Fortune Magazine reported last month that according to new data from the Federal Reserve, the “Top 1 percent of U.S. households hold 15 times more wealth than the bottom 50 percent combined.”
Let me put that another way. The top 1 percent of wealthy Americans hold more wealth than the entire Middle Class combined; or, the top 1 percent hold more wealth than the bottom 90 percent combined. If you’re looking for underlying causes of social distress and tension in America, this may be one of the biggest factors. It’s called income inequality.
These wealth-distribution facts often go unnoticed, buried under the 24-hour news cycle, policy discussions about corporate taxes, wildfires, jobs reports and trade issues.
Here’s a little bit more to scratch your head over. Elon Musk just surged to the top of the wealth list in the world with assets in excess of $300 billion dollars. According to several statistical sources, 300 billion one-dollar bills laid end-to-end would wrap around the globe 116,100 times. Sounds like enough to live on.
The U.S. Office of Management and Budget reports that the average individual federal income tax paid by billionaires is 8.2 percent. Individuals earning about $40,000 a year in 2021 pay 22 percent.
According to Forbes Magazine, American billionaires added more than $1 trillion dollars to their wealth during the pandemic, and that was as of January 2021. The chasm just gets wider.
All this money, money, money has led to proposals to further tax these super rich. Senator Warren, during the last election cycle, talked about an additional flat tax of 2 percent on those making between $50 million and up. The chair of the Senate Finance Committee, Ron Wyden (D., Ore.), has sponsored a bill that would impose an annual capital gains tax on about 700 of America’s wealthiest. This one is tricky as it taxes unrealized (uncashed paper) investment capital gains. Losses would off-set gains.
The proposal died in the Senate, but as Laura Saunders of the Wall Street Journal reported, Michael Graetz, a former Treasury Department official who teaches at Columbia University said, related to this, “Tax proposals that aren’t enacted don’t die, they just go on the shelf for future use.”
Communist leaders like Vladimir Putin and Xi Jinping use these inequities to disparage capitalism. Last October, Putin said in a speech in Sochi that, “Everyone says that the existing model of capitalism, which is the basis of social structure in the overwhelming majority of countries, has run its course… Everywhere, even in the richest countries and regions, the uneven distribution of material wealth leads to aggravating inequality.” This, by-the-way, coming from a leader who has adopted a twisted form of crony capitalism to try to keep up with the rest of the world.
The Economics Policy Institute reports that income inequality and income deprivation affects health, obesity, heart disease, nutrition, education, lower rates of school performance, incarceration rates, teen pregnancies, suicides and homelessness, in addition to other social problems. These indicators show up more dramatically in countries with inequalities greater than the United States, in nations like South Africa and Brazil.
Trending technologies like robotics and artificial intelligence are likely to further affect income disparities in America. Reduced investment in human capital have the potential to lead to not only the issues mentioned above but social instability and unrest which can only put downward pressure on America’s collective mental health and competitiveness in an increasingly competitive world.
The political, social and cultural mashup we are currently experiencing in America makes dealing with these wealth disparity issues problematic.
The late 19th and the early 20st century faced the effects and consequences of what came to be known as the era of the “Robber Barons,” also known as the “Gilded Age.” The circumstances were somewhat different, but wealth disparities tie this earlier era to present times.
We learn in school that those who fail to remember the past are destined to repeat similar mistakes. But things are quite different today. Income disparity is even greater today, proportionately, and there are the added dimensions of globalization, and how the health and well-being of America will affect our leadership status in the world, not to mention this era’s burdensome challenges of climate change and global immigration.
The surging fortunes of America’s gilded 1 precent infer new meaning to the rest of us, when we make entreaties for health, wealth and happiness.
Bill Sims is a Hillsboro resident, retired president of the Denver Council on Foreign Relations, an author and runs a small farm in Berrysville with his wife. He is a former educator, executive and foundation president.