A video has been blazing across social media and drawing attention to the growing wealth inequality in America. Honestly, I’ve been a little surprised at people’s shock at the clip, because the data isn’t new.
But maybe I shouldn’t be. Because you need go no further than an article earlier this week by The Associated Press to see why people might be misinformed. The article creates the distinct impression that the rich may already be bearing too great a tax burden.
The stance the article takes is a bit disturbing coming from a major and respected news organization — and so dubious that I would not be surprised to learn that Scrooge McDuck wrote the article.
The article begins: “The poor rich. With Washington gridlocked over whether to raise their taxes, it turns out wealthy families already are paying some of their biggest federal tax bills in decades even as the rest of the population continues to pay at historically low rates.”
The article goes on to further explain how average tax bills for the wealthy are among the highest they’ve been since 1979. It doesn’t say tax bills for the wealthy are the highest they’ve been since 1979, merely that they are among the highest they’ve been. Which reads a little weaselly to me — or is that ducky?
Even if the statement is true without such equivocation, it should be surprising to no one, given that 1979, just before the Reagan era, is a nearly ideal cutoff point for a gold-swimming duck spinning a pro-wealthy tax narrative.
If you venture further back in history, the story becomes much different. In his recent book on income inequality, Beyond Outrage, Robert Reich notes that “in the half century spanning 1958 to 2008, the average effective tax rate of the richest 1 percent of Americans — including all deductions and tax credits — dropped from 51 percent to 26 percent.” In the ’50s, the wealthy paid nearly double the total tax percentage they do now.
The AP article goes on: “The average family in the bottom 20 percent of households won’t pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.”
But the article doesn’t mention that, as the viral video demonstrated, 15.1 percent of those Americans aren’t living large and tax-free. They’re living below the poverty line. And the article also fails to note that the poor pay more in state and local taxes than the wealthy:
Meanwhile, in his book Reich also notes that as recently as the 1980s, the top tax rate on capital gains was 35 percent. And as recently as 2000, the estate tax was 55 percent and started after $1 million, but is now just 35 percent, and kicks in at $5 million.
But this perspective is also missing from the AP article. And more importantly, you have to get to the 25th paragraph of the piece to learn that “average after-tax incomes for the top 1 percent of households more than doubled from 1979 to 2009, increasing by 155 percent.”
Who wouldn’t take a modest increase in overall taxes in return for a 155 percent increase in after-tax income? I sure would. This is the real story — and it’s buried. It’s buried so far that some newspapers cut the article off before it got to this essential fact. Pretty clever, Scrooge McDuck. Pretty clever.
The reality is that in every year of income growth in America since 1979, at least 85 percent of that growth has gone to the wealthiest 10 percent of Americans, as you can see in this interactive feature from the Economic Policy Institute.
Clearly, if any wealth redistribution has occurred, it’s been to the wealthy. If anything has been trickling, it’s been trickling up. And while there’s certainly waste in government, from our crooked healthcare system to our sometimes-dubious no-bid government contracts, the poor are not an appropriate target for further cuts.
In fact, as Reich points out, in 2012 “the U.S. Treasury would receive about $50 billion less than if the tax code didn’t allow for charitable donations — or about the amount the government would spend in 2012 on Temporary Assistance for Needy Families, which is what remains of welfare.”
Which wouldn’t be a problem, except that, as Reich also notes, “only an estimated 10 percent of charitable deductions are specifically directed at the poor or organizations expressly dedicated to helping the poor.” So the rich get nearly as much in charitable tax deductions for their pet causes as the poor do in welfare.
In a nation as wealthy as America, it’s disgraceful for anyone to go hungry or homeless while others have so much. And taxing the wealthiest Americans more to help the poor is a reasonable measure that could also help balance the budget.
This idea has been proposed by the Congressional Progressive Caucus in its People’s Budget, but has received little attention. The proposed budget suggests an additional tax bracket of 45 percent that kicks in over $1 million in earnings, and a 49 percent tax bracket for earnings of over $1 billion. It eliminates corporate welfare for oil, gas and coal companies, invests in job creation and infrastructure, and implements a progressive estate tax. And by making these changes, it creates a budget surplus within 10 years.
If you make more than $1 billion in a year, let’s face it, you’re doing pretty well. You’ve already got a room full of gold to swim in, and you won’t be hurting if you give a little more. For America’s children — and its duck nephews — this approach probably warrants more consideration.
