Ben Downing: Moral Capitalism

Feb 13, 2019

Recently, Congressman Joe Kennedy called for a “moral capitalism,” in which our economy is “judged not by how much it produces but by how widely it shares.”

Kennedy was speaking about a vision for the nation. But he could have just as easily been describing the solution to one of Massachusetts’ most persistent problems economic inequality. For all of Massachusetts’ relative economic success, the benefits of recent growth have not been widely shared. The top 1 percent of earners take home 23.8 percent of all income and make

31 times as much as the bottom 99 percent. The average income of the top 1 percent is over $1.9M, while the average income of everyone else is $66,000. Between 2009 and 2015, the top 1% captured

58% of all income growth in the state.

Along with inequality among workers, Massachusetts has significant disparities between regions, races and genders. Rural communities of western & central Massachusetts and non

Boston cities are growing older and poorer, while Boston & its suburbs grow younger and richer.

Springfield, Pittsfield, Lawrence, Lowell, Holyoke, Fall River and many other former regional economic engines have poverty rates at least 50 percent higher than the state average, some 150 percent higher. Within areas that are growing, African Americans and immigrant populations have benefited the least. In Boston, the average net worth for white households is $247,000, for Hispanic immigrants its $3000, for African American households it is $8.

Our economy is producing, but only for a very few. There is no single step to reverse this trend, but nearly every step requires public investment and the investments required are not possible with our current tax system. The current system doesn’t raise enough to change the status quo, and what it does raise, is done unequally. The bottom 20 percent of income earners pay 10 percent of their income in taxes, while the top 1 percent of income earners pay only 6.8 percent of their income in taxes.

This discrepancy is the result of an over reliance on sales tax and property tax, driven by deep cuts to the state income tax. Twenty five percent of the benefit of income tax cuts over the last 20 years have flowed directly to the top 1 percent of income earners. While Massachusetts hobbles from one structural budget deficit to the next, the income tax comes down and inequality widens.

Current tax policy has hampered Massachusetts’ ability to maintain status quo levels of investment, and made it impossible to embark on the scale of effort needed in transportation, early education, K12, vocational and public higher education to reverse current trends.

So long as those investments cannot be made, the vision of a moral capitalism remains just that, a vision. Federal leadership is needed to create a more just and fair society. That need does not absolve state inaction. If anything, it cries out for states to lead. A moral capitalism is within our grasp. Our leaders should reach for it.

Ben Downing represented the westernmost district in the Massachusetts Senate from 2006 to 2016. He is currently a vice president at Nexamp, a Massachusetts-based solar energy company, and an adjunct faculty member at Tufts University.

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