Wall Streeters don’t balance New York’s budget. Taxes on Wall Streeters do.

Clyde Haberman’s “What to Expect in New York in 2012″ contains what I realize is a throwaway line. But I can’t let it go because the sentiment it reflects is both pervasive and pernicious.

The local economy may feel the effects of layoffs in financial services this past year. Even hard-core haters of the 1 percent might come to appreciate the importance of Wall Street types to the public purse, not that many of them would ever say so publicly.

This line has rankled me for more than a decade—ever since Andrew Sullivan in 2000 (in an article that I unfortunately can’t find; the web was young then) derided Al Gore’s promise to raise taxes on the wealthy by snarking about “the top one percent, without whom there would be no surplus.”

Correction. Without taxes on the top one percent there would have been no (Clinton-era) surplus. This isn’t opinion. It’s history. The top one percent didn’t go away after George W. Bush lost won the 2000 election. In fact they did very well, due largely to capital gains. What went away was even the modest, Clinton-era level of taxation on the top one percent—and with it, the surplus.

If Wall Streeters want to, they can try to argue that what they do creates huge benefits for the economy as a whole. The narrower argument that they benefit Gotham specifically, by hoovering up profit that would accrue to the rest of the country and spending it in New York, would be somewhat more persuasive (though this argument, which might be called the “efficient-parasite hypothesis,” is for some reason rarely asserted in the first person). But if we’re talking about a contribution to the city, state, or national budget, it’s not their economic activity or anyone else’s that brings about that. It’s the taxes on that activity.

This point matters politically and matters a lot. “Class warfare” hysteria aside, very few who criticize the top one percent want them to stop existing (nor is there a shred of evidence that any mainstream progressive proposal would threaten their existence). We want them to face somewhat tighter regulations and substantially higher taxes. If you want Wall Street to contribute to “the public purse,” you belong on the side of Elizabeth Warren, not Donald Trump.




    • Andrew Sabl says

      Nice. But the *current* one percent could of course stop existing—fatally punctured by the pitchforks of rampaging anarchists from Zuccotti Park—and that’s the fate that the increasingly desperate defenders of the status quo seem to fear, or profess to fear.

  1. larry birnbaum says

    “…ever since Andrew Sullivan in 2000 (in an article that I unfortunately can’t find; the web was young then) derided Al Gore’s promise to raise taxes on the wealthy by snarking about ‘the top one percent, without whom there would be no surplus.’”

    More evidence why Mark’s approbation for Sullivan’s “recantation” of his loony-tunes endorsement of loonier-tunes Ron Paul made no sense.

  2. liberal says

    ““Class warfare” hysteria aside, very few who criticize the top one percent want them to stop existing…”

    The fundamental issue is rent collection. To the extent that the rich get that way by benefiting from government-granted privileges, yes, I want them to stop existing. To the extent they make actual contributions to production, I want them to continue existing.

  3. darryl says

    Ching! “Efficient Parasite Hypothesis” (or EPH) makes a very nice coinage.

    Reminds me of William H. McNeil’s definition (in Plagues and Peoples) of ruling elites as “macro-parasites” (as opposed to the micro-parasites of biological epidemic disease; a secondary thesis of the book being the suggestion that the invention of agriculture created the uniquely enlarged and concentrated population base necessary for the support of both types of parasite, and without which neither could survive).

    I’ve always thought “macro-parasite” deserved wider circulation than it ever got. Here’s to EPH doing better.

    • Andrew Sabl says

      Jared Diamond says something similar about priests (and I suppose their contemporary secular equivalent, i.e. political theorists) in *Guns, Germs, and Steel.* I can’t remember if he cites McNeil or not.

  4. Betsy says

    So if the 1% claim that their economic activity is good for everyone, and that they should therefore not be taxed (non sequitur, but assuming arguendo here) … how is their money special? How are *they* the “job creators”?

    Isn’t anyone’s economic activity also good for everyone else? Doesn’t that make everyone in the 99% a job creator who should not be taxed? Why does it create jobs and benefit the economy to have 50% of the resources (or more) concentrated in the 1 percent, but not the 50% that belongs to the 99 percent? I don’t get it. Someone explain to me how a 20 million dollar yacht is better for the economy than 2,000 $10,000 cars or 200,000 $10 bags of groceries.

    Why does the purchasing power have to be vested in the very rich to be considered job-creating wealth? Wouldn’t it be better if purchasing power of the same amount were in the form of general prosperity and utility (such as cars and groceries doing many many people lots of good and helping them be productive) than in some luxury good that only one or a few people can use at a time, and which doesn’t even constitute capital in the sense of useful production means … or even useful raw materiel …

    • CharlesWT says

      The wealthy drive technological development by being first adapters of initially expensive technologies. The poor have consumer goods that use to be luxuries. And the homeless have cell phones.

      • Betsy says

        Ha! Perfect. What, technological innovation like cars? Even Henry Ford knew the key there was broad-based prosperity in the ranks of the working!

        • CharlesWT says

          Cars had been around for some decades and were very expensive before Ford got in the game.

          • Betsy says

            I mean that’s fine, the first-adapter effect is surely something that the rich (as well as the non-rich, but profligate) do contribute. I would have named it myself as contributory.

            But it’s a fractionally small effect, or a catalytic effect on a fractional part of the economy. It’s not a driving effect. It’s not a job-creating effect.

      • J. Michael Neal says

        True, but by far the larger share of economic growth comes when the former luxuries become standard consumer goods, not when they are initially created. If you want to create economic growth, then you have to make sure that everyone else has enough money to buy stuff. So Betsy’s question still stands: why is it the rich that are considered *the* job creators when it is the spending of the rest of the population that really drives the creation of jobs in any mass sense?

        • says

          Because the rich have gained control of the media?

          In fact, there’s a pretty good argument that (like defense spending compared to human-services or infrastructure spending) a dollar passing into the hands of a rich person creates fewer jobs on average than the same dollar passing into the hands of a middle-class or poor person.

  5. says

    As far as I can tell, the enormous sums of money Wall Street makes has less to do with creating value, than merely being in an oligarchical sweet spot.