According to Forbes magazine, the combined net worth of America’s 33 richest citizens is $689 billion. This total is just slightly more than the combined net worth of the entire lower HALF of the US population. In other words, if 157,000,000 Americans paid all their bills, sold everything they own, and put all that money into one big pile, they still wouldn’t have as much money as those 33 people.
It would take about 2500 filled-to-capacity Metrodomes to hold half the US population. Think about how it would be to walk into each one of those 2500 stadiums and look at all those people. Imagine the millions of hours of work they do every day. I don’t think there’s any way the efforts of 33 people, no matter how hard they worked or how talented they are, could equate to the efforts of those 157 million people. And yet, our economy and tax system has rewarded the two groups equally.
The average net worth of the lower 75% of Americans has remained stagnant for the past twenty years. Forbes says, “The very richest, meanwhile, have seen rapid gains in their wealth. In today's dollars, the Forbes 400 Americans had net worth of $480 billion in 1990. The people in that group today have more than three times that level of wealth.” Essentially all of the new wealth created in our country since Reagan was elected has gone to the wealthiest 10% of the population.
Why has this happened? Some of it has to do with technology that makes it easier and easier to quickly sell and distribute popular products to billions of people. But it’s also happened because of our unfair tax system. Most of the money made by the very wealthiest Americans comes from capital gains (profits from investments), not from salaries or business income. The federal tax rate on long-term capital gains is 15%. That’s the same rate paid on taxable work income of over just $8500 per year.
Fifteen percent is well below the tax rates paid by middle-class households. For 2011, my wife and I paid 25% federal income tax on some of our income. My wife also paid 13.3% self-employment tax on her half of our income and I paid 5.65% payroll tax on my half. Once we hit $69,000 in taxable income, we paid more than thirty cents in federal tax for every additional dollar we made. Compare
that to Mitt Romney who reported no income from wages, but $6.8 million from capital gains. Romney’s tax rate on that $6.8 million was less than half the rate we paid on our income over $69,000. That’s how the wealthy get wealthier while the lower and middle classes get nowhere.
Two things should be done immediately to bring some fairness back to our tax system. It was only fifteen years ago that the long-term capital gains tax rate was a more reasonable 28% rather than the current 15%. It should be changed back to the pre-1997 level. Second, high income earners should pay Social Security tax on all of their income – not just amounts up to $106,800. This revenue could be used to permanently fund the temporary 2% rate drop implemented by Obama.
Republicans like to label as un-American or socialist those seeking to rebalance the nation’s distribution of wealth. But what did they call it when taxes on the rich were lowered? That also affected the distribution of wealth. In fact, ANY money government spends or collects results in a redistribution of wealth. Certainly Romney and other Republican leaders understand this. They simply throw out words like “socialist” and “un-American” to scare people away from the topic.
Fact is the rich keep getting so much richer while the rest of the population struggles to maintain. Romney places the blame for this situation on the people who are struggling. He thinks they’re content to live on government handouts rather than taking responsibility for their own lives. Don’t believe that for a second. The disparity in wealth began growing with Reagan’s trickle-down tax policies and it hasn’t let up since. People are working just as hard now as they were thirty years ago. To blame them while continuing to promote tax policies that favor the wealthy is not only offensive, it’s disingenuous.
It’s simple common sense: tax policies favoring the rich have created a situation in which the combined wealth of 33 Americans equals the combined wealth of 157,000,000. It’s time we reverse that trend.