- Every Friday, "20 Minutes" offers a personality to comment on a social phenomenon, in his meeting "20 Minutes with ...".
- Emmanuel Saez and Gabriel Zucman have just published Le Triomphe de l'Injustice , (Ed. Le Seuil), a work that combines historical narrative and economic analysis on American taxation.
- Their book, which points to the inequality of the American tax system, provokes an unprecedented debate a few months before the presidential election in the United States
For the first time in more than a century, American billionaires are paying less tax in proportion to their income than the American middle and working classes. Emmanuel Saez and Gabriel Zucman, French economists who teach in Berkeley, California, explore the roots of this state of affairs in their work Le Triomphe de l'Injustice (Ed. Seuil). A book, the fruit of months of research, which provokes debate among the Democratic candidates, a few months before the presidential election. Their work also alerts to the drifts of the declining tax applied by European states and in particular France. As an extension of the publication of their book, they make their data and research available on the TaxJusticeNow.org site.
The strong idea of your book The Triumph of Injustice (Ed. Seuil) is that taxes are a tool for social justice. It is very successful in the United States, where it provokes debate, why?
With the election of Ronald Reagan in 1981, the United States brought down an extremely ambitious system of progressive tax rates, which had been in place in the 1930s.
If we look at the period 1980-2018, during the Reagan revolution, during which the tax became much less progressive, with a tax rate of 28% for the middle classes and 23% on the highest incomes, we see that growth has decreased by 1.4% per year on average and especially that it has become very unequal.
Particularly for the lower classes. The poorest 50% of Americans experienced a complete stagnation of their income, that is to say that the average income of the working classes was 18,000 dollars per year in 1980 and today it is 18,500 dollars per year per adult.
So almost zero growth points for half of the American population. At the same time, there is an explosion of income for the richest 0.1% of income.
However, from the 1930s to the 1980s, the United States had implemented one of the most advanced progressive tax systems in the world.
To fully understand how far the United States has gone in tax escalation, one must remember the speech by Franklin Delano Roosevelt to Congress in 1942, "Look, no American should have after-tax income more than 25,000 dollars at the time (1 million dollars today) ”. He proposes to create a 100% tax on all income above $ 25,000.
Parliamentarians agreed on a rate of 93% and this rate of 93% on the highest incomes remained in force until the 1950s, then the 1960s including in the time of Dwight D. Eisenhower. This testifies to the consensus in the United States at the time on the fact of using the tax system to regulate inequalities.
Why ?
The aim is to prevent too much wealth which is akin to an overly extreme concentration of power: the power to influence the dominant ideology by creating foundations, think tanks, buying media, for example .
If we read the American founding fathers, in particular James Madison, who is one of the fathers of the American Constitution and in the pantheon of American conservatives today, the state must limit the accumulation of wealth by a handful of individuals, because this wealth is concentrated at the expense of democracy.
How does the paradigm shift of the 1980s take place with the Reagan revolution?
First there is the economic theory of runoff, which was very popular at the time. But also the triumph of a certain defeatism. When Ronald Reagan entered the White House in 1981, the tax rate on the highest earners was 70%. But meanwhile Ronald Reagan made this famous speech: "The government is not the solution, it is the problem".
This discourse legitimizes the tax optimization industry and in fact there is a boom in tax evasion and optimization in the 1980s. In 1986, all the political elites are convinced that it is no longer possible to tax the highest earners and that the only solution is to lower their taxes. This is how Ronald Reagan's tax reform was passed by a Congress with a Democratic majority. In the Senate, 97 out of 100 senators will also vote for its reform. Almost all are Democrats, they are even the party figures of the 2000s: John Kerry, All Gore, Ted Kennedy, Joe Biden.
Today, all the democratic candidates for the primary, and particularly Elisabeth Warren and Bernie Sanders, propose the establishment of taxes on very large fortunes at an extremely high level in the pyramid of wealth (50 million dollars of fortune for Warren and 32 million for Sanders).
If we look at opinion polls, a majority of Americans consider that today the wealthy do not pay enough taxes. There is a strong demand to fight against inequalities. For a long time, the Democratic Party did not respond to this request. It is changing.
His program earned Bernie Sanders a label of socialist, would it not be detrimental to him?
Almost 50% of the American population does not vote in the presidential election because it does not feel represented by the candidates. When we look at the polls that are done on a potential Donald Trump confrontation against Bernie Sanders, we see that Sanders is the Democratic candidate who would fare best against Trump.
Bernie Sanders' bet is as follows: to mobilize part of the abstainers who represent 50% of the electorate. Will it pay off in this election? Many people have been away from the political process for a very long time, so perhaps their re-mobilization will take time.
What is the nature of your contact with the Bernie Sanders team?
From elementary school in 2016, Sanders took over our work with Emmanuel Saez on inequalities. This allowed us to discuss with his team on tax issues. Beyond these exchanges, we wanted with Emmanuel Saez to write a book and a site which is an extension of TaxJusticeNow.org to contribute to the widest and most democratic debate possible. So much so that all the candidates for the Democratic primary are now raising taxes on the highest earners. Even Joe Biden and Michael Bloomberg are proposing tax increases of 30% or 40% for the wealthiest Americans.
Still, the 2020 election is caricatured: we have on the one hand a billionaire Donald Trump, on the other Michael Bloomberg who has already spent $ 365 million and is already number 2 in the polls without even having campaigned. It is a worrying plutocratic drift in a country where the lack of federal revenue requires strong measures.
Health insurance for example?
Today, health in the United States absorbs 18% of the GDP against 10 to 11% in other countries, including France.
This is the cost of private health insurance premiums today, and who bears this cost (source: https://t.co/QPwFwRhWwX)
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With a decline in life expectancy in 2015, 2016, 2017 and overall performance is quite dramatic.
Through their employer, people contribute up to $ 13,000 a year (for those who are not covered by Medicare or Medicaid), regardless of the amount of their remuneration. It is like capitation, the most unfair tax there is. It is a compulsory and privatized tax which goes directly to private insurance funds.
If this system were replaced by indexed income taxes, more than 80% of people would gain. For the most popular classes, this would be an essential gain.
In the light of your work, how do you analyze tax policy in France?
In France we have the same system as in the United States with a regression of the tax which is problematic. Except that the levy rate is higher: 50% for the middle classes when the highest incomes are only taxed up to 40%.
We are in the caricature of the thought that has dominated in many countries: the richest are more mobile, they must be zero-rated. We can only tax the most immobile plates like the fuel tax that will cause the movement of yellow vests. Steps were then taken to rebalance. Nevertheless, this sequence increases the divorce between the working classes and the high incomes and the political elites. We can do it differently. Also on a European scale.
On tax exile, France could choose to tax these expatriates at least for a few years after their departure, contrary to what is currently done. If you have managed to build a great fortune in France, it is all the same thanks to the studies you have done there, to French infrastructures, to the workers you have employed trained by French schools and universities. There is no natural right to expatriate and be exempt from taxes once a fortune has been made.
- American presidential election
- Economy
- Society
- tax system