Five Facts About America’s Pathological Wealth Distribution
Most people associate inequality with the income gap. As distorted as the distribution of income may be, our wealth distribution is even more extreme. Americans are beginning to realize that years of preferential tax treatment for the rich, under the guise of “supply-side job creation” nonsense, have bloated the fortunes of the super-rich to a level that would make Rockefeller and Carnegie envious.
1. We’re close to being the most unequal country in the world. Among countries with at least a quarter-million adults, only Russia, Ukraine, and Lebanon are more unequal, according to the most recent figures from Credit Suisse Research. An earlier report by the same research team had indicated that Denmark and Switzerland were more unequal than the United States. While Switzerland is still high in the new data listing, ranking 18th, Denmark is actually rather equal relative to other countries, and received its dubious earlier position due to its own accurate reporting of household debt, as will be noted in Fact 5 below.
2. Wealth accumulation has been rigged for the rich. The richest quintile of Americans owns 93% of non-home wealth. For Americans with incomes over $10 million, nearly half of their income comes from capital gains and dividends, on most of which they pay only a 15% tax. From 2002 to 2007, two-thirds of all income went to the richest 1%. Then, in the first year after the recession, a startling 93% of all new income went to the richest 1%.
Massive wealth holdings have accumulated for the richest Americans not only because of their appropriation of income, but also because of their manipulation of the tax code. The 15% capital gains tax is their proudest accomplishment. Other ploys include carried interest,performance-related pay, stock options, and deferred compensation.
The imaginary ‘work’ of financial gain gets taxed at a much lower rate than real work. Through the years, as the rich have fattened up on stocks and other financial assets, the stock market has grown three times faster than the GDP. Yet American workers have not benefited from their own productivity. Their wages have flatlined while the fruits of their labor have gone to investors.
3. As tax rates have gone down, income for the rich has gone up. A Business Insider chart depicts the remarkable – yet reasonable – negative correlation between tax rates and the wealth of the super-rich. Over the past hundred years, every time tax rates have been decreased, the income percentage of the richest .01% has increased, and vice versa.
Other sources confirm that changes in the tax rate have little to do with economic growth, and that the top tax rate can – and should – be much higher, up to 83%. The Reagan-era myth of “higher taxes, less revenue” has been debunked. It’s enough to convince any thinking American outside of Congress that our budget problems are rooted in an extraordinary degree of tax avoidance at the top.
The preceding article originally appeared in its entirety here at Common Dreams.