Tag Archives: income inequality

A Trillion Here, A Trillion There…

What does the pandemic have in common with income inequality? Both target the same low-income people, and enrich the already-wealthy.

According to Inequality.org, U.S. billionaires have seen their wealth jump over $930 billion since mid-March alone.

If this interminable election season finally ends, and if–as polls suggest is possible (I’m too superstitious to say “likely”)–Democrats take the White House and Senate, that first hundred days is going to be busy. At a minimum, the latest “gift” to the billionaire class, Trump and McConnell’s unconscionable tax act, needs to be reversed. But that’s the minimum.

A September essay in Time Magazine by Nick Hanauer and David Rolf considered just how much that billionaire class has taken from the rest of America.

In this essay, Hanauer and Rolf begin by setting out the extent to which income inequality has hampered America’s ability to deal with the pandemic.

Like many of the virus’s hardest hit victims, the United States went into the COVID-19 pandemic wracked by preexisting conditions. A fraying public health infrastructure, inadequate medical supplies, an employer-based health insurance system perversely unsuited to the moment—these and other afflictions are surely contributing to the death toll. But in addressing the causes and consequences of this pandemic—and its cruelly uneven impact—the elephant in the room is extreme income inequality.

How big is this elephant? A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades.

Hanauer and Rolf go on to explain that the 50 trillion dollar number isn’t some
“back-of-the-napkin approximation.”  A working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, demonstrated that–had the more equitable income distributions of the three decades following World War II (1945 through 1974) simply held steady–the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. Since 1945, that number is $50 trillion.

That’s $50 trillion that would have gone into the paychecks of working Americans had inequality held constant—$50 trillion that would have built a far larger and more prosperous economy—$50 trillion that would have enabled the vast majority of Americans to enter this pandemic far more healthy, resilient, and financially secure.

Nearly all of the economic growth of the past 45 years was captured by those at the very top of the income distribution. And as Hanauer has repeatedly argued, that extreme disproportion has left millions of Americans with very little disposable income, a situation that hobbles economic growth overall.

It also made us much more vulnerable to the pandemic.

Even inequality is meted out unequally. Low-wage workers and their families, disproportionately people of color, suffer from far higher rates of asthma, hypertension, diabetes, and other COVID-19 comorbidities; yet they are also far less likely to have health insurance, and far more likely to work in “essential” industries with the highest rates of coronavirus exposure and transmission…. Imagine how much safer, healthier, and empowered all American workers might be if that $50 trillion had been paid out in wages instead of being funneled into corporate profits and the offshore accounts of the super-rich. Imagine how much richer and more resilient the American people would be. Imagine how many more lives would have been saved had our people been more resilient.

The article goes through the numbers, including numbers that answer the question “What if American prosperity had continued to be broadly shared?—how much more would a typical worker be earning today? They set out their conclusions in graphs embedded in the article. On average, they concluded that extreme inequality is costing the median income full-time worker about $42,000 a year.

Remember, these calculations would result from keeping former income inequalities static–not engaging in redistribution down, but simply refraining from engaging in redistribution up.

The top 1 percent’s share of total taxable income has more than doubled, from 9 percent in 1975, to 22 percent in 2018, while the bottom 90 percent have seen their income share fall, from 67 percent to 50 percent. This represents a direct transfer of income—and over time, wealth—from the vast majority of working Americans to a handful at the very top.

This situation is bad for the economy, bad for our health and very bad for our democracy. It needs to be reversed.

Money, Tax Havens and Inequality

Income inequality has become a major concern over the past several years, as multiple indicators point to a gap between the rich and poor that exceeds that of the Gilded Age. Economists and policymakers recognize the existence of the gap, but haven’t necessarily agreed on its dimensions.

Meanwhile, Congress– surprise!!– is just beginning debate on a tax “reform” bill that in its current form would further exacerbate inequality, with a “reverse Robin Hood” approach that takes from the poor and gives to the rich.

New studies that give us the ability to make more accurate estimates of the gap’s size suggest that–if anything–the distance between rich and poor is far larger than previously supposed.

From Journalists’ Resource, we are directed to recent research on tax havens and other methods used by the very rich to–shall we say “obscure”– the actual amount of their wealth.

And guess what? The rich are a whole lot richer than even the more suspicious among us  thought.

It’s difficult to assess the net worth of the world’s super-rich. Havens like the Cayman Islands, Switzerland and Hong Kong are happy to stash their cash, offering privacy and a shelter (often perfectly legal) from taxes. And without knowing how rich the rich are, we can’t make an accurate assessment of income inequality.

But new sources of data, including leaks such as the Panama Papers, are helping researchers shine light on these shelters.

That is the impulse behind two new working papers for the National Bureau of Economic Research by Annette Alstadsæter of the Norwegian University of Life Sciences, Niels Johannesen of the University of Copenhagen, and Gabriel Zucman of the University of California, Berkeley. The team shows that measuring income by tax declarations alone is misleading – since so many people dodge their taxes – and that income inequality in many countries is far worse than previously thought.

One team of researchers estimates that amounts equivalent to ten percent of global economic output – that was $5.6 trillion in 2007 – are held offshore. Because it is out of the taxman’s sights, it is also out of sight of those trying to account for global wealth and/or global tax avoidance.

Speaking of “tax avoidance” (another word for evasion), a second study focused on Sweden, which the researchers believe–for a number of reasons– is one of the countries with the lowest percentage of tax cheats.

They found that households with $10-12 million in assets were twice as likely as households with $5-6 million to conceal assets from tax authorities. For that matter, the richer the  household, the more likely to cheat; households with over $45 million were four times more likely to “stash” their wealth than those with “only” $5-6 million.

Thus, the wealth in offshore tax havens is “extremely concentrated”; the top 0.01 percent of households own about 50 percent of it.

For the top 0.1 percent of households, accounting for accounts offshore increases their wealth by a third.

So–if the percentage of tax evaders in the United States is no more than the percentage in Sweden (and if you believe that, I have some swampland in Florida to sell you…), the top one percent of American plutocrats have a third more wealth than we previously thought.

And what we previously thought is bad enough! Click through for the graphic…

If history is any guide, this will not end well.