Extreme inequality is wrecking our communities, pulling us apart, and undermining everything we care about. At the core of our problem are four decades of stagnant paychecks, excluding half the U.S. population from the economic gains of the internet age.
Thanks to a new study by the Economic Policy Institute, “The New Gilded Age,” we can take a closer look at income inequality by state, metropolitan area and county. It includes some nifty online tools for researching the level of inequality in your own community.
According to the study, the richest 1 percent took home 22.03 percent of all income in 2015. And since the economic meltdown of 2008, the top 1 percent has captured 41.8 percent of all new income growth. In contrast, during the “shared prosperity” decades after World War II, between 1945 and 1973, the top 1 percent captured only 4.9 percent of all income growth.
The current decade more closely resembles the “gilded age” levels of grotesque inequality from a century ago, the last time we had such unequal wealth. In 1928, on the eve of the Great Depression, the richest 1 percent had 23.9 percent of all income. The richest 1 percent took home an average of 26.3 time as much income as the bottom 99 percent.
Who is this 1 percent? At the national level these are households with incomes starting at $421,000 with an average income of about $1.3 million. The largest concentrations of national 1 percent income are in New York, Connecticut, Florida, Massachusetts, District of Columbia, California, New Jersey, Nevada, Wyoming and Illinois. Income inequality has risen in every state since the 1970s –and in 43 states it has worsened since the economic meltdown of 2008. But some states have even more extreme levels of inequality with the most unequal states in the country being New York, Florida and Connecticut.
“While the degree of income inequality differs across the country, the underlying forces are clear,” said report co-author and economist Mark Price. “It’s the result of intentional policy decisions to shift bargaining power away from working people and towards the top 1 percent.”
Another measure of inequality is looking at wealth and savings. Almost one-fifth of U.S. households are “underwater” when it comes to wealth, holding zero or negative wealth. Meanwhile, the wealthiest 400 U.S. billionaires have as much wealth combined as the bottom 62 percent of U.S. households combined. The three richest billionaires – Jeff Bezos, Bill Gates and Warren Buffett – have as much wealth as the bottom half of U.S. households combined.
We can reverse these inequalities and orient the rules of the economy to “share prosperity” as we did in the decades after World War Two. In fact, the majority of working people in this country support a program of raising the minimum wage, taxing the wealthy, and investing in infrastructure and people to create an economy that works for everyone.
Our nation needs to “conscript wealth,” as we have during periods of crisis, to reverse extreme inequality. We must also put a brake on the concentrations of wealth that distort the economy and undermine our democracy and civic health. We are living through evidence that a polarized economy gives rise to a bitter and polarized politics.
As the GOP Congress considers additional tax cuts, mostly for global corporations and the richest 1 percent, we should press for very different policies:
1. Restore top income tax rates to progressive levels.
2. Institute new higher marginal tax rates on income over $250,000 and $1 million and up.
3. Institute higher tax rate on top 1 percent and top 0.1 percent.
4. Ensure the super-rich pay the same effective rate as most taxpayers.
5. “Scrap the Cap”: Eliminate the cap on Social Security withholding taxes.
6. Raise or eliminate the cap on payroll taxes to increase reserves and strengthen the Social Security system for present and future retirees.
7. Close the carried interest loophole.
8. Immediately eliminate the loophole that enables hedge fund managers to reclassify their income as capital income, and subject it to lower rates.
9. Tax income from capital at same rates as work.
10. Eliminate the tax preference for income from wealth (capital gains) and tax all income with a
graduated rate system, regardless of its source.
11. Strengthen the inheritance tax.
12. Defend the estate tax on wealth over $10 million and strengthen it by closing loopholes and instituting graduated rates on inheritances over $50 million, $100 million and up.
13. Institute a financial transaction tax.
14. Levy a modest Wall Street financial transaction tax to discourage high-frequency trading and raise substantial revenue from speculative investing activity.
Inequality can be reversed. But we have to boldly assert an agenda that helps us grow together and not be further pulled apart.
Chuck Collins is co-editor of Inequality.org and director of the Program on Inequality and the Common Good at the Institute for Policy Studies. He is author of numerous books about inequality, including Economic Apartheid in America and Born on Third Base. His newest book is Is Inequality in America Irreversible? (PolityPress).