Our uneven income distribution system
Glenwood Springs, CO Colorado
“The test of our progress is not whether we add to the abundance of those who have much. It is whether we provide enough to those who have little.”
– Franklin D. Roosevelt
Most of us are vaguely aware that we have not been doing very well financially in recent decades, and a lot of us feel that something is wrong with the way money is distributed.
Professor William Domhoff of the University of California says that most Americans, Republicans or Democrats, have no idea just how concentrated the wealth distribution has become.
For example, he points out that the bottom 80 percent of Americans in terms of wealth received only 6 percent of all the new financial (non-home) wealth created by the American economy between 1983 and 2004. He attributes this mainly to large tax cuts for the wealthy and the destruction of labor unions.
The result was that the financial wealth of the bottom 80 percent fell from 8.7 percent of the total in 1983 to 7 percent in 2007.
Of all wealth, including homes, the bottom 80 percent’s share fell from 18.7 percent in 1983 to 15 percent in 2007.
And since homes clearly represent the major wealth of working families, that share must have fallen dramatically in the past two years. That is why the mortgage debacle and ensuing crash in home values caused by Wall Street is such a crushing blow to what remains of the middle class.
The rising concentration of income is even greater. According to IRS figures, the bottom 60 percent made less money in 2004 than in 1979, about 95 cents for each dollar they made in 1979. This despite the fact that overall income grew by 27 percent during the same period. But the IRS figures showed that only the top 5 percent made significant gains.
That top 5 percent made very large gains indeed, and Professor Domhoff shows that these gains were due to the cuts in tax rates on capital gains and dividends, a form of income not really available to working families.
Furthermore, he points out that only the first $105,000 of a person’s income is taxed for Social Security purposes. (It would be easy to fix Social Security by raising that figure.)
Better known to most of us are the outrageous figures on CEO pay. Average CEO annual pay went from 42 times the average factory worker’s pay in 1960 to 344 times the average worker’s pay in 2007.
Why? Here’s an explanation by a retired CEO of DuPont, Edgar S. Woolard Jr. He says the argument that such high pay is necessary to keep qualified people is “bull” and the rationale that they deserve these salaries because they create wealth is “a joke.”
Woolard says the real reason is that CEOs help select the corporations’ boards of directors and that these boards include fellow CEOs on whose boards they, in turn, sit. So of course the boards give them what they want so they can return the favor. It’s a big “you scratch mine and I’ll scratch yours” scam. This brings up the topic of our totally out-of-control huge corporations. But that’s another column.
For now, I ask if this is the way we want things to be.
– Mary Boland is a retired teacher and journalist, a proud grandmother, and a longtime resident of Carbondale. Follow her on twitter@grannyboland
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