G2 EZ EE THE WASHINGTON POST.SUNDAY, OCTOBER 20 , 2019
system further in their favor. Put
more simply, it is to prevent
anyone from becoming super-
rich in the first place.
What Saez and Zucman seem
to forget is that taxes are not the
only, or even the main, reason,
why the distribution of wealth,
income and power has become
so unequal. Nor are taxes the
only instrument for unrigging
markets to make them more
competitive. It is possible to
change the way the economic
pie is divided by changing the
rules of the marketplace —
altering trade treaties,
reforming labor laws, stepping
up antitrust enforcement and
financial regulation, and
curbing the role of money in
politics.
These other strategies go
down easier with Americans
than confiscatory taxes and
muscular redistribution. And
they have the distinct advantage
that they can be justified
without demonizing those who
acquired their wealth fair and
square, providing products and
services people wanted to buy at
prices they were willing to pay.
“Soaking the rich,” “ making
them pay” — this is the rhetoric
of a class war that most
Americans don’t want and that
neither side can win. It’s bad
politics and bad economics.
In using the tax code as the
go-to instrument for managing
the economy or assuring
economic and social justice,
progressive Democrats risk
making the same mistake as
free-market Republicans.
Doing so inevitably
undermines what ought to be
the primary goal of any tax
system, which is to finance vital
government services in a way
that is efficient, economically
neutral and broadly based on
the ability to pay.
[email protected]that for the ultrarich, that point
won’t be reached until their
annual cash income is taxed at
75 percent and their overall
wealth at 3 percent.
There are two problems with
this line of argument.
The first is the assumption
that there is a fixed tipping
point at which rich people begin
to withhold their money or their
excellence, shrinking the pie for
everyone. It is in the nature of
social scientists these days to
believe that, on the basis of hard
data, they can calculate exactly
where that tipping point is. And
it is in the nature of journalists
to be skeptical of such
calculations, knowing that
economic decisions are shaped
by norms and expectations that
vary by country and culture and
are constantly evolving.
A second objection is that
people have a variety of
sometimes conflicting notions of
economic justice that don’t
conform to the Rawlsian
formula of “tax ‘em till they
squeal.” We think it fair that
people should keep the fruits of
their hard work and ingenuity.
We think it unfair if anyone is
forced to live in misery or
degradation but expect everyone
to take responsibility for their
lives.
We think equality of
opportunity more important
than equality of economic
outcomes.
Saez and Zucman, however,
scoff at such “nebulous” moral
precepts. In their view, the
rationale for confiscatory tax
rates isn’t simply to ensure that
the rich pay their fair share and
take care of the poor.
The real aim, they write, is to
prevent the superwealthy from
using their economic and
political power to entrench their
advantage and tilt an already-
rigged political and economicThey start with the definition
of economic justice proposed by
the renowned Harvard
philosopher John Rawls, who
argued that the only reason to
tolerate an economic system
with any income inequality is
that it makes even the poorest
among us better off.
From that standpoint, they
reason, fairness requires that we
keep raising taxes on the rich
(and redistributing the revenue
to the poor) until the rich stop
working and head to the beach,
or stop saving and investing, or
take extraordinary steps to avoid
paying taxes at all.
Saez and Zucman calculateuse to buy a yacht or give to
charity or pay his taxes. Ye t it is
based on this more expansive
definition of income that Saez
and Zucman assert that the
American tax system is no
longer progressive.
Using the more traditional
definition of income, the
Congressional Budget Office and
the Ta x Policy Center, among
others, find the tax system is still
progressive, albeit less than it
was and less than it should be.
More troubling is the moral
calculus Saez and Zucman use to
justify what they proudly
acknowledge as confiscatory tax
rates for the wealthy.and economists would endorse
many of their proposals: an
international treaty to shut
down the use of tax havens by
multinational corporations;
stepped-up enforcement by the
Internal Revenue Service;
equalizing tax rates for
corporations and other
businesses; equalizing tax rates
for labor (wages and salaries)
and investment income (capital
gains and dividends);
“integrating” t he corporate and
individual income taxes by
giving shareholders a tax credit
for their share of corporate taxes
paid. Given the Bush and Trump
tax cuts, most would also agree
that the rich need to pay more in
taxes.
But some of their proposals
push things too far, based on
questionable assumptions and
faulty logic.
The most obvious flaw is that
in calculating the annual
incomes of wealthy individuals,
they include those individuals’
shares of the annual profits in
companies they own, even if
they never receive those profits
in the form of dividends or
capital gains.
That may be the way the
nation’s GDP accounts are
calculated, but when thinking
about the percentage of income
individuals pay in taxes, it is
misleading.
The book value of Mark
Zuckerberg’s Facebook stake
might go up by a billion dollars
in a year, but until he sells his
stock for cash, that increase in
his paper wealth shouldn’t be
confused with income he canto guarantee day care, health
care, college educations and jobs
for all Americans.
The latest progressive tax
manifesto comes from Berkeley
economists Emmanuel Saez and
Gabriel Zucman, who are also
advisers to Democratic
presidential candidate Elizabeth
Warren. In “The Triumph of
Injustice: How the Rich Dodge
Ta xes and How to Make Them
Pay,” Saez and Zucman build on
work assembling decades of tax
data to document the dramatic
rise in income inequality.
This work focuses on the
decline in taxes paid by wealthy
Americans, including the
startling finding that the richest
400 taxpayers now pay less in
taxes as a percentage of their
income — 2 3 percent — than the
middle and working classes.
To roll back this loss of
progressivity, the economists
propose steep increases in the
corporate tax and the individual
income tax for the wealthiest
households, along with a new
annual wealth tax for those with
a net worth of more than
$50 million. Those changes
would bring the overall tax
burden for the richest
Americans back up to
60 percent, where it was in 1960
— a level, they say, demanded
both by economic justice and
economic efficiency.
Saez and Zucman are
respected economists who have
produced a well-written, well-
reasoned and thought-provoking
book. The majority of tax experts
PEARLSTEIN FROM G1
benefits,” s aid director of
communications Mary D eTurris
Poust. “However, t he Diocese of
Albany never managed t he St.
Clare’s pension fund.”
But a gain, this isn’t just about
this one pension plan. There are
possibly 1 million people
nationwide participating i n
religious-affiliated p ension plans,
according t o Smith.
“But that’s not to say that all of
them are i n financial trouble or
anything like t hat,” s he said. “But
because they don’t have the
federal backstop, of c ourse t here
is always more risk.”
AARP’s advice: C heck o ut your
church plan.
“Many people would have n o
idea that they are not protected
by federal laws on p ensions,” s aid
William Alvarado Rivera, senior
vice president for litigation a t the
AARP Foundation. “It may well be
something t hat people may want
to ask i f they’re w orking f or a
company, a school, a hospital or
some other provider.”
As I reviewed the facts in this
case, i t’s clear to me that C ongress
needs to revisit the r eligious-
affiliated pension plan
exemption. O r many more people
might find o ut too late t hat a
promised safety n et h as vanished.Readers may write to Michelle
Singletary at The Washington Post,
1301 K St. NW, Washington, D.C.
20071 or
[email protected]. To
read previous Color of Money
columns, go to wapo.st/michelle-
singletary.Pension Benefit Guaranty Corp.
(PBGC) was established. PBGC
operates two insurance
programs: one covering p ension
plans sponsored b y a single
employer a nd another covering
“multiemployer” p ension plans.
However, an exemption in t he
law excludes religious-affiliated
pensions from b eing covered
under E RISA. T he exemption
applies to church-related tax-
exempt o rganizations, w hich
includes some hospitals.
Although such entities can choose
to be covered by P BGC, there’s n o
requirement that t hey pay for the
insurance.
St. C lare’s w asn’t c overed. A nd
because of the hospital’s f ormer
connection to the R oman
Catholic C hurch, the AARP
Foundation, L egal Aid Society of
Northeastern New York, Legal
Services NYC and a private
attorney h ave filed a lawsuit
against t he Diocese o f Albany.
The lawsuit, filed u nder state
law, s ays that the d iocese should
be held responsible for the
insolvency of t he p ension fund.
“The hospital took advantage
of the church p lan exemption
because of its close r elationship to
the D iocese of Albany,” s aid Dara
Smith, a senior attorney with the
AARP Foundation. “So, we believe
the d iocese is responsible for
paying i nto the p ension fund.”
A spokeswoman f or the d iocese
says the church doesn’t see it
that way. “ The diocese respects
the r ights of p ensioners t o do
what they feel is necessary t o
secure recovery o f their lostgreatly reduced. About 440 older
workers and retirees who met an
age cutoff saw their checks c ut by
30 percent.
Aikens-English, who h ad
planned t o retire next year,
elected to collect her p ension
early a t 62. B ut she ended up
receiving o nly two years’ worth of
a reduced p ension check of
$1,000 before they s topped.
“I feel like I ’ve been cheated out
of some p eace of mind,” s he s aid.
If you d on’t h ave a pension, or
if yours is solvent, you might
wonder w hy y ou should care
about the folks who worked a t St.
Clare’s. Here’s w hy.
With each federal budget
season, w e are reminded of t he
ballooning costs of taking care o f
people who don’t h ave the
financial resources to take care of
themselves. Every pension that is
shut down or in financial t rouble
becomes our nation’s collective
problem.
In t he case of St. Clare’s, some
people have had to sell their
homes because they can’t afford
them any longer, according to
Victoria Esposito, a dvocacy
coordinator for the Legal A id
Society o f Northeastern New
York. Others are having t rouble
making ends m eet on t he reduced
pension amount. “ These are not
people who are looking for a
handout,” Esposito said. “They
earned those pensions.”
The federal Employee
Retirement Income Security Act
— otherwise known a s ERISA —
sets s tandards f or private pension
plans. As p art of the act, t heImagine t hat
you’ve worked
decades for the
same company,
choosing n ot to
take another job
for h igher pay
because your
employer o ffers a n
increasingly rare
benefit — a
pension plan.
Juanita Aikens-English, 64,
doesn’t h ave to imagine. She
started working a s a nurse for S t.
Clare’s Hospital i n Schenectady,
N.Y., in 1 985. She spent part of her
career helping to deliver babies.
Aikens-English said she s tayed
on at t he h ospital, which l argely
served the i ndigent, b ecause s he
loved the work and the people.
She also c ounted on her l oyalty
netting her a monthly p ension
check. “We would g et l etters each
year saying h ow much money you
would g et,” A ikens-English s aid.
St. C lare’s c losed in 2008 with
another hospital taking over i ts
facilities a nd a bsorbing a lot of its
employees. A lthough t he new
hospital refused to take on the
obligation of t he underfunded
pension, the f ormer St. Clare’s
employees believed t he pension
was s olvent. Then the l etters
started to come informing plan
participants that their pension
was i n peril.
Last y ear, about
1,100 e mployees — nurses,
orderlies, laboratory technicians,
clerks a nd h ousekeeping staff —
were told t hat they either would
not g et a pension or it would b eface challenges from leadership
and the public on how we
allocate volunteer hours. As
committee chair, you’ll be under
especially tight scrutiny.”
How do I put my feelings
away so that I can better discern
when she might have a point?
Some people just set our teeth
on edge. But we can sometimes
get past that if we know and
trust their motives. Do you
suspect she’s gunning for your
paid position, or is she just a
frustrated expert whose only
agenda is being right? Do you
trust that she’s trying to do right,
albeit in the wrong way?Then acknowledge her
strengths, even the irritating
ones — “She is passionate about
the cause.” “ She has a sharp eye
for inefficiencies” — followed by
the corresponding weaknesses:
“She lacks diplomacy and
patience.” “ She tends to micro-
focus on negatives and lose
perspective on the broader
priorities.” Keep that
information to yourself, but use
it to help you understand and
anticipate her behavior.
When interacting with her,
give her space to explain (or
fumble) her position: “I’m not
seeing how doing it your way is
better for our mission. Can you
tell me more so I can justify it if
we get pushback?” And give
yourself space until your initial
reaction to her settles down and
your vision clears: “I hear what
you’re saying. Let me get back to
you on that.”
When tension flares up, e.g.
cold shoulders, address it
without assumptions: “Is
everything okay?”
Finally, you mention clashing
with this person but not
whether her fellow volunteers
appreciate her initiative or chafe
at her imperiousness. Cultivate
your own relationships with
them and invite their feedback.
As mentioned, your employer
can’t afford to lose volunteers —
and it certainly can’t afford to let
another volunteer drive them
out.
[email protected]Reader: I work at
a nonprofit with a
mission I greatly
support. I am a
paid professional
staff member
working with a
committee of
volunteers. Most
are lovely, but
there is one I
continually clash
with. She is a critical person who
seems to tell me everything the
rest of us are doing wrong.
While she knows the subject
matter, her delivery leaves much
to be desired; she makes
demands rather than advising. I
have gone out of my way to be
diplomatic, but there is still
tension. (She totally gave me the
cold shoulder at a recent event.)
She directs the group’s energy
away from assigned tasks to suit
her own agenda. Now she’s
volunteered to be chair of this
committee next year. This is a
politically touchy situation, as I
don’t have the option of
choosing or rejecting committee
members.
I need to figure out how I can
work with her under these
circumstances. Should I address
this tension with her head on?
Should I instead hold a meeting
about general expectations for
the committee? And how do I
put my feelings away so that I
can better discern whether she
has a point or is overreaching?
Karla: Even if you had power to
“fire” her, nonprofits can seldom
afford to lose dedicated
volunteers or subject them to
the kind of structured
performance management for-
profit employers use. Still, you
are being paid to direct
resources to meet the nonprofit’s
goals, so you have some
leverage. Let that ground you
while you process the following
questions:
Should I address tension head
on? Yes, you should try to defuse
this situation sooner rather than
later. But at this point, the
interpersonal tension seems less
relevant than her observable
behavior. Thus:
Should I hold a meeting about
general expectations? Yes, and
her pending promotion is the
perfect opportunity. If she’s
going to be given authority, she
also needs to be made aware of
the corresponding
responsibilities and limitations:
“We have to ensure that use of
resources can be directly traced
to the organization’s purpose.
That means being prepared to
Dilbert Scott Adams
Editor: Suzanne Goldenberg • Art Director: Clare Ramirez • Photo Editors: Bronwen Latimer and Annaliese Nurnberg • E-mail: [email protected] • Telephone: 2 02-334-9800 • Mail: The Washington Post, Sunday
Business, 1301 K St. NW, Washington, D.C. 20071 • Advertising: Noelle Wainwright, 202-334-7610, [email protected]BUSINESStaking stock
A bossy volunteer o≠ends
paid sta≠er at nonprofit
Work
Advice
KARLA L.
MILLER
Why it matters that a nurse’s pension plan went bust
Michelle
SingletaryTHE COLOR
OF MONEY“She is a critical person
who seems to tell me
everything the rest of
us are doing wrong.”
A nonprofit professionalSTEVEN PEARLSTEIN
Democrats should beware
of soak-the-rich tax plans
MARIO TAMA/GETTY IMAGES
Democratic presidential candidate Elizabeth Warren is being
advised by two Berkeley economists who advocate confiscatory tax
rates for the wealthy as a means of promoting economic justice.