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OCTOBER 21, 2021

Meyerson on TAP

Dealing With Sinema

The Arizona weirdo has compelled the Democrats to abandon taxing the
rich-so they're proposing to tax rich folks' unearned gains.

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

Follow Harold Meyerson on Twitter

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