Framing Middle-Class Insecurity: Tax and the Ideology of Unequal Economic Growth

Fordham Law Review, Jul 2016

This Article first explains how the prevailing discourse frames federal tax support for the middle class as either consumption or redistribution, both of which appear to be essentially unproductive and potentially destructive. Second, this Article examines the expansion of state and local tax support for elite private capital. In contrast to tax support favoring the middle class, this upper-class support is accepted widely as necessary for productive economic development. Operating below the radar of prominent tax debates, this state and local tax policy reveals more starkly and perversely how prevailing views of tax rationalize inequality and austerity. This Article concludes by defending the core regulatory and productive function of the democratic tax system, grounded in the legitimate collective power of middle- and lower-income households to make the economy more responsible to their interests.

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Framing Middle-Class Insecurity: Tax and the Ideology of Unequal Economic Growth

Framing Middle-Class Insecurity: Tax and the Ideolog y of Unequal Economic Growth Martha T. McCluskey SUNY Buffalo Law School Recommended Citation Martha T. McCluskey, Framing Middle-Class Insecurity: Tax and the Ideology of Unequal Economic Growth, 84 Fordham L. Rev. 2699 (2016). Available at: http://ir.lawnet.fordham.edu/flr/vol84/iss6/13 - Article 13 Tax law has helped make struggle, risk, and sacrifice the new normal for the American middle class. This change in middle-class status results not only from tax policies, but also from ideas about tax that cultivate acquiescence in unequal austerity.1 As Lisa Philipps shows in the context of Canada, recent income tax policies encourage middle-class citizens to rely more on their own private family wealth and personal human capital—and less on collective public protection—to secure middle-class expectations of access to health care, education, income security, family, retirement, and economic opportunity.2 Yet, as Philipps explains, those tax policies of self-reliance clash with a reality in which middle-class earnings and savings are increasingly precarious, if not substantially out of reach. That reality of middle-class vulnerability is even more pronounced in the United States, with more limited public support for health care, retirement, and higher education. This insecurity has grown even as middle-class American households generally have taken greater responsibility for economic gain by increasing work productivity, upgrading educational attainment, and working more hours.3 From 197 1 to 2015 , U.S. household income overall has shifted upward from middle-income to upper-tier households, leaving the middle * Professor of Law and William J. Magavern Faculty Scholar, SUNY Buffalo Law School. Thanks to Linda Sugin and Mary Louise Fellows for organizing the Fordham Law Review symposium entitled We Are What We Tax and to Lisa Philipps and other participants at the symposium for rich and inspiring discussion and comments guiding this Article. For an overview of the symposium, see Mary Louise Fellows, Grace Heinecke & Linda Sugin, Foreword: We Are What We Tax, 84 FORDHAM L. REV. 2413 (2016). class both smaller in size and squeezed economically.4 In 2013, upperincome families had seven times the wealth of middle-income families, compared to three times the wealth of middle income families in 1983.5 The upper 10 percent have received an increasing share of gains from business cycles since the 1980s compared to the bottom 90 percent of households and all of the gains from growth during the 2000 to 2008 business cycle.6 How we think about tax shapes how we think about this new redivision of the economic “pie.” Tax policies championing security through individual savings do not simply promote the ideal of personal economic responsibility for economic loss and insecurity. More insidiously, these policies convey the message that good middle-class citizenship is about accepting low expectations of personal economic success. The prevailing scholarly and popular tax discourse helps rationalize increased middle-class risk and sacrifice as an economic fact beyond politics. This discourse largely presumes that middle-class economic power and prosperity does not come from democratic solidarity and collective protection. Instead, it echoes a neoliberal vision that embraces government support as a foundation of economic success, but insists that success depends on redirecting government support away from ordinary workers, families, and consumers toward protecting concentrated private market wealth as the primary engine of economic prosperity. That vision identifies middle-class status with incapacity, insecurity, and dependency in a new and naturally unequal economic order. A more accurate understanding of the role of tax in the political economy can help challenge this neoliberal reconstruction of the middle class. Government taxing and spending is fundamental, not supplemental, to the seemingly private market order. Tax policy inevitably operates to lead, not just to follow or distort, the “normal” production and distribution of economic power. Tax policy, in a democratic government, can and should be a means for ordinary citizens to participate in constructive collective control over economic production for their benefit. This Article first explains how the prevailing discourse frames federal tax support for the middle class as either consumption or redistribution, both of which appear to be essentially unproductive and potentially destructive. Second, this Article examines the expansion of state and local tax support for elite private capital. In contrast to tax support favoring the middle class, this upper-class support is accepted widely as necessary for productive economic development. Operating below the radar of prominent tax 4. For instance, 49 percent of U.S. aggregate income went to upper-income households in 2014, up from 29 percent in 1970. PEW RESEA (...truncated)


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Martha T. McCluskey. Framing Middle-Class Insecurity: Tax and the Ideology of Unequal Economic Growth, Fordham Law Review, 2016, Volume 84, Issue 6,