by Paul Buchheit from "CommonDreams.org"
Paul Buchheit is a college teacher, an active member of US Uncut
Chicago, founder and developer of social justice and educational
websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the
editor and main author of "American Wars: Illusions and Realities"
(Clarity Press). He can be reached at paul@UsAgainstGreed.org.
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.(Photo by
1. We're close to being the most unequal country in the world.
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 [http://www.usagainstgreed.org/GiniWealthIncomeAll.xls].
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.
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 [http://blogs.wsj.com/washwire/2012/11/22/irs-tax-rates-for-wealthiest-fall-again-in-2010/].
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% [http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf].
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
Other ploys include
carried interest [http://inequality.org/americas-plutocrats-play-political-ponies/],
performance-related pay [http://www.ips-dc.org/reports/executive_excess_2012],
stock options [http://www.commondreams.org/view/2012/08/22-0],
and deferred compensation [http://www.commondreams.org/view/2012/08/20-7].
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 [http://www.forbes.com/2005/03/29/cz_0329oxan_equity.html].
Yet American workers have not benefited from their own productivity.
Their wages have flatlined while the fruits of their labor have gone to
3. As tax rates have gone down, income for the rich has gone up.
Business Insider chart depicts the remarkable - yet reasonable -
negative correlation between tax rates and the wealth of the super-rich [http://www.businessinsider.com/plutocracy-reborn].
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% [http://www.taxjustice.net/cms/upload/pdf/TJF_7-2-2.pdf].
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.
4. "We should all cheer for the stock market" is a big scam.
mainstream media would have us believe that the whole country depends
on a rising stock market. But the lowest-earning three-fifths of
Americans -- 60% of the population -- own just .2% (one-fifth of one
percent) of all wealth outside the home.
The Heritage Foundation
and the American Enterprise Institute claim that wealth inequality has
remained steady over the past century, even in the last 30 years. Both
organizations cite a paper by Kopczuk and Saez [http://www.columbia.edu/~wk2110/bin/estate-NBER.pdf],
which shows that the share of wealth owned by the top 1% has decreased
from the early 1900s to the early 2000s, possibly because the
"democratization of stock ownership...now spreads stock market gains and
losses much more widely than in the past."
While it's true that
the percentages of net worth and financial wealth for the top 1% barely
budged from 1983 to 2007, the percentages for the rest of the richest 5%
increased by almost 20% [http://www.federalreserve.gov/pubs/feds/2009/200913/200913pap.pdf].
And the percentages for the poorest 80% of the population DECREASED by almost 20% [http://www2.ucsc.edu/whorulesamerica/power/wealth.html].
other words, the share of wealth owned by the top 1% leveled off
because the "democratization of stock ownership" spread the wealth among
just 5% of the population, those earning an average of $500,000 per
year. A few people -- 5 out of 100 -- got very rich, but everyone else
5. Debt has masked wealth inequality for 30 years
The authors of the Global Wealth Report state [https://infocus.credit-suisse.com/data/_product_documents/_shop/368327/2012_global_wealth_report.pdf]:
"Rising household debt...began around 1975. Before this date, the ratio
of household debt to annual disposable income within countries remained
fairly stable over time and rarely rose above 75%." Today, Americans
are burdened with over $11 trillion in consumer debt, including
mortgages, student loans, and credit card liabilities. As the very rich
have accumulated income and wealth, the middle class has kept up
appearances by taking out loans.
However, that's only half the
story. Private debt appears to be more manageable when public debt is
low. Denmark has the highest household debt to wealth ratio in the
world, but its government debt amounts to just 3% of the financial
wealth of Danish households. The U.S. is at 32%. And our government debt
as a percentage of GDP is 103%, one of the highest percentages in the
Conclusion: Where is all the wealth coming from?
to the authors of the Global Wealth Report, the world's wealth has
doubled in ten years, from $113 trillion to $223 trillion, and is
expected to reach $330 trillion by 2017.
The UN definition of
wealth includes (1) natural capital: land, forests, fossil fuels, and
minerals; (2) physical capital: buildings and infrastructure; and (3)
human capital: the population's education and skills.
We need to add a 4th category: the magical creation of wealth by the financial industry.