Condemned to plutocracy? The relentless rise of US inequality | US income inequality
As Barack Obama’s presidency drew to a close, Jason Furman, then chairman of the president’s council of economic advisors, was put forward The steps his administration has taken to reduce the country’s exorbitant income inequality include “the largest investments in inequality reduction since the Great Society.”
Indeed, by the end of 2016, taxes and transfers had reduced the share of income accruing to the richest 1 percent of households by just over a fifth. congressional budget office (CBO) more than under any government since at least Jimmy Carter’s. They increased the income bracket of the poorest quintile from 3.9% to 7.9%; This is the highest share since at least 1979.
Those were the days.
While Elon Musk was appointed the world’s first trillionaire following the IPO of internet shares in artificial intelligence group SpaceX, that moment just 10 years ago when the government bragged about its efforts to curb America’s uneven wealth distribution may give us hope that we are not doomed to plutocracy; social and political forces can stop inequality unmerciful rise
Benjamin Franklin loved to talk about America’s “happy mediocrity”; A country “as miserable as the poor of Europe… where there are very few people in Europe who can be called rich.” But still, America’s history of fighting inequality is brutal. Obama’s performance as the United States’ most determined stabilizer in more than half a century underscores the ultimate lack of interest among the nation’s political coalitions in more equitably distributing the fruits of prosperity.
Ostensibly a populist advocate of hard work, Donald Trump’s priorities have quickly turned elsewhere. Tax Cuts and Jobs Act of 2017 offered huge tax cuts for Americans in the upper income percentile. By the end of his first presidency, the share of income (before taxes and transfers) accruing to the richest 1 percent of households had risen to 13.2 percent, from 12.5 percent the year Obama left office.
The $2.2 trillion Cares Act, which Trump signed in response to the economic shock caused by the Covid pandemic, improved most of the poor. In 2020, the share of national income obtained by the poorest fifth of households reached the highest level in the last decade with 8.2%. However, under the Joe Biden administration and in 2022, the last year in which the CBO announced its data, this rate dropped to 7.4%.
Redistricting is nowhere on Trump’s priority list. Despite some shiny goodies aimed at his base (like tips, overtime, and tax cuts for the elderly), Trump’s One Big Good Bill has skewed the working class by cutting spending on Medicaid, food stamps, and health insurance subsidies, largely to pay for corporate tax cuts.
According to CBOThe law reduced the annual income of the poorest decile of households by an average of 3.1 percent (about $1,200), while increasing the income of households in the top 10 percent by 2.6 percent, or $13,600. Tax blow has arrived above tariffs This has taken a disproportionately large bite out of working class disposable income.
And yet it is critical to understand that America’s deep inequality and its general disinterest in doing anything about it are not Trump’s fault. The disproportionate distribution of wealth is a feature of American society that has persisted across administrations, whether Democratic or Republican.
It boils down to a simple, rock-solid truth: Americans don’t like paying taxes. And this is especially true at the top of the ladder. Economists’ research The University of California, Berkeley estimates that the 400 richest Americans pay a smaller share of their income in taxes than the average Jane; This is largely due to the many ways oligarchs can move money around to minimize their tax bills. Over the past half-century, taxes and transfers have never reduced the share of income flowing to the one percent by more than one-fifth.
The Gini index is a common measure of inequality. It ranges from zero, where income is distributed equally, to one, where a single person receives everything. America’s Gini among the highest at the Organization for Economic Co-operation and Development. But what is most worrying is that taxes and transfers less to reduce inequality More in the US than in almost any other country in the OECD.
Musk is certainly happy to have achieved trillionaire status in this environment, a landscape where his wealth will likely remain largely unaffected by redistribution efforts. The richest 1 percent of Americans almost 32% net worth of the country. This money is passed on from generation to generation largely untouched.
The basic trick of plutocracy is to have as little taxable income as possible. It is known that Steve Jobs received $1 as a salary when he returned to Apple in the 1990s. So did Meta’s Mark Zuckerberg, Oracle’s Larry Ellison, and Google’s Larry Page. Their wealth comes from knowing the value of stocks. They don’t just do this because they have to pay capital gains tax when selling; They don’t finance their lifestyles with loans that renew endlessly, using stocks as collateral. Unrealized capital gains account for 55% of the largest estates. They are inherited tax-free.
Moreover, Musk’s accountants are more talented than most. According to a ProPublica’s investigative reportMusk’s wealth increased by $13.9 billion between 2014 and 2018. But he paid only $455 million in taxes on “only” $1.52 billion in reported income. Propublica found that Musk paid $68,000 in federal income taxes in 2015. He paid $65,000 in 2017 and made no payments in 2018.
It is somewhat ironic that these experts in tax avoidance are at the helm of a technological revolution that could push inequality to new and unprecedented levels. As artificial intelligence displaces much of human labor and further rewards owners of capital, expected go further reduce the share of the country’s income accrued to workers.
Will redistribution help ordinary Americans cope with such an unequal economic landscape? It is not encouraging that Obama’s efforts, his most intense since Lyndon Johnson’s Great Society, now seem like small dots in the long arc of America’s indifference to massive inequalities.
