Hillary Clinton comes under lots of attacks. Most of the charges leveled at the former secretary of state range from the far-fetched (her alleged complicity in the Benghazi tragedy, for instance) to the hard-to-discern-what-the-issue-is (her “damn e-mails”).
However, the one line of attack that is substantial, and that she’s had the most trouble dispelling, is her closeness to Wall Street. Many of the economic policies of her husband’s presidency — the repeal of the Glass-Steagall Act, the refusal to regulate derivatives — were formulated by top aides who’d spent their lives on Wall Street, who were instrumental in the explosive growth of the financial sector and who were trusted consiglieres to both Bill and Hillary.
To her credit, Clinton recognizes that stratospheric levels of economic inequality now require some reining in of Wall Street’s gluttony. She’s called for a small tax on high-frequency trading, a “risk fee” on a range of big financial institutions and a hike in the capital gains tax on short-term shareholders. Unlike her chief opponent for the Democratic nomination, Sen. Bernie Sanders (I-Vt.), however, she opposes a resurrection of the Glass-Steagall limits on commercial banks and hasn’t endorsed the kind of across-the-board financial transactions tax that Sanders has proposed.
Not surprisingly, then, Clinton’s Wall Street association still weighs her down. Late last month, the New York Times reported that her campaign advisers conceded that “the issue could resonate in Democratic [presidential primary] contests in Iowa, Nevada, Ohio and Michigan.” And Clinton certainly didn’t help herself when, during the last Democratic debate, she attributed her campaign contributions from Wall Street to her work to restore Manhattan after the 9/11 attacks.
So is there anything Clinton can do to rid herself of the Wall Street albatross? Of course there is. She should say that if elected president, she’d subject the Wall Streeters to a higher tax rate than anyone else.
That doesn’t mean taxing those employed in retail banking — loan officers and branch managers, not to mention tellers. But those taxpayers whose incomes put them in the highest bracket and who work for banks, private equity firms, hedge funds and the like should pay more than their fellow multimillionaires. (I’d exclude venture capitalists from this penalty, since they primarily fund innovation.)
We already have a separate tax rate for some of the wealthiest bankers. Under the tax code’s “carried interest” provision, hedge fund managers are taxed at a lower rate than Americans with identical incomes who make their money in a different line of work. That has it exactly backward. It’s plainly in the nation’s interest to shrink the scope and sway of the financial sector, and the most effective way to do that is to tax the incomes of its highest earners at Eisenhower-era levels (when the highest marginal rate was 91 percent). It’s no mere coincidence that it was during this time that the share of income going to the working and middle classes soared, that U.S. companies funded their expansions out of their own earnings rather than the equity markets and that, freed from the pressure of investors demanding a bigger cut for themselves, those companies offered their employees decent pay and job stability and invested more in employee training and long-term research.
As the top tax rates fell, however, Wall Street’s income and power rose — with profoundly negative consequences for the nation it purported to serve. The explosion in financiers’ pay played a decisive role not only in the redistribution of wealth and income to the top 1 percent but also in the growing dominance of big money over politics, the dismantling of domestic manufacturing in the service of shareholder value and the diversion of many of the most talented young college graduates to careers in asset inflation rather than value creation.
Clinton says she intends to raise taxes on the wealthiest Americans. She’s provided no numbers, but if, let’s say, that means hiking the rates on incomes over $1 million or $2 million to 45 or 50 percent, the better to fund affordable tuition or infrastructure repair, that would be great. But if she really wanted to create a more dynamic and equitable economy — based on making smart products rather than sweet deals — she’d see it was in the nation’s interest to loosen the stranglehold that Wall Street holds over our economy and politics. She’d raise the tax on its self-proclaimed wizards to a more appropriate 70 or 80 percent. That would be not only sound economics but also the one way she could definitively yank the Wall Street albatross from around her neck.
And if the wizards then up and leave? Renounce their citizenship and move to the Caymans? No problem — that way, they won’t be able to buy our elections.
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