Inequality is a cancer on society, here in the U.S. and across the globe. It keeps growing. But humanity seems helpless against it, as if it's an alien force that no one understands, even as the life is being gradually drained from its victims.
The recent Oxfam report on global wealth inequality reveals some of the ugly extremes that have divided our world. It also directs our attention to the Global Wealth Report compiled by Credit Suisse, and the companion Databook, which offer a shocking testament to the severity of U.S. and global inequality.
1. The 30 Richest Americans Own as much as Half of the U.S. Population
The Oxfam report tells us that 85 individuals own as much as half the world. The U.S. is the biggest reason for that, with 5% of the world's population and 30% of the wealth. China, India, and Africa, on the other hand, combine for about half the world's population and just 12% of the wealth.
In the U.S., the richest 30 individuals own about $792 billion, while the bottom half of Americans own 1.1% of our country's wealth, also about $792 billion. That's 30 people owning as much as 157,000,000 people.
2. The Bottom Half of America Owns a Smaller Percentage of National Wealth than Almost All Other Countries and Continents
The 1.1% of America's wealth owned by the poorest half is less than the poorest halves of Asia (1.3% of the region's wealth), Africa (2.1%), Latin America (3.2%), India (4.5%), the United Kingdom (7.6%), and China (9.6%).
It goes beyond the poorest half. The upper-middle class of America (roughly $50,000 to $200,000 in wealth) own a smaller percentage of wealth than the corresponding upper-middle classes of China and India. Of course, America's lower and middle classes have more money in absolute terms than corresponding classes in China and India. But that leads to the next topic.
3. Less Mobility: North America's Bottom Half Has Less Chance to MOVE UP than Any Other Region of the World
Conservatives argue that individuals should be able to improve their economic positions with personal initiative and hard work. But economic mobility is lower in the U.S. than in most developed countries. And lower than in many undeveloped countries.
The results of a Credit Suisse wealth mobility simulation are given in the Global Wealth Databook: "North America is...less mobile than other regions, especially over longer time horizons. Europe is next in line, followed by the middle group of Asia-Pacific, Latin America and Africa. The most mobile regions are China and India."
4. America's MIDDLE CLASS is Further from the Top than in All Other Developed Countries
As noted above, it's not just the bottom half being battered by inequality -- it's most of the rest of us. The U.S. median of $44,911 is only 15% of the $301,140 mean (which is greatly skewed by the wealth of the richest 10%). That ratio is less than any other of the 27 developed countries listed by Credit Suisse, and much less than the average OECD ratio of 35%.
For the world as a whole, the median is only 8% of the mean, reflecting the fact that half the world's adults average less than $500 in wealth.
The Greatest Shock: How Little is Needed to Restore Some Sanity
Extreme inequality means that people without homes are freezing to death in America. On a winter day in 2012 over 633,000 people were homeless in the United States. Based on an annual single room occupancy (SRO) cost of $558 per month, a little over $4 billion would provide shelter for every homeless person for the entire year.
The stock market grew by $4.7 trillion in 2013. A wealth tax of just a one-tenth of 1 percent (one dollar out of every thousand) would have provided the $4 billion needed to shelter every homeless American for 365 days.
But we have no wealth tax. And the wealth just keeps growing for the wealthiest Americans.
Let's Talk About Entitlements
The word “entitlement” is ambiguous. For working people it means "earned benefits." For the rich, the concept of entitlement is compatible with the Merriam-Webster definition: "The feeling or belief that you deserve to be given something (such as special privileges)." Recent studies agree, concluding that higher social class is associated with increased entitlement and narcissism.
The sense of entitlement among the very rich is understandable, for it helps them to justify the massive redistribution of wealth that has occurred over the past 65 years, especially in the past 30 years. National investment in infrastructure, technology, and security has made America a rich country. The financial industry has used our publicly-developed communications technology to generate trillions of dollars in new earnings, while national security protects their interests. The major beneficiaries have convinced themselves they did it on their own. They believe they're entitled to it all.
Their entitlements can be summarized into four categories, each of which reveals clear advantages that the very rich take for granted.
- Income: Mocking Our “Progressive” Tax System
Americans who earn millions of dollars a year feel entitled to the same maximum tax rate as those making about $400,000 a year. Progressive taxation stops at that point. In fact, it reverses itself, with the highest earners paying lower tax rates. The richest 10 percent pay about 20 percent in federal taxes and it goes down from there, with the richest 400 paying less than 20 percent. When all taxes are included (payroll, sales, state and local), the super-rich pay about the same percentage as America's middle and upper-middle classes.
Corporations feel entitled to lower taxes, too, having cut their income tax rate in half in just 10 years. The companies that have benefited the most from public research have become skilled tax avoiders.
Some corporate CEOs feel entitled to total freedom from taxes, employing a noble-sounding strategy of a $1 per year salary to avoid federal income taxes. It allows them to defer all capital gains taxes on their stock holdings, which can be used, if cash is needed, as collateral for low-interest loans.
- Wealth: Trillions in Financial Gains, Zero Tax
America has gained $16 trillion in financial wealth over the past five years, with 80-90 percent of that gain going to the richest 10 percent, for many of whom productive labor may have been limited to checking their online portfolios. America is gaining in wealth because of technological infrastructure and a deregulated financial industry that uses the technology to capture most of those gains.
There is no tax on all that wealth. Capital gains can be deferred indefinitely, and then another entitlement comes into play: the lower capital gains rate, purportedly meant to stimulate new business investment, but in large part failing to do that. The nation's wealth needs to be distributed more equitably among productive citizens, ideally by allowing everyone to share in the capital of companies that use our nationally developed technologies.
- Financial Transactions: Trillions in Speculative Purchases, Zero Tax
As Forbes notes, the hundreds of trillions of dollars of speculative financial transactions constitute "a massive financial accident waiting to happen, yet again."
We pay a sales tax of up to 10 percent on boots and mittens for the kids, But not a penny of sales tax is paid on U.S. financial transactions, which may be valued as high as three quadrillion dollars annually, or over three thousand times the deficit. No sales tax is paid despite the high-risk nature of "flash trading" that can lose entire pension funds in a few seconds.
The trading industry feels entitled to tax-free purchases, claiming that even a tiny sales tax will decrease liquidity, or slow the economy, or constitute a sin tax. Yet it's an easily administered tax that has been imposed in some of the freest economies in the world.
- Subsidies: Alms for the Rich
About two-thirds of nearly $1 trillion in individual "tax expenditures" (deductions, exemptions, exclusions, credits, capital gains, and loopholes) goes to the top quintile of taxpayers.
At the corporate level, tens of billions of dollars go in subsidies to the fossil fuel, fishing, and agricultural industries. Fossil fuel subsidies may be much, much more. The IMF reports U.S. fossil fuel subsidies of $502 billion, and according to Grist, even this is an underestimate.
Cheated
There's more. A regressive payroll tax, an almost nonexistent estate tax, the lower capital gains rate on carried interest for investment managers, trillions socked away in tax havens—all involve tax avoidance by wealthy Americans who feel entitled to their privileged positions.
Entitlements for the rich mean cuts in safety net programs for children, women, retirees, and low-income families. They threaten Social Security. They redirect money from infrastructure repair, education and job creation.
And the more the super-rich take from us, the greater their belief that they're entitled to the wealth we all helped to create.
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