"Five Policies Eric Cantor Should (But Probably Won’t) Embrace To Reduce Income Inequality"
With income inequality at its highest level in the U.S. since the Great Depression, House Majority Leader Eric Cantor (R-VA) finally agreed this week that “there is too much income disparity.” On Friday, he will deliver a speech on income inequality and “how Republicans believe the government could help fix it.”
Currently, his two major ideas center on relying on the wealthy and “mak[ing] sure the people at the the top stay there.” But in case he’s legitimately considering the issue, we’d like to be helpful and offer five tangible ways Cantor and Congress could effectively address income disparity:
1. Promote Unionization: Unions are a key building block of a strong middle-class, ensuring fair wages and treatment of working families. Research shows that today’s union workers make about $2.50 more per hour than their non-union counterparts. However, union membership has seen a sharp decline in membership over the past forty years, matched by an significant drop in the middle class’s share of the nation’s income, while America’s wealthy take their largest share of national income in over 80 years. If unionization rates were just 10 percent higher, the Center for American Progress found that a “typical middle class household would earn $1,479 more every year.” Cantor’s home state of Virginia’s unionization rate currently stands at 4.7 percent. If it was 10 percent, Virginia’s middle class families would gain over $3 billion in income.
2. Rein in CEO Pay: Executive pay continues to greatly outpace worker’s wages, with CEOs at America’s largest companies earning 343 times more than the typical worker. Indeed, “the largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms.” And while executive pay has “more than quadrupled” since the 1970s, pay for a typical worker “has dropped more than 10 percent” over the same period. 90 percent of major U.S. companies “expressly set their executive pay targets at or above the median pay,” which for “top executives” stands at about $4.9 million.
3. Fair, Progressive Tax Reform: Preferential tax treatment for America’s wealthy is a driving force behind income inequality. The Bush tax cuts that Republicans continually fight for increased the economic divide “by delivering more than half of their benefits in 2010 to the top 10 percent of earners, who make over $170,000 a year.” In fact, 25 percent of millionaires in the U.S. pay a lower effective tax rate than 10.4 million middle-class Americans because of favorable tax treatment. Overall, the working poor are actually paying a higher percentage of their income in state and local taxes than the wealthy in 49 states. If Cantor would champion progressive tax policies like the Buffett rule, it would put every taxpayer on a more equal footing and help to alleviate the income disparity.
4. Increase the Capital Gains Tax Rate: As TP Economy editor Pat Garofalo notes, capital gains (including stock, bonds, and real estate profits) “are almost exclusively made by the very wealthy and are taxed at lower rates than wages and salaries,” which serves to drive income inequality. Over the past 20 years, more than 80 percent of capital gains income in the U.S. has gone to the top 5 percent. Because the capital gains tax is capped at 15 percent, “anyone making more than $34,500 a year in wages and salary is taxed at a higher rate than a billionaire is taxed on untold millions in capital gains.” If Cantor — who currently champions reducing this tax rate — really wants to address the disparity, he’ll reconsider this position.
5. Promote Economic Mobility Through Education: Economic mobility is a bedrock principle of American society. But a recent report found that Americans face widespread “downward mobility,” with one in three middle-class Americans slipping down the income ladder. This trend, along with general income inequality, stifles economic growth which, in turn, hampers mobility. As the Brookings Institute notes, promoting education is a vital way to “boost the mobility of children from poor and low-income families.” Cantor — who voted against bolstering Pell Grants, reducing student loan payment rates, and believes preventing teacher layoffs is not a priority — may ignore this as well.
Most of these policies would require Cantor to reject the entire portfolio of GOP talking points and thus are unlikely to make it into his speech. However, if he is serious about finding a solution for income disparity, he should start by recognizing the problems behind it.