤字攀升、貧富差距擴大，都對現任政府極為不利。各項問題中尤以貧富對立，其原因冰凍三尺非一日之寒，其後果已撕裂美國的今日與未來。它的重要性可能遠超乎誰主白宮。借鏡美國的同時，我們發現台灣的近況相當神似，實在不能不多加警惕。

    　美國最富百分之一人口，擁有全國百分之四十的財富。近三十年來，收入最高的百分之一美國人所得成長一倍；收入最高的百分之零點一美國人資產成長兩倍，而中產階級的收入則停滯不前。強調階級流動、人人都有機會的「美國夢」已經變成神話。

    　美國已成先進國家中最不均者。有識之士如諾貝爾得主史提格里茲（Joseph Stiglitz），早就警告當局若任由貧富矛盾激化，美國將走向分裂社會，且與第三世界經濟體愈趨相似，貧富不均問題終將對富人造成反噬。

    　美國不均度已經持續惡化幾十年。導致不均度上升的原因，大約可從雷根政府撤銷對金融部門的管制，以及賦稅系統累進幅度的下降為其濫觴。雷根的繼承者繼續走相同的路，以致於今天頂層百分之一富人，大概只繳所得的百分之十五，其平均稅率遠低於中等所得者。另外，目前資本利得稅竟比薪資稅率還低，所謂資本利得又常是投機獲取的利潤。換言之，美國的稅制偏袒用錢賺錢的富者，對於以勞力賺錢的中下階級則極不友善。

    　最不合理的是，財團賺錢時大呼政府管制應該鬆綁，遇有蕭條不景氣時又呼籲政府紓困。真正是「把利潤私有化，把損失社會化」，不公不義莫此為甚。

    　回頭檢視台灣，近年貧富差距拉大，廣義失業狀況（含無薪假、非志願性半職等）嚴峻，都是絕無僅有的。台灣社會雖沒出現「占領華爾街運動」，貧富族群也尚未尖銳對立，但是今天如不積極解決，明天就會後悔。

    　縮小貧富差距之道，經緯萬端，本文無法盡述。我們最急於呼籲政府的是，堅持稅制改革，為所當為；最急於呼籲企業的是，調高員工薪資，利人利己。

    　台灣稅收占ＧＤＰ比率只有百分之十二左右，不但遠低於歐美國家，也低於南韓。號稱資本主義櫥窗的美國，其稅收占ＧＤＰ比率從頭至尾都高於「奉行三民主義」的台灣。再看經濟結構、發展方式與台灣極度相似的韓國。一九九五年之前，韓國稅收占ＧＤＰ的比率都低於台灣。但是一九九六年之後，情況完全相反。稅收比率較高的韓國政府，令世人留有勇於任事的印象；稅收比率偏低的台灣政府，似乎瞻前顧後，左支右絀。

    　台灣的稅收比率偏低且每況愈下，可能與選舉頻繁有關。政黨為爭選票，競相減稅，置政府權責與公義分配於不顧。一九九六年起每四年一次的大選，似乎影射著稅收比率下滑的節奏。尤有甚者，稅收的所得重分配效果照說應該高於政府移轉支出之效果。但是近年來台灣的所得重分配，大多仰賴政府移轉支出，而不是稅收。蓋因民主政治之下，發錢容易，收稅難。

    　明年元旦才要上路的證所稅，近日就被部分立委提案，企圖併入證交稅。股市冷、不景氣是提案者的藉口。相對於大量失業家庭，能夠投資股市者實在是幸運兒。稅率的高低實在與景氣、競爭力無關。請看高稅率的北歐國家，經濟既有活力，貧富差距又小。如何解決失業的急迫性與正當性，遠高於調動尚未上路的證所稅。財政部好不容易才通過上路的證所稅，絕對不該棄守。

    　企業主如果願意以長遠眼光，主動減少利潤，為員工加薪，不僅可激勵員工生產力，更可增加全體內需。當年美國汽車大王亨利福特給員工加薪，就是要他們認真工作並且買得起福特汽車。

    　包括索羅斯和巴菲特，已有數百人聯名發起百萬富豪愛國增稅方案。他們說「美國善待我們，提供一個讓我們成功的基礎。現在我們要回饋，使這個基礎更堅實，也讓別人可以像我們一樣成功」。

    　但願台灣的富豪和企業家，也有這份氣魄與擔當。富者加稅，企業為員工加薪，立刻縮減貧富差距，也為明天的經濟復甦添加柴火。