The growing inequity of Americans’ income
Glenwood Springs, CO Colorado
The income gap between the wealthy and the shrinking middle class has been growing at an increasing rate since 1980, and is now at a level not seen since 1928. Today the top 10 percent of Americans receive more than 50 percent of the total income, while the bottom 20 percent receive only 4 percent.
Just the top 0.1 percent (30,000 people) have more income than the entire bottom 40 percent (120 million people).
In 1960, the average income of corporate CEOs was 42 times that of their average worker. It now exceeds 400 times that of their average worker, whose income has actually declined in purchasing power in the last 10 years.
The gap in financial wealth is even wider, and growing even faster than the income gap. The top 10 percent of Americans own 83 percent of the country’s wealth, and the bottom 80 percent own only 7 percent. Most of the wealth created by the U.S. economy during the past three decades has gone to the wealthy – 94 percent to the top 20 percent of Americans, and nearly half of that to just the top 1 percent.
What are the effects of these disparities on our society, our economy, our political stability and educational opportunity?
Our society is in danger of degenerating into a two-class system, with an ultra-rich class at the top and an impoverished underclass into which increasing numbers of the economically important middle class are slipping.
And as both the number and purchasing power of middle class families decline, so goes the economy.
Resentment by those who feel left out and feel that their government has been taken over by the power of wealth and no longer represents their interests – young men, struggling single mothers, blacks and Latinos – can lead to unrest such as we have witnessed in France and England, and in North Africa and the Middle East where the Arab Spring has toppled governments.
Are the spreading Occupy Wall Street demonstrations – protesting against criminal activities in the financial industry that precipitated the economic collapse and pervasive corporate and individual greed – the beginning of an American Autumn?
With declining income and the steadily rising cost of college education, increasing numbers of middle class families are finding they can no longer afford to send their children to college, which will have devastating consequences on middle class families and our country.
Without that education, the future earning power of today’s young people will be compromised. They could descend into a permanent underclass. Our country will also be a loser, falling behind the rest of the world because it will no longer have the numbers of educated and skilled people needed to keep up.
Just how valid is the often-repeated argument that increasing taxes on the wealthy would be a job-killer?
Historically, the middle class has spent about half of its income on goods and services, supporting 70 percent of the economy. The lower class, after spending most of its income on necessities, has very little left for other goods and services.
But what about the wealthy? They spend a much smaller portion of their income on the goods and services that create jobs. The vast majority of their income is devoted to increasing their personal wealth by investing in the stocks of corporations that have increased profits (along with dividends and stock value) by replacing 3 million jobs with high-tech automation and computerization and sending another 2 million jobs overseas to cheaper labor markets.
Increasing taxes on the wealthy will have little effect on what they spend on goods and services, but would curtail some of their investment activities, which are the real job-killers for American workers.
In order for our economy to recover, we must rebuild the middle class and its purchasing power – the foundation of our economy. That will require putting more money into the pockets of the middle class by an equitable sharing of the profits of the American economy. It will take a combination of better pay and a restructuring of income tax laws to lower taxes on the middle class, balanced by increasing taxes on the wealthy.
A good start would be to eliminate the gratuitous 15 percent tax rate on corporate dividends, which are major income source for many of the wealthy, but provide only a minor portion of the income of the rest of us.
“As I See It” appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at email@example.com.
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