Smells like a banana republic

The term may sound a little harsh, but it is difficult to disagree with New York Times’ columnist Nicholas D. Kristof’s assessment that the United States has become something akin to a “banana republic.” He doesn’t mean a country headed by a tinpot dictator, but a country in which a tiny percentage of superwealthy individuals (certainly not schoolteachers, or even bigcity superintendents) have gobbled up a hugely disproportionate share of the wealth.

The richest 1 percent of Americans now pocket almost 24 percent of the income in this country, a significant increase from the almost 9 percent they took home in 1976, Kristof noted in a recent column. The huge disparity, he said, now gives the U.S.A an arguably more unequal distribution of wealth than traditional banana republics, such as Nicaragua, Venezuela and Guyana.

The longterm implications for the financial – and political – health of such a country aren’t good.

I don’t have comparable figures for Texas, but our state’s tradition of low workingclass wages, high incidence of poverty, large numbers of residents without health care and high dropout rate certainly don’t improve upon the national trend. Moreover, the situation in Texas will worsen next year under the draconian budgetary cuts promised by Gov. Perry and his new, largerthanlife conservative majority in the Texas Legislature.

The wealthiest Texans, many of whom financed Perry’s recent reelection campaign, will be only minimally impacted by the upcoming spending cuts in public schools and other public programs. They don’t earn government or teacher paychecks, they can afford the best health care and they can afford private schools for their children.

Ironically, the teachers, school bus drivers, cafeteria workers and other government employees who will lose their jobs because the governor and Republican lawmakers would rather cut services then raise taxes pay a higher tax load, proportionately, than the wealthiest Texans.

A heavy reliance on sales and property taxes and lack of a personal income tax give Texas one of the most regressive tax systems in the country. A regressive tax system is one that hits the poor and middle class harder, proportionately, than the wealthy.

According to the Institute on Taxation & Economic Policy, the poorest 20 percent of Texans, those with annual incomes of less than $18,000, paid 12.2 percent of their incomes in state and local taxes in 2007, the most recent data available.

Those earning $18,000 to $31,000 paid 10.2 percent, and those earning $51,000 to $89,000 paid 7.2 percent. I am skipping some categories, but the higher the income level, the lower the percentage paid in state and local taxes.

The wealthiest 1 percent of Texans, those earning $463,000 or more per year, paid only 3 percent.

Just something else to think about as we contemplate the probable financial winners and losers from the upcoming legislative session.

Here is a link to Kristof’s column:

http://www.nytimes.com/2010/11/07/opinion/07kristof.html?_r=2