Text 1. Democracy and Equality

Date: 2015-10-07; view: 395.

UNIT 9: INEQUALITY IN ECONOMY

Although the United States is a democracy that prizes political equality for its citizens, its record in economic equality is not as good. In fact, its distribution of wealth—which includes not only income but ownership of savings, housing, automobiles, stocks, and so on—is strikingly unequal. According to the Census Bureau, the top 12 percent of American families control almost 40 percent of household wealth. Moreover, the distribution of wealth by ethnic groups is alarming. The typical white family—which has an annual income more than 1.7 times that of blacks and 1.5 times that of Hispanics—has more than ten times the accumulated wealth of black families and nearly eight times the wealth of Hispanic families. If democracy means government “by the people,” why are all the people not sharing more equally in the nation's wealth? If one of the purposes of government is to promote equality, why are government policies not working that way?

One scholar theorizes that interest group activity in a pluralist democracy distorts government's efforts to promote equality. His analysis of pluralism sees “corporations and organized groups with an upper-income slant as exerting political power over and above the formal one-man-one-vote standard of democracy.” The pluralist model of democracy rewards those groups that are well organized and well funded.

An example: As already noted, federal income tax is withheld by law from earned income (salaries and wages), not from unearned income (interest and dividends). Early in his first term, President Reagan surprised the financial world by proposing to withhold taxes from unearned income as part of his overall economic plan, and Congress made the plan law in the summer of 1982. Financial institutions were given a year to devise procedures for withholding 10 percent of dividend and interest payments for income tax (the withholding was to begin July 1, 1983). Led by the American Bankers' Association, the banking interests urged their depositors to write legislators protesting the law; they even handed out sample letters that could be sent to members of Congress.

Some people, who apparently had never declared their bank interest as income, indignantly protested this “new” tax. Washington was flooded with mail stimulated by local banks and savings and loan associations. Congress had to hire temporary workers to answer letters from angry high-income taxpayers (who are also high-turnout voters). The president and many members of Congress were furious at the American Bankers' Association, which spent more than $300,000 in its effort to have the law repealed. Democratic Representative Thomas J. Downey of New York said that if withholding was repealed, “We send a signal that the Congress of the United States is a group of patsies to every well-organized group in America.” But Congress did back down, and withholding from unearned income was repealed only weeks before it was to go into effect.

What would happen if federal tax policy were determined according to principles of majoritarian rather than pluralist democracy? Perhaps not much—if public opinion is any guide. The people of the United States are not eager to redistribute wealth by increasing the only major progressive tax, the income tax. If federal taxes must be raised, Americans strongly favor a national sales tax over increased income taxes. But a sales tax is a flat tax, paid by rich and poor at the same rate; it would have a regressive effect on income distribution, promoting inequality not equality. The public also prefers a weekly $10 million national lottery to an increase in the income tax. Because the poor are willing to chance more of their income on winning a fortune through lotteries than are rich people, lotteries (run by twenty-six states in 1988) also contribute to income inequality through a regressive revenue system.

The newest tax on the horizon is a type of national retail sales tax called the value-added tax (VAT), which is applied to the value added to a product at each stage of production and distribution. The VAT is levied by all countries in the European Economic Community, and—with the potential of a 5 percent VAT raising about $100 billion annually in revenue—it is certain to be a subject of debate in the United States. But if a VAT is adopted in place of raising the income tax rate, it, like all sales taxes, will be a regressive tax.

Majoritarians might argue that most Americans fail to understand the inequities of the federal tax system. However, majoritarians cannot argue that the public demands “fairer” tax rates that take from richer citizens to help poorer ones. If it did, the lowest-income families might receive a greater share of the national income than they do. Instead, economic policy is determined mainly through a complex process of pluralist politics that preserves nearly half the national income in the hands of the wealthiest 20 percent of families.

(from “The Challenge of Democracy”)

Tasks:

do the phonetic reading and written literary translation of the fifth passage;

put 8 questions to the text;

give the summary of the text;

retell the text as if you were:

1) a representative of some ethnic group;

2) a low income tax payer;

3) a high income tax payer;

4) a large domestic producer;

5)an economist.