Dealing With Sinema
Joe Manchin doesn’t want to spend; Kyrsten Sinema doesn’t want to tax—that is, in both cases, on anything that would ease the travails of most Americans and make the economy a bit more egalitarian and vibrant. To deal with Manchin, Democrats are having to scale back the most humane and forward-looking programs they’ve ever proposed. To deal with Sinema, who opposes raising taxes on corporations and the rich (despite the overwhelming support such taxes receive in poll after poll), Democrats are scrambling to find some other way to fund their programs that still focuses on the vast pots of money that billionaires passively accumulate and that corporate CEOs reward themselves with.
Let’s begin with the billionaires, whose fortunes have swelled during the pandemic not because they’ve been developing new products but, rather, because their stock portfolios have swelled. America’s billionaires are more than a trillion dollars richer now than they were before COVID-19 struck, simply because the stocks they already own have risen in value (as have the great majority of stocks). This has sent the wealth of Jeff Bezos and Elon Musk soaring, and fattened their coffers so much that they’ve each embarked on their own vanity space programs, with a benefit to humankind that is as yet undetectable.
These passive gains in wealth go untaxed, though; as the Bezos-Musk space race makes clear, our billionaires have more money than they know what to do with—at least, productively to do with. Accordingly, Democrats are now proposing to treat such gains as income, subject to taxation. Ironically, this would be a scaled-back version of Elizabeth Warren’s proposal to tax such gains, though Warren was willing to subject mere centi-millionaires (those with wealth over $100,000,000) to such taxes, too.
The other Democratic work-around (around Sinema, that is) is to tax corporations that buy back their own stock—a move that reduces the number of outstanding shares, which boosts the value of the remaining shares, thereby rewarding shareholders and the top corporate executives who are routinely awarded with shares when the value of shares rises. Not coincidentally, it’s those very top corporate executives who make the decision to buy back shares, thereby considerably enriching themselves. Nice work if you can get it.
Nobody but those top corporate executives was really paying attention to share buybacks until the middle of the last decade, when University of Massachusetts economist William Lazonick wrote an article for the Harvard Business Review documenting the surprising and depressing fact that the companies that had belonged to the Fortune 500 during the previous decade had spent so much on share buybacks and dividends that the total was either equal to or actually exceeded their profits. Rather than devote their revenues to research and development or new product lines or better wages and benefits, America’s corporations were rewarding their shareholders and executives.
As share buybacks do not reward executives and investors for things like innovation, they are, like the asset value increase of billionaires’ stock holdings, the most passive source of income, and, again, directed overwhelmingly to the already rich. Accordingly, that exemplary Democratic senator, Sherrod Brown of Ohio, has proposed taxing corporations for their buybacks, which have only become more pervasive and pernicious since Lazonick’s original study.
One can only hope that these two progressive and creative proposals will pass muster with Sinema, who is increasingly showing signs of being either a sociopathic narcissist or a narcissistic sociopath. Which, dear reader, do you think she is?
Harold Meyerson is editor at large of The American Prospect. His email is firstname.lastname@example.org.
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