is it American Exceptionalism - that allows great inequality to exist ? Many people may suffer - but hey I'm doin' OK here so I don't see the problem ?
Attribution bias with wilful blindness to poverty (from slavery daze) ?
If I'm rich it's cos I'm smart and hardworking
If you're poor it's cos you're stupid and lazy.
So - rich WASPs who inherit grandpa's mansion and trust fund feel entitled - that they deserve it cos they 'worked hard' at Harvard or Stanford.
Ignoring poor immigrants who got nuthin' and struggle with 4 poorly-paid part-time jobs just to pay rent and put food on the table with food stamps, etc.
60
Based on this income "inequality" dogma being espoused by both the NYT and Washington Post, I have to believe that Ayn Rand was right. Liberals will not be satisfied until they're able to confiscate the wealth of those who earn and gradually disincentivize hard work, innovation, and ambition. No one owes you anything in this world despite the faux rights the left likes to hold up (right to medical care, college, etc.). Wealth can easily migrate and like water, will seek the lowest level of confiscation (aka taxation).
33
Sigh. The author conflates (intentionally) wealth with income. Yuppie consultant/lawyer making 300K is not wealthy nor elite (despite what the NYT may say). They are simply employees with larger paychecks.
How the elite have exploited globalization to consolidate wealth and regulatory influence would provide more meaningful insight. And that insight would undoubtably challenge neoliberal orthodoxy. Something I do not think the NYT is comfortable with.
89
Yes, the analysis is important, but I think it is more important to discuss where the red line is. Needless to say, the chance of political turmoil surges when it goes over the line and if it should happen to the US, the entire world would be hell.
7
Yes, the analysis is important, but I think it is more important to discuss where the red line is. Needless to say, the chance of political turmoil surges when it goes over the line and if it should happen to the US, the entire world would be hell.
1
Let's rediscover Henry George!
3
The U.S. is just an oligarchy. We have "legalized" bribery. D.C. is a mafia like structure. It's over folks. Only catastrophe changes this. Intended or unintended events that break us.
36
Doesn't mention inherited wealth, that's a big one.
28
The top marginal tax rate needs to be increased back to 80% at the least. Tax shelters need to be made illegal. Corporations and individuals should not be able to squirrel their money away in an island somewhere. Health care should be a right. College education should be free. A separation between conventional and investment banking needs to be re-established and a host of controls need to be implemented on the OTC derivatives markets and on rating systems used for securities. Campaign finance reform must be severe, eliminating the ability of the 1% to control legislators.
These things will all help reduce income disparities and bring America back to the more equal society our founders envisioned. Right now, we are an oligarchy controlled by uncontrollably greedy and unpatriotic citizens.
87
Not surprisingly, if we look at the list of countries that supposedly have the happiest people - we have Norway ,
Denmark, Iceland, Switzerland, Finland, the Netherlands, New Zealand, Austalia, and Sweden. Not only do these countries have universal health care (one very good reason to be happy) - but I am guessing that because they have a high standard of living - and judging from the accompanying NY Times chart - lower income equality - Everyone is happy. Why can't we have universal healthcare, a high standard of living, and income equality? Why are we more like RUSSIA? What is wrong with this picture and why does Congress refuse to fix it and help us? Ugh!
75
Most of the "elite professionals" that I know are government scientist civil servants who are grossly underpaid. Your category definition is circular. Does "elite" mean "well-paid" to you? Or does it mean actually elite?
27
What seems to be lost on the people/legislators that have engineered this type of inequality is the probable deflationary risks in the future. The shrinking middle class will not have money to survive with basic living needs while simultaneously fueling consumerism over the long term.
19
Huh? What matters is wealth, not income. And when income matters, it's income from monopoly rents that matters, not income from doing surgery, trying cases, singing, hitting a baseball, etc. Management income? It better be tied to markets. No one is really perceived as so good that a market would reward them with a $20M severance or retirement, and as often as not, to get rid of them. Their hiring is more like a coup.
16
Blatant falsehoods. Actually, there is pretty strong evidence that it IS trade, immigration, tax policy, and market-power.
I challenge the author to attempt to get his thesis past peer review.
19
We are constantly begged to hate employers. Then please tell me who will hire the next 21 million poor workers like Reagan did (just during his presidency)? Has anyone had any luck asking a beggar for a job?
Remember - there is no guarantee with hiring people If you were too optimistic and the whole thing goes away, you'll probably go broke. Please come here with your name if you still think your taxes n that case should go sky-high.
Remember too, the successful at the top are practically the same people as us schoolteachers and teachers' kids.
4
The decline of unions - systematically pushed by the GOP - is a major driver of inequality because it prevents wages from rising.
16
Most of the "elite professionals" that I know are government scientist civil servants who are grossly underpaid. Your category definition is circular. Does "elite" mean "well-paid" to you. Or does it mean actually elite?
3
Not surprisingly, if we look at the list of countries that supposedly have the happiest people - there is Norway ,
Denmark, Iceland, Switzerland, Finland, the Netherlands, New Zealand, Austalia, and Sweden. Not only do these countries have universal health care (one very good reason to be happy) - but I am guessing that because they have a high standard of living - and judging from the accompanying NY Times chart - lower income equality - Everyone is happy. Why can't we have universal healthcare, a high standard of living, and income equality? Why are we more like RUSSIA? Why does Congress refuse to see this and fix it? Ugh!
7
I like data. And increasing income disparities can clearly cause dangerous societal tension. However, we should all realize that making certain professionals poorer, such as doctors, lawyers, and dentists, won't make the rest of us wealthier.
For this article, the 1 % as a group should be broken down. My guess is that if you go to the o.5%, you will still see a similar graph on income increases since 1980s. Lumping a dentist with a hedge fund manager is simply not valid. One makes $400,000 perhaps. The other makes 4 million routinely.
The author throws in a political commentary covering it up with pseudo-fact supporting independent practice of non-dentist dental professionals, non-doctor health care professionals, and non'lawyer legal professionals. Beyond the serious danger to public welfare this will cause, this will only further separate the top earners from the rest of us as well, further increasing the problem. Top earners will hire top professionals, and the rest of us will simply get priced out of the top medical, legal, and dental markets for doctors, lawyers, and dentists.
The cause is actual globalism - nothing else. The world isn't even close to what it was in 1980. Those who make money by owning flow of information make it faster; those who are doing things that can be done in other countries manually equilibrate to wages in those other countries. Ya wanna thrive in the US but not be a techno/info flow owner? - pick what can't be outsourced or done by AI.
25
So much for Mr. Rothwell "dispelling misconceptions"!
He conveniently omitted the fact that just over 50% of the net worth (wealth) in this country is owned by the top 1%. The fact that they only have 20% of the income, is pretty much irrelevant, since they can sell a minuscule amount of their assets and increase their income any time they want....
But this deserves an example: lets say that I have yearly income of $200,000 and I also have assets (mostly liquid) of $10,000,000. To increase my income by 50% all I have to do is sell a mere 1% of my total assets....
33
Economic outcomes in America today are driven primarily by political factors. If you want to make a lot of money, you are best advised to enter a field or a profession which has a high degree of:
- regulatory capture (healthcare, tech, pharma, real estate and finance especially)
- concentration of market power in a few dominant firms (see above, w exception of real estate)
- abuse of market power by politically-influential oligopolist firms (Google and Goldman Sachs esp.)
- abuse of employment laws to create artificial barriers to entry (for the professions) and to limit market forces that would lower profits (see the H1B visa scam that puts a ceiling on engineers' salaries in the tech industry)
The playing field is not level. The market does not operate fairly. The meritocracy is a myth.
If you want to know why two flaky oddball candidates, Sanders and Trump, came out of nowhere last year to capture so many millions of primary voters - each of them in a party of which he was not even a loyal member prior to 2015 - then consider these facts.
We have an oligarchy.
Our age is the most corrupt since the era of the Robber Barons.
32
I wonder if the backlash to Trump and a 40%, permanent reduction in corporate taxes and elimination of the estate tax will be a 90% marginal tax, universal Medicare and elimination of the Electoral College. (And gun control.).
It’s a pleasant daydream.
16
Americans are generally unhealthy (2/3 of US adults are overweight or obese) and file lawsuits at the drop of a pin--and people are surprised that these professionals make a lot of money?
Everyone hates lawyers until they need one, and everyone wants the best medical care when they get sick (and everyone is ready to sue if something goes wrong): I'd say that pointing fingers at attorneys and physicians for the state of the nation's income inequality is playing a dangerous game. They deserve to be paid (and paid well) for the invaluable services they provide.
Hedge fund managers and the founders of SnapChat? I'm not so sure...
21
Mr. Rothwell's short comment on trade misses the important distinction between actual trade and labor-outsourcing, Yes, Denmark has to import its cars and fresh citrus fruit, but Danish employers haven't shuttered their works to make Danish products more profitable by making them somewhere else.
In Denmark, Germany, the Netherlands and other happy (literally) lands "job creators" still create jobs at home. It is the job destroyers more typical of American employers who reduce incomes and opportunities in the communities where they close plants while increasing profits for their investors.
20
I welcome this article as it looks for correlations; however, most comments only seem to be talking about US AGI incomes.
I may have been misunderstanding the term 'top 1%'. After reading JR's article I now think it is based on AGI from tax returns. What happens with joint tax returns - is the AGI split equally between all on the return? What about people who don't do a tax return? If these aren't added in it reduces the quantity in the denominator.
JR mentions imports (Netherlands) but I think the new GOP is complaining about the balance of payments rather than just imports. I haven't found a tabular set of data but did find (ITC website)
Netherlands: imports 398,336,339 exports 444,867,363
USA: 2,248,208,943 1,450,457,291
Where can I see a discussion of the correlation points raised?
3
I think this increase and widening of the income inequality gap can be mostly attributed to politics and voters (many middle income) who vote for inequality policies, cut backs, tax breaks and austerity values and programs. When people voted for low and middle class interests, the gap was alot smaller. Even moderate democratic socialism scares alot of people politically, but without it you will have income equality. Thats a proven 21st century fact.
3
I think these "1%" pieces are problematic.
The first problem is that they treat all income the same. Specifically, they look at the adjusted gross income of tax returns. A single, unemployed person collecting $400,000 a year from a trust fund is counted the same as two married professionals with advanced degrees, each working 50 hours a week and making $200,000 a year. Also, for many people who cross the 1% threshold, it is a very temporary thing such as the one-time sale of a business or an appreciated house.
The second problem is that discussions of inequality should be focused not on the 1%, but the .1%. Is it really a problem if cardiac surgeons make $400,000 a year? The bigger problem is a system that allows a hedge fund manager to make $400 million in a year and pay half the tax rate of the surgeon.
14
Agreed! Also, I was looking for a discussion of investment practices and the resulting income. Is there data examining whether the elite have different investment practices than the merely wealthy, and how those practices further insulate them from economic forces that impact the rest of us?
2
Interested in wealth, not income? Here's the general outline of wealth in the US:
1. Ordinary folks with more than $1 million in financial assets, about 9 million households. These people have $1-10 million in assets, but most of them are frugal and live normally. They are either educated professionals, or have businesses.
2. Quite rich capitalists with $10-25 million, about 1 million households. Many of them also live modestly, but some don't. They have substantial business and real estate investments, or big stock portfolios. Business executives, top doctors and lawyers, really astute local businessmen, and serious stock investors are found here.
3. The really rich, 100,000 households with $25-100 million. The top CEOs, the highly successful athletes, the famous actors may fall into this class, as well as some people whose name is displayed on 1000 garbage trucks.
4. The 15,000 families with assets of $100 million to $1 billion. Most of them started, and many still own, well known national businesses. Some are obscure, some famous.
5. The Fortune 400, with $1 billion plus. Bill Gates, Warren Buffett, Larry Ellison - everybody knows how they got rich.
This is really an amazing number of rich people overall, around 10% of all households in the US.
8
I think these "1%" pieces are problematic.
The first problem is that they treat all income the same. Specifically, they look at the adjusted gross income of tax returns. A single, unemployed person collecting $400,000 a year from a trust fund is counted the same as two married professionals with advanced degrees, each working 50 hours a week and making $200,000 a year. Also, for many people who cross the 1% threshold, it is a very temporary thing such as the one-time sale of a business or an appreciated house.
The second problem is that discussions of inequality should be focused not on the 1%, but the .1%. Is it really a problem if cardiac surgeons make $400,000 a year? The bigger problem is a system that allows a hedge fund manager to make $400 million in a year and pay half the tax rate of the surgeon.
6
Er...you are not super rich if you are earning 400k in NYC, LA and SF which are huge population centers unlike rural AL. You'd certainly be very comfortable but with fairly modest homes in in the burbs of LA costing 2-3 million positioning such basically upper middle class people reflects more of technical definition than a real one.
3
A good part of what puts people at the top is that they aren't taxed the way they were in the 1950s. Unfettered, unregulated, untaxed capitalism will always create a hyper wealthy class. For years, American conservatives have bees promoting wealth disparities, with great success. They are doing it again before our very eyes today.
9
You dont't have 'Unfettered, unregulated, untaxed capitalism', there's a reason why one gives money to the regulators!
1
A good part is plain monopoly. The hurdles dentists and MDs through their associations put in front of capable, brilliant immigrants trained in these professions is astounding. Even after completing a course of study in one state, for some odd reason you're supposed to move to another state to get employment! Result is that MDs make $300,000 instead of the the $90k they deserve if they truly faced fair competition. Engineers did, and they make $100k a year because there are immigrants who keep their salaries in check and keep US tech corporations competitive. Without immigrant labor engineers would be making $300k a year and the tech industry here would tank, moving somewhere else where the competence is just as good but the salaries are much lower.
5
A one-party war on unions. Tax laws that favor investment income over wage labor income. A financialization of the economy. Court decisions classifying corporations as persons. Court decisions enabling the monetization of political speech. All controllable factors that have contributed to the increase in inequality in the US since 1980. What happened in 1980? Election of Reagan, the start of the Republican war on the middle class, and the Republican war on unions, and the Republican's "divide, wedge-issue, and vote" distraction politics. Workers and middle-class Republican voters, distracted by the cultural shrilling of wealth-funded media, have voted into power the very people whose policy decisions increase inequality and wealth concentration.
24
This is an excellent analysis of what's driving income inequality in the U.S. This is an extremely important issue to the future of the U.S. economy.
I am solutions oriented so I would suggest that the concentration of wealth and increasing income inequality can be mitagated by using government as the investment manager to develop technologies with benefits, by the nature of the technology, that can be broadly shared. E.g. as highways, airports, public water and sewage treatment systems, and environmental commons protection, etc.
Benefits would typically be accrued due to greater efficiency of a system and available at a lower price than the technology that is replaced. While inventions are made by individuals, development and testing, and running competitions for selection of technology applications are typically the result of government investment.
Government must also enact fiscal policies that fairly distribute the tax burden. I have mixed feelings about a flat tax or progressive percentage. There are merits for both systems. However, I am certain that the social INSURANCE contribution of payroll taxes should NOT be capped and as the Trust Fund accumulates a larger balance, the total deduction could be reduced or the payments to beneficiaries could be increased. In addition there are tax preferences that benefit only the very few. These preferences should be stopped.
I suggest the 1982 study of Mancur Olson as reported in "The Rise and Decline of Nations"
8
The really remarkable thing is that a relatively minuscule amount of increased taxation for the 1% would bring millions of Americans up to a fairly respectable income. The
unremarkable thing is that neither the 1% or the republican congress will allow even that. And the only sure thing is that we are headed toward a catasthrope of unhearlded dimension: riots, depression and general mahem as a common occurrence. America is a disaster waiting to happen. And it's quite obvious that this is going to happen very soon.
14
I couldn't agree with you more and cannot understand why the one percent cannot see what they will ultimately reap. However strong the gates in their gated communities, it will not be enough. The tax plan, if passed, will simply add fuel to the simmering fire. It would be much easier if those with wealth and power agreed to share it. In fact, in doing so, they could help to negotiate the terms. When the 99% come knocking, and they most certainly will, there will be no negotiation.
11
It is people like my 28 year old daughter who are the problem. She is a lawyer for a big firm in Silicon Valley. This last week she worked until 3 AM every day and returned to work by 7:30 AM. She earns 200K. How dare she?
Being at a work site is not the same thing as hard work and sacrifice. I worked in Silicon Valley. Much of the "work" that goes on is paperwork interspersed with breaks around takeout and even runs down to the local bar. Especially among pencil pushers such as lawyers and accountants whose sole added value is to circumvent regulations legally.
1
Those who are wealthy have to come up with something to do with all their cash, so they use it to purchase political advantages that wall off the rest of us from being able to accumulate wealth. Then they make more money as they benefit politically, and then reinvest their increases again, and so on.
Wealth is a relative phenomenon -- it only exists if there is poor. At the beginning of Monopoly, no one is rich compared to anyone else, near the end of the game a few are left holding everything while the rest are nearly bankrupt. They are now rich, the others are now poor.
Why do they charge astronomical fees to join country clubs? To prevent the poor from joining: the money is not so much about making the putting greens look nice inasmuch as it is to act as a filter. If you can afford to join up and pay the annual fees, then clearly you ARE part of the club. The wealthy use their money more to isolate themselves more than to buy goods and services.
The 1 % work all day long from falling back into the dreaded and dirty 2%, the same can be said about the 2% towards the 3%, and the 90% from dropping down into the depths of the 80%. Nothing motivates the wealthy to accumulate our wealth then the prospect of joining us, and they could never have increased the holdings that make up the 1% bracket if they didn't find a way to skim it off of us, because that is exactly where their wealth comes: from us. We make the wealth and they collect it.
18
This article completely omits the incomes gained by the ultra-rich due to lower-taxed and untaxed capital gains as a driver of inequality. That's where the rubber hits the road. I just earned an LL.M. degree in International Taxation and Wealth Management. The most important thing I learned is that the rich do not need any more tax breaks. Heck, there's even a structure called a Dynasty Trust in many states that shields income from investments up to 90 years for heirs.
27
This article completely omits the incomes gained by the ultra-rich due to lower-taxed and untaxed capital gains. That's where the rubber hits the road as far as massive economic inequality. I just earned an LL.M. degree in International Taxation and Wealth Management. The most important thing I learned is that the rich do not need any more tax breaks. Heck, there's even a structure called a Dynasty Trust in many states that shields income from investments up to 90 years for heirs.
Wow this is really unimpressive. The issue is not what the top 1% of earners make (and I am in this group with a family income of $400000). The issue is the 1% of wealth is concentrated in a few families, and these are not people who have jobs. I feel so blessed to be so comfortable now. Fifteen years ago, my oldest daughter was eligible for reduced school lunches. My husband and I have worked hard, moved cities more than we would have liked, and have successfully pursed our economic well-being. Our three children will not inherit a fortune and all are pursing careers that will, hopefully, provide meaning and some financial stability. As far as my husband and I are concerned, we are at the pinnacles of our demanding, difficult careers and though we are in the top 1% of earners now, we have not always been so and will most likely not continue to be.
15
Why is wealth more important than income/buying power? What good would it do if the poor owned more of the means of production?
The last thing we need to do is attack high skilled professionals earnings. What the 1% earns isn't the issue the issue is what the bottom 25% earn. There's one easy way to raise wages for low income earners it's to crack down on illegal immigration. Taking out 50 billionaire hedge fund managers won't help poor people it will just hurt the rich, maybe that's the goal. Wages rise when there's a labor shortage we really have no need for any immigration let alone low skilled workers especially with automation on the rise.
5
The bubble in financial assets, especially real estate and equities, is probably the main driver of income inequity. The old saying "it takes money to make money" is still true and with Central Banks pursuing a cheap money policy since the financial crash those with cash to invest have seen spectacular returns.
7
What the author seems to be glossing over here is that, by far, the biggest earners in America are in the financial services sector, i. e. money making money, paper shufflers, they don't create anything, they don't build anything. It has been stated many times by many experts that once a societies number one means of producing wealth is in this sector, the future is not bright.
When bankers and hedge fund executives are generating incomes in the hundreds of millions of dollars every year while the overwhelming majority of workers wages continue to stagnate, any wonder why the U.S. leads the developed world in growing inequality?
56
Well, if I could tell you which stocks will go up in the future, wouldn't you be willing to pay me a large amount of money for this information?
Of course, no one can really do that, but that's the general idea. People are willing to pay these advisors large sums because they believe their advice will make them rich.
1
The tax system and regulatory system are skewed heavily in favor of the financial services sector at the expense of the customer. That does not have to be this way.
8
The "administrators" at GW and other hospitals here in Washington and across the country are getting rich - I don't know if it is the physician who treats me. I don't begrudge hard working men and women who have sacrificed time and spent a great deal of money to make a decent living. The disparity between the very top and those of us in the upper lower is too great and one day there just may be a revolution.
5
I wonder what kind of "physicians" the article refers to. As a primary care doctor, I can tell you it doesn't pay to see patients in primary care. No, what pays is NOT to see patients in clinic. what pays is do do things to patients (procedures, surgeries) and to manage groups of people who see patients.
besides highly paid surgical specialists, who are these 1% doctors? I bet administrators.
37
You have got to be kidding me. As a physician, I am part of the one percent? Really? I am? At most, I make twice what a local store manager makes, and I have an expensive and many-years-long education. I am still paying on my student loans. If I get to retire at 70 I"m lucky. And I am part of the problem of income equality? You are missing the real problem.
19
It offends the idle rich that anybody who works for a living seems even remotely well-off. This article is just an extension of their arguments against trade unions, in favor of H-1B visas, etc. Labor is just labor and it needs to get cheaper, whether that labor is medicine or engineering or teaching or paving roads.
20
"This trend, combined with slow productivity growth,"
This statement needs to be clarified. According to the US Dept of Labor, people worked the same number of hours in 1998 and 2013.
But according to the US Dept of Labor:
And given this lack of growth in labor hours, it is perhaps even more striking that American businesses still managed to produce 42 percent—or $3.5 trillion—more output in 2013 than they had in 1998, even after adjusting for inflation.
And how did they do that? Produce 42% more with the same number of man hours? Productivity.
The fact that people are producing 42% more for the same wages is why we are neck and neck with Russia for 1% having 20% of the national income.
Tell me this is not a reason to hang our heads in shame.
https://www.bls.gov/opub/btn/volume-3/what-can-labor-productivity-tell-u...
13
"The fact that people are producing 42% more for the same wage"....well it's not so much the people as it is the automation that has occurred along with technology gains....
2
Any attempt to understand what's driving inequality that doesn't differentiate the 1% from the .1%, and ignores the upward wealth transferring legislation that congress passes, will miss the really powerful drivers.
The Telecom Act of 1996 gave each telecom it's own geographic monopoly - the $30-$40 per household per month that's lost to the absence of competition amounts to state-sanctioned upward transfer of wealth.
The private insurance model transfers 20% of our health care dollar upward.
The outsourcing of low skill jobs (referred to euphemistically as "globalization") has been a huge driver of inequality, knocking the bottom out of the middle class - and congress gave corporations tax breaks on the moving expenses.
Prolonged patent periods, esp in big pharma, are another major conduit of wealth upward.
The financial sector, once a small fraction of the GDP is now a huge slice of out output. They were allowed to develop schemes to make huge amounts of money via financial manipulations. With all that money, essentially unearned, they are now in the landlord market, buying up foreclosed homes (the product of the meltdown they created).
Rothwell's agenda wasn't to uncover the drivers of inequality - it was to make us think that inequality is the natural order of things.
8
I beg to differ re the Telecom Act of 1996. It did NOT give any entity a monopoly. In fact, it opened the regional Bell operating company areas (defined in the Modified Final Judgement that broke up the Bell System in 1984) to competition from competitive local exchange companies (CLECs). And the Act placed special requirements on Incumbent Local Exchange Carriers (ILECs, particularly the RBOCs) to encourage competition. The cable companies have done quite well doing so for voice services. There is probably less competition than one might hope for in some markets but that is primarily due to the fact that building a network is difficult and costly, particularly in low density areas, as Google and other have found out. It's a boots on the ground business and the people who wear those boots have faired less well I wager than under the Bell System
2
Suppose we lined the top 1% up against the wall and shot them. When the brief sense of schadenfreude faded, ask yourself -- would we be better off? If not, line up the new 1% and repeat. How about then?
If this doesn't seem like a path that would actually make the rest of us better off, then consider the point made by this article -- that the common factor that seems to be behind what we perceive as excessive wealth concentration is restraint of trade in the professions-- the consequence of of many professions from corporate lawyers to barbers successfully lobbying government to create laws and regulations aimed at keeping others out of their business. This behavior is no different than that of corporations always seeking monopolistic status to fend off competitors. And here, also, their biggest prospective ally is always the government.
In both groups -- professionals and corporations -- the best investment they can make is not one designed to make their product or service better or cheaper -- rather, it is investment in the best government (at all levels) that money can buy to keep the "others" out.
So if firing squads don't seem like the solution, maybe it's time to begin focusing on tearing down the edifice of successfully lobbied government constraints erected to guard the professions and corporations from competition -- that would really begin to redistribute their monopoly-like incomes and ease the concentration of wealth...
3
Speaking as a surgical resident, if you want to go to a surgeon after the easing of licensure requirements like you propose be my guest, but I would rather live in the present day. In terms of quality of care, modern medicine has never delivered better outcomes than the present, precisely because of the strong barriers to prevent unqualified people from entering it. Germany has some of the most stringent requirements for careers with even separate high school paths for professionals and blue collar workers. Electricians, mechanics, gardeners, even store clerks all have labor permits which provide job security and reduces 'gig' labor competition. This is a good thing, reducing inequality and improving safety, and this is reflected in the fact that Germany has not experienced the growth in inequality like the United States has; see the chart in the article. Nearly every country see in the provided data with the least growth in inequity (which also correlates with happiness levels) has strong barriers to professions. With all that said, I don't think you can claim to have a strong argument that that it is "time to begin focusing on tearing down the edifice of successfully lobbied government constraints erected to guard the professions."
11
I certainly want my doctors, nurses, accountants, electricians and other professionals well trained. And I want them trained so they pass our high standards. I am sure Alex's training as a surgeon is superior to other surgeons trained in other parts of the world. I do question the cost in this country when compared to other countries.
Salary of a nurse in various cities:
RN Average Base Salary in dollars rounded to thousands:
Boston $90,000
Los Angeles $89,000
New York $94,000
Bonn $70,749
London $75,000
Paris $66,000
And not to pick on nurses...
General Surgeon:
Boston $435,000
London $320,000
Computer Programmer:
Boston $100,000
London $82,000
(These are from a salary expert site and I took the average base salary.)
I guess my point is that professionals in this country make more than their counterparts in Europe. Although I am sure you would trade your student debt for a doctor's debt in Germany.
Part of the wage disparity in this country is caused by households formed by successful professionals marrying other successful professionals.
2
I certainly want my doctors, nurses, accountants, electricians and other professionals well trained. And I want them trained so they pass our high standards. I am sure Alex's training as a surgeon is superior to other surgeons trained in other parts of the world. I do question the cost in this country when compared to other countries.
Salary of a nurse in various cities:
RN Average Base Salary in dollars rounded to thousands:
Boston $90,000
Los Angeles $89,000
New York $94,000
Bonn $70,749
London $75,000
Paris $66,000
And not to pick on nurses...
General Surgeon:
Boston $435,000
London $320,000
Computer Programmer:
Boston $100,000
London $82,000
(These are from a salary expert site and I took the average base salary.)
I guess my point is that professionals in this country make more than their counterparts in Europe. Although I am sure you would trade your student debt for a doctor's debt in Germany.
Part of the wage disparity in this country is caused by households formed by successful professionals marrying other successful professionals.
3
Don't import poverty here. That isn't helping either. Many jobs now require Spanish fluency to pander to illegals who break our immigration laws and then compounding the issue by not learning our language.
16
The countries where income inequality has been steady and low all have tax rates that tax income more progressively than the US. Such progressive systems provide a disincentive to greed. It cannot be a coincidence that income inequality and the ratio of CEO pay to average worker pay has increased so much since the 1980's when upper tax brackets were cut under Reagan. In short, greed now pays. We should return to much more progressive tax rates. The wealthy do not pay their fair share anymore.
And maybe I missed it, but does this analysis include so-called passive income? CEO's routinely get pay in stock options, which are taxed at a capital gains rate, and can far exceed their income. This is such a crooked system; I do not understand why it is allowed to continue. Work is work. We should end such preferential systems and tax it all as income. Treating all income equally would simplify the tax code, reward work as much as investment, and raise revenues that the state needs. If a CEO wants to invest in the company, fine; do it after you get paid like the rest of us do.
Other commenters have raised the income vs. wealth question already, and we need an adequate estate tax to address this issue.
16
The countries where income inequality has been steady and low all have tax rates that tax income more progressively than the US. Such progressive systems provide a disincentive to greed. It cannot be a coincidence that income inequality and the ratio of CEO pay to average worker pay has increased so much since the 1980's when upper tax brackets were cut under Reagan. In short, greed now pays. We should return to much more progressive tax rates. The wealthy do not pay their fair share anymore.
And maybe I missed it, but does this analysis include so-called passive income? CEO's routinely get pay in stock options, which are taxed at a capital gains rate, and can far exceed their income. This is such a crooked system; I do not understand why it is allowed to continue. Work is work. We should end such preferential systems and tax it all as income. Treating all income equally would simplify the tax code, reward work as much as investment, and raise revenues that the state needs. If a CEO wants to invest in the company, fine; do it after you get paid like the rest of us do.
Other commenters have raised the income vs. wealth question already, and we need an adequate estate tax to address this issue.
4
And we need to put back the luxury tax 10$federal.. on the 400 million this and that's.. Why does everyone leave this out of the analysis??completely fair. A consumption tax.. Interestingly today I noticed that the cost of travel insurance was directly related to the price of my ticket. It's cost wen down 16$ when the ticket price went down about 200$$..
I used to live in Japan. You simply do not see the wealthy enclaves over there like you see in the US. One time I was visiting a friend and he pointed at one of the houses. A very famous news anchor lived there. The house looked pretty much like all the other decidedly middle class homes. Maybe a little bigger, a little nicer, but if he didn't point it out, I wouldn't have noticed. Meanwhile, in the US, doctors live in compounds that are astonishingly decadent.
The rest of the world figured out a long time ago that society is not served when the top 1% or .1% control so much wealth. We need to go back to a 70% top tax bracket for anyone making more than a couple million per year. Who knows, it might incentivize companies into paying their workers more and executives less!
13
KH -
The news anchor was not remunerated at the level of talking heads in the US. Salaries in Japan are much lower than the US for comparable roles and there are very few super-star salaries for the upper level professions. Japan is largely an egalitarian society, but there is inequality and there are super-rich industrialists, and yes, some rich enclaves. I see private Rolls-Royces and other super-luxury vehicles in Tokyo regularly.
However, I take your point seriously about taxation. The take rate for Tokyo at the top bracket is 55%. That is approximately 50% federal and 5% municipal. There is also a consumption tax of 8% on most goods and services.
Now, what do you get for that? Probably the best organized, cleanest society on earth. Universal healthcare and the best transportation and infrastructure money can buy.
11
Thats all well and good.
Economy in Japan is stagnating and people commit suicide often due to poor financial situation.
They call it "human incident"there
Japan is homogeneous and has a high population density.
Let's please move the ball off the 1% and focus on where the real money is - the 0.1%. I don't begrudge highly remunerated professionals in the bottom half of the 1% from making a good living if they do so honestly. These are the people who, after all, mostly did what our society puts forth as the 'right thing.' They studied hard, made good choices, applied their natural talents effectively, and rose to the top. This is what most parents want for their children and their lives represent The American Dream. Very successful people will also tell you that they had a bit of luck along the way too, when things broke their way and not for others. Most people I know in the professional class are sensitive to income disparities, politically engaged, well read and highly intelligent. These are the citizens we want and need.
The problem lies above. People in the professional and managerial class often work for the obscenely wealthy - the yacht and plane brigade. There is a lot self-entitled and selfish behavior and very little sense of noblesse oblige unless it is a vanity project with naming rights. (NYPL) It is this cohort of people that should be the focus of any conversation about income disparity, not the folks who work hard for their 500K - 1 million a year. I can tell you it isn't the single digit millionaires buying off Congress and manipulating policy in their favor.
20
Thank you! I work for a living and I make good money, enough to put me in the 1% by income (but not by wealth). The CFO at my company makes 80x what I make, and the CEO makes 10x what the CFO makes. And hey, at least those people work for a living! Many of the 0.1%-ers are just heirs, coasting off passive income.
14
The problem with left-slanted analysis on these topics is that they tend to group the "fabulously rich" together with the "merely affluent." These groups could not be more different. The private jet class is not the same as two married dentists.
The former is the problem. The latter - the top 10% to the top 2% - is generally comprised of salaried workers in the professional fields (not renters, or the leisure class), and in blue states these people pay marginal tax rates of 55-60% including state and local and payroll taxes. That stings.
I don't care how much money you make, if the government takes 55-60% of it, that is too much.
6
Did you read the article? He explicitly distinguishes between these two groups throughout the piece. This is an analysis of the top 1% not the top 10%, which it seems is exactly what you're demanding. Furthermore, high taxes are not his recommended solution. Rather, he points to regulations, etc. as the cause(s) of this extraordinary inequality.
Perhaps in the future before you decry a pattern of bias you might make sure it's not your own.
2
I agree income inequality is a problem.
But we have to be careful with numbers. Assume a worker and a CEO make $50 thousand and $200 thousand respectively. Each gets a 10% raise and both deserve it. The CEO has wisely expanded her company and hired many more workers. Shouldn’t everyone should be happy?
But income inequality has grown. The worker’s raise was $5 thousand and the CEO’s $20 thousand. If next year both get another 10% raise, income inequality will rise again. This will always do so, even though worker and CEO are treated equally, in terms of percentage.
Most people assume, understandably, that “inequality” is bad, by definition—though the growth of it, in the above examples, can be a picture of prosperity.
1
That was a charming narrative, but with no relevance to reality. In reality the ratio between CEO and worker pay at American companies is about 200-to-1, not the quaint 4-to-1 that you suppose. And the growth in CEO pay is running at about 6% annually, while the growth of worker pay is growing 1% annually. Next year the ratio will be 212-to-1.01 and after ten years of that the CEOs will be making 325 times more than their workers.
By the way, in 1980 it was the opposite: income of the very rich was increasing about 1% per year and median worker income was increasing 2%. Then Reagan came with his revolution and here we are.
31
@Jeff - Actually, the average CEO salary of all publicly-held companies is $167K. Only the CEOs at very large companies make extremely high salaries.
1
There are far more doctors and financial pros than CEOs. CEOs just get all the attention. In the meantime, the finance guys and MDs fuel the corruption on Wall Street and in the health care system, wasting everything in their paths.
1
I truly do not believe the facts and figures offered in this analysis. My wife and I are retired and live in The Villages, Florida. There are oodles of very, very wealthy baby boomers here. More than half paid cash for their homes. Many have incomes greater than $250,000 annually. On our street of 22 homes every couple has several or more millions. No-one is poor, or middle class. The great majority of people living here were professionals including doctors, engineers, retired military, school teachers, college professors, management and business administrators, and lots of other high earners.
But, here's the catch. The people who work in The Villages, like plumbers, brick layers, electricians, accountants, lawyers, and others, make large salaries above $100,000. Many earn far more than that. And this is not the only retirement community in Florida, Georgia, Arizona, California and other states with mild climates. There are millions of retirees who are very well off.
In my view the collection of data is greatly flawed and not everyone who is earning big money is being counted. Don't forget that many people stashed cash and are drawing that money, not IRA funds that are taxable. I'd bet the same is true in large American cities like NY, Chicago, Washington and others. There's an ocean of money out there. And not all of it is being counted. The wealthy middle class has plenty of dough.
8
The wealthy are not "middle-class."
2
This is very inductive reasoning. Your narrow personal observations of people in your proximity who have the luxury of an easy retirement in their old age are not a valid foundation for your conclusions on the state of household finances in the United States, much less the OECD.
2
In the matured world of globalization that opened, vast numbers of slave labor wages participants, and the growth of the digital world tech monopolies , few have been included. Difficult to reverse.
5
Two quick problems with the data described:
If there is any connection between "regulatory barriers that shelter [these professions] from competition," and their increasing share of income, why is that not also the case in European countries that, if anything, have even greater barriers to entry and stricter regulation? Is it not possible that "the elite professionals premium" is a result of market forces and under-regulation?
Second: The proportion of the workforce that are "members" of a union is next to irrelevant, because of different legal regimes. The question is what proportion of the workforce works under terms of employment that have been negotiated between the employer (or a federation of employers, or a whole industry) and a union or coalition of unions, and what proportion must bargain on an individual basis.
2
This doesn't fit what I've read about in previous serious discussions of the issue - in that most of the wealth has gone to the top 0.1%, not just 1%. These are not physicians and professionals, but corporate titans, hedge fund managers, wall st financiers.
12
I'll refer to the first graph as the "Oligarchy Index."
But how do the elites rise to the top in the US? Education has something to do with it. And now, corporate minions, I mean House Republicans, want to make education more expensive and inaccessible by removing tax benefits for higher education that will never compensate for the bill’s other provisions and fantasy projections.
I’m supporting the Pitchforks, Rakes, and Torches Party in 2018.
14
First sentence does not make sense. The table shows Russia starting at smaller base and ending at 20%, just like US, so it is actually worse than what happened here.
1
You can save some column space by reducing the answer to the question your headline asks:
What puts some at the 1% top?
Abject, runaway greed by those already there,
and a complete and fundamental
abandonment of the common good.
13
You forgot - great intelligence; willingness to take a risk and good ol' hard work - see Tesla, Apple, Amazon, Google, Oracle, Salesforce, Microsoft.
These are all first generational or second generation companies founded by folks with no special advantages.
The people that complain are the ones that never risked anything - let alone failure.
1
It's wealth that's the issue....The rich are really working....Also, I'm not a fan of lawyers, but I'm ok with my MD making a lot of $$$....
4
No matter how rich you are you cant take it with you when you die...its good to share the wealth around I think, personally...
9
I'll refer to the first graph as the "Oligarchy Index." And the US is 2nd.
But how do the elites rise to the top in the US? Education has something to do with it. And now, corporate minions, I mean House Republicans, want to make education more expensive and inaccessible by removing tax benefits for higher education that will never be compensated for by the bill’s other provisions and fantasy projections.
I’m supporting the Pitchforks, Rakes, and Torches Party in 2018.
4
The author should focus on the 0.1% who really control the bulk of the country's assets and comprise the donor class that owns our politicians, like our Treasury Secretary and his Marie Antoinette of a wife, rather than the professionals that work very hard for 40 years only to reach the 1% borderline of income and then have no significant accumulated wealth or assets for their retirement other than a home and a retirement account. These "overpaid" professionals are not going to save anything by the elimination of the estate tax or the ludicrously low rate on pass through S-corps and partnerships. Paying doctors less isn't going to make the country more equitable as Mr. Rothwell surely knows very well.
15
A number of factors have contributed to growing income inequality that seem to have more to do with who pays you and what you do with that money, than what one actually does to earn it. Unfortunately, attorneys and accountants have become complicit in enabling the growing wealth and income inequality of individuals in this country. Attorneys and accountants have facilitated this wealth transfer at every step by crafting laws and exploiting loopholes and regulations to benefit wealthy clients. It couldn't have been done without them. The actions of the less ethically challenged of these professionals has been to the economic detriment of everybody else.
We got to this point of inequality by:
Demonizing the positive role government plays within society
Lowering the top tax rate from 90%
Enacting laws and tax regulations that favor the wealthy (a tax break for golf courses)
The joy of compound interest (1 million in a savings account at 5% a year = $50,000)
Using off-shore accounts, trusts, partnerships, and other schemes to evade taxation
Using social, class, race, and gender barriers to deny participation in capitalism while promoting nepotism
Tolerating the prevalence of wink wink, nod nod capitalism
Starving & crippling government agencies so they cannot adequately perform their jobs (the IRS, the EPA & more)
Structuring elections so laws & politicians became beholden solely to big money, fund raising, & maintaining the legal power & control of wealthy promotors & patrons.
14
There's a tax break for buying and raising race horses too. Because it's risky.
1
I am certainly in the 1 percent, and I wasn’t born into money. My parents were immigrants, coming to the US without money, or knowing the language or even having a job or a place to work. That was when people could do such a thing. My big chance was to be able to go to college, with a scholarship I earned because I had good grades. Once out of school I got an entry level job with a big company and worked as hard as I could. I took every tough assignment, in fact I asked for them. We moved wherever we had to for the opportunity that was presented. I delivered on them and got promoted into bigger jobs along the way. We lived frugally. Below our means, old cars, modest homes, few distractions. We always saved and invested the savings. We belonged to churches, volunteered in a variety of places, gave generously. A bunch of kids, colleges, weddings, grandkids all covered out of the savings we put away along the way. Still married to the same terrific girl too. How did we get wealthy? We did it the old fashioned way. We earned it.
17
Doctors, lawyers, dentists: named in the last paragraph. These "elite professionals" are taking far more than their fair share.
3
Socialist equal sharing of the worker's output is not generally defined as a 'fair share'
The truly WEALTHY do not have any or only minimal personal income. Assets are in LLCs and family trusts. You only take out what you need to spend. The real money stays in the trust. But keep in mind high ticket items like homes and jets are paid via the LLCs anyways. I would not be surprised if even smaller items like couture and purses are paid from "corporate" cards. That's why there's places in Vancouver area with relatively low-income but average houses are $5M+.
As if someone making real salary+bonus income of $500k is considered 1%er by NYC or SF standards. Like these people will ever buy a $20M penthouse or a learjet. Hahahaha. Most of these people actually have negative wealth once you consider their mortgage and/or student loans. Of course some come from WEALTH but it's not really something you can assess via income levels. It really destroys me to read articles like this in the NYTimes. Fundamental lack of understanding of income vs assets.
23
Niche: Did you forget to mention the impact of international buyers on the Vancouver market? To wit: http://business.financialpost.com/personal-finance/mortgages-real-estate...
For a long time this country tolerated inequality because at least those not in the top 1% still had a comfortable lifestyle. That's increasingly not true so something drastic will have to be done about it. Assured basic income, free education, etc. will have to be implemented to equal the playing field. To expect that everyone should be a lawyer, doctor, consultant, investment banker, etc. is ridiculous.
You don't make a functional society that way.
8
" physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives."
A Tax breaks for this collection of individuals is spending money on a fiscal stimulus program likely to have a multiplier below 1. These are all services incubated from the global market place by geographic and legal barriers to entry. They have little to no horizon for the sort of innovations that would produce virtuous cycles of GDP growth. Moreover, they are reliant on the state to provide and guard the legal and geographic boundaries that guarantee their livelyhood.
Some within this cohort have used their wealth to wield outsize influence on the political process to produce a plan to tax out of existence the research university system seeding the innovations securing both the GDP growth and national boundaries upon which this cohort relies. I can only wonder if they've given any thought to what their children and grandchildren will do with their lives.
2
responding to Lew SD, answer: from Piketty's On Capital, share of wealth, not income.
I'm a lawyer. Most of my friends are lawyers. We are all decidedly middle class. Yet this article puts us in the same category as finance executives. There has to be more to story.
11
@CN, I didn't realize that I'm in the top 1% already, and I definitely DON'T feel rich that way. Yes, we live comfortably, but we also live in a very high-cost state and area where everything is expensive. We live frugally. Believe it or not, I clip coupons too (well, it's "free money", why not). Our only family car is 16-years-old, but is running strong and reliably that I don't see the need to replace it. I don't feel like I have to do conspicuous consumption to feel validated or rich. I volunteer and donate to charities too, not because of tax deductions, but I believe in giving back. We came from very humble background (a family of 7 where our family home is a small studio and we slept in double-bunk beds), but we were happy. Ultimately, that's what matters most to me: Not how much I earn or own, but that I feel happy and content. If we all are so deadset on income equality, and worry about why our neighbors look richer than we do, we'll never be truly happy, no matter how much we've got already.
6
Aside from the legal and financial protection of the top 1% and their income sources, there is a social element. Many people believe they are gods. The laws don't apply to them, or should be bent or change to protect their behavior and livelihoods. And they finance this protection through PACs and direct donations to their supporters in Congress.
All of this is sanctioned by our society that worships capitalism, the "free" market, and the pull-yourself-up-by-your-bootstraps approach to a societal safety net. Sure this may drive innovation and global competitiveness, but at what cost?
Everyone for themselves. Our politicians are too self-interested, and don't have the guts, to do otherwise.
7
"...stagnant living standards for most Americans."
as a member of the 99%, i am more concerned about the median income level, which has grown substantially since 1980. i recall that the median price-adjusted income level reach its highest level recently (+$50,000), and even the (post-tax, post-subsidy) income level of the bottom 10% has grown modestly in the past few decades.
and in general, you forgot about post-tax, post-subsidy income. the easiest way to fix income inequality is through income taxes and subsidies. the US already does this, even if some believe more is needed. (if you are in this latter group, you are free to make america progressive again with bernie sanders.)
next article: how working hours and occupations of the 1% and 99% have changed since 1980. (hint: less manufacturing, less agriculture, more services)
1
These are excellent points. However changes in cost of living must also be considered. Many find their healthcare, housing and insurance costs advancing more quickly than income.
3
This article underestimates the inequality gap as it only focuses on income. To truly see the full extent of the gap one must use wealth as the metric--then you'll capture all of the assets.
For most Americans, their wealth is often less than their income as it includes their debts. But for most wealthy Americans (and particularly those at the top), income is only a fraction of their total wealth as it does not include real estate, investments, etc.
13
These are the types of studies that often leave people more confused than where they started because countries are so different and change so much over time. Russia was the USSR in 1980, is now smaller, is a large energy producer and has deregulated greatly. China was a miserable country where millions were starving. It's questionable how wealth could even be measured in those countries in their prior form. The US deregulated quite a bit and moved from an industrial economy to a services economy. The internet did not exist. The Dow Jones was less than 1,000 and now it's over 23,000. Buying stock was only for doctors.
What's more helpful is to understand what kind of country we want to be and then look at impediments to reach that goal. It's also helpful to know how the bottom 10% profile and how to move them up. At the top end, many of the top income earners work tremendous hours and don't really take home any money until June or July as they are paying 40% to 50% of their money in taxes.
Education is highly correlated with economic success and appears to be the root cause. People who are not educated cannot move up to the higher paying jobs.
3
This is a useful analysis in dispelling several myths about inequality but in exploring the real causes leaves out one huge one: starting with Ronald Reagan in 1981, this country passed a whole series of laws that tilted the playing field in favor of the rich. Reducing the highest tax bracket from 90 to 35 percent, eliminating estate taxes for all but the very largest estates while resisting any redistribution toward the poor (higher minimum wages, etc). If you literally put hundreds of billions in tax cuts into the pockets of the very rich, and cut services for the rest, surprise, surprise, you get increased income equality.
8
To the author:
When you get diagnosed with cancer and need surgery, chemotherapy, and radiation, you should have your pancreas surgery done by a surgical physician assistant, your chemotherapy by an oncology physician assistant, and your radiation should be planned by a radiation oncology physician assistant. Your insurance will bill about the same amount, the PAs will make what they currently make, insurance company profits will be higher, doctors will lose their jobs, and your cancer will fail to have been fully removed, you may die from complications from incorrectly administered chemotherapy or radiation.
Brave new world!!!!
Enjoy.
9
Patients in Western Europe, Japan, Australia etc. manage to get their surgeries done and tumors removed by doctors who get paid 1/2 to 1/3 of their American counterparts.
Very clever trying to scare people with assistants doing surgeries.
16
You really expect someone to go to medical school and then become an intern on call so that they can make $50,000 to $100,000 a year? I know someone who is a cardiologist, he was on call 24 hours a day and didn't start earning decent money till he turned 40. It's not the doctors, it's the hospitals that charge a fortune, also big pharma. I don't begrudge a doctor who makes $500,000 a year when they have to pay off their student loans which are over $200,000. That doctor could have used their superior intellect to go work on Wall Street and made millions without having to go through the grueling process of becoming a doctor.
1
Ever heard the term "straw man"? By your lights, "real" surgeons never make mistakes, operate on the wrong body part, leave stuff inside the body, etc etc.
Let's see, doctors who hire PAs, but bill the insurance companies that same rate, meaning *patients* pay Cadillac prices for a Kia practitioner, while the practice benefits from using a lower cost PA to handle patients. (Honestly, though, PAs seem far more engaged with patients than many doctors do.)
The data show that the U.S. is well down the list of good outcomes from medical care, infant mortality ratest, etc. as @Californian notes.
1
I am sorry Jonathan Rothwell,
You seem to have missed the point that wealthiest people shuffle MONEY around .
They hide it offshore etc etc.
Working professionals cannot possibly accumulate billions even if they work all hours of the day.
13
So why are those who support the incompetent-in-chief not angrier than anyone else about the absurd attempt to make the wealthier more so with generous tax cuts while temporarily cutting taxes for -some- lower and middle class taxpayers and actually increasing taxes for others. Trump, of course, is wealthy and his "friends" are as well, so his motivation is obvious (he has no interest in ideology per se), whereas Republicans in congress are trying to fulfill their useless and completely fabricated economic ideological tenets because they can — if enough are willing to ignore the greater good.
Yes, there has always been a 1 percent and a 10 percent, but there's no moral excuse for not raising their taxes while cutting taxes for all in the middle and working classes. During the years of the American Dream, the greatest increase in greater good prosperity in the country's history, the tax rate for the wealthy was double what it is now. Cutting taxes is obtuse - they rarely pay for themselves (thus they are tax spending) while only increasing deficit and debt.
Eclectic Pragmatism — http://eclectic-pragmatist.tumblr.com/
Eclectic Pragmatist — https://medium.com/eclectic-pragmatism
5
No matter what the income distribution is, there will always be a top 1 % and a top 10%. Its just the nature of the numbers. So instead of focusing on specifically on who the 1% are, it is more constructive to focus on the extreme inequalities in wealth controlled by these groups and how they got that way. What are the policies that lead to a higher Gini coefficient and how does current (or proposed) legislation lead to furthering this divide. What is equally disturbing is a permanent class of "haves" where there is no income mobility and one is essentially unable to climb out of his/her economic strata at birth.
3
The last graph is not very convincing. You have a number of countries bunched towards the lower left corner, and then three clear outliers (US, Israel, and Mexico), and try to draw conclusions from a tiny sample of outliers.
But it's worse, the U.S. isn't even on the same fitted line as the others. If anything, the graph shows that the US has more inequality than other countries with similar relative professional incomes, suggesting this isn't really the problem.
1
Instead of focusing on income, if you really want to look at wealth inequality, you have to look at cost transfers. It isn't about who is holding the party, but rather who gets stuck with the bill at the end of the party.
3
We may be better off focusing on spending inequality. Let's not penalize people for being successful. Let's penalize them for not spending their money. A functioning capitalist economy requires money to be cycled through the system. How about a 50% tax on non-depreciating assets above, say, $5M? Simply spend what you don't need for retirement, and avoid the tax.
4
And somehow not be able to hide trillions in off shore accounts! To what good are these assets really serving?
2
It would be helpful to have some discussion of the impact of tax policy here. Have US tax laws contributed significantly to inequality? Why or why not? How could they be changed to combat it? Also, it seems to me a bit implausible that protections of professional trades (like the bar and medical licensing) are that big of a factor in the recent rise in inequality. Those licensing requirements have been around significantly longer than the period being discussed here, and many of the increasingly lucrative positions in the banking and the financial sector lack the same barriers to entry.
2
Top 0.1%, not top 1%, share of wealth is 20%, largely inherited wealth with high return on capital, but also new wealth from entrepreneurial and investment success. This is NOT due to high earning professionals. Inequality will increase if Republicans effort to reduce estate tax is successful.
13
Rothwell includes a link to an article by the economists Thomas Piketty, Emanuel Saez, and Gabriel Zucman in support of his contention. The Piketty et al article states, "In the meantime, the average pre-tax income of top 1% adults rose from $420,000 to about $1.3 million, and their income share increased from about 12% in the early 1980s to 20% in 2014."
The article is 52 pages long and it cites the raw data sources and details the methodology it uses to arrive at its conclusions.
So where did you get your data that only the top 0.1% share of wealth is 20%? And where do you get your data for the source of that wealth?
4
The author doesn't understand the issue. Here, he is talking about the 1% of Americans whose salaries are highest. While problematic, the real issue is WEALTH and WEALTH consolidation, not income. The wealthiest Americans aren't earning a wage, they are consolidating WEALTH through investments, tax loopholes, and outsized political influence.
140
I don't quite understand that last graph. If you swap the axes, doesn't that mean we are *underpaying* our elites? In other words, we have more inequity that can be explained by the salary differential.
3
My husband worked 3,000 hours last year and earned roughly $225,000. He leaves the house at 4:30 am and returns home around 7:30pm. His daily commute is 3 hours roundtrip by commuter bus into NYC. We pay plenty in Federal, State and local (property taxes) we also get hit with the AMT tax, we live within our means, live in a smaller home than we otherwise could afford because we are frugal and trying to save for eventual retirement. Our household income is in the 3%, I believe. We are not going on fancy vacations because my husband rarely takes time off from work. People who work hard and pay most of the taxes in this country are constantly being squeezed by ever higher taxes and it's depressing. My own family members think we're rich and they seem jealous of my husband's success because he makes 5 times the average annual income according to what they keep telling me. Meanwhile I have a sibling who still lives at home and refuses to work at all and who advocates for Bernie Sander's style socialism. He quit his good paying union job 7 years ago for reasons I don't understand. He said the work environment wasn't good for his health! He now lives off my parent's charity. Sad.
33
It's true that "people who work hard are constantly being squeezed". If you think it's tough in the top 3%, try being working poor. Meanwhile, the wealthiest can just live off their fortunes or, increasingly, their inheritance.
21
There is a massive difference between income inequality, which is addressed in this article, and wealth inequality. Someone who uses their income to provide means for living in the day-to-day world is in a much different place than someone whose salary and wages make a negligible impact on their finances. Although I do believe people in higher income brackets should pay much higher taxes, ultimately, we are probably more considering the top .1% at the top of the wealth scale which is approximately 5000 households, give or take. If you have to think about price, you're in the wrong category. And that is not even addressing taxes on large corporations...
8
My husband did not go to college, he went trade school (Apex Technical School) in the 1970's and learned welding. We sure did not start off in the top 3%, we got there through very hard work, mainly my husband's hard work and very long hours working in the construction field for over 35 years. So he finally got to the point where he is making very good money for a person with his limited education. He started off working in an auto body shop, then he transferred over to being a construction worker on high rise construction jobs (such as AOL Time Warner, WTC building 7 after 9/11, and many other large construction jobs working in all kinds of weather, rain, sleet, snow, heat, cold, etc. Through very hard work and some luck he was promoted multiple times till he became a foreman. After the global financial crisis he lost his position as a foreman. He was offered a job as a regular carpenter who had to go back to swinging a hammer and using a skilsaw, etc. He decided to retire at an early age and collect his smaller than it would have been pension had he waited till full retirement age. He then went into a second career and that is when he began making his current salary as a consultant. So at one time he certainly was in the working poor. He worked at odd jobs and was paid $250 a week at the body shop and had no benefits in the mid 1980's. He did it through sheer hard work and a lot of determination.
Some people have it and some people don't. No one handed him it, he earned it
1
Medicine seems to be an area where the normal rules of the market do not apply. There is no price competition, artificially limited supply and a very poorly informed customer base. This leads to very little questioning about the price and amount of services rendered. In fact, there are entire industries devoted to showing doctors and hospitals how to increase their billing and maximize government and insurance reimbursements.
We have regulated monopolies in the past. When there was essentially one phone company, the government regulated the prices that could be charged to protect the consumer, as well as ensured that investment wasn't wasteful and the product met quality standards. Something like this should be considered for healthcare.
11
This article hints at the disparity, but as others have pointed out is that income disparity is coming from not cash income, but investment income, and that is where the 'elite' make most of their money. 40 or 50 years ago, the stock market, while important, was not the be all and end all of things, what mattered were companies creating profits from the goods/services they delivered, and the stock price was a reflection of that...but back then, stocks were only one investment, bonds, other investements, or even bank savings competed with it. Back then, too, the executives and the like got almost all their income from cash salary and bonuses.
That changed, and we became a stockholder nation, but that is not evenly distributed. Workers for the most part, even skilled workers, get most of their income from salary and cash bonuses. Meanwhile, executive compensation is 90% stock based, and that growth has been explosive. More importantly, stocks are mostly the real of the extremely well off, they get most of their income from investments, so as tax policy favored stocks and the stock market became this huge gambling pool, full of hedge funds and algo trading and tv shows, their income has exploded. Worse, this focus on stock price has led to suppressing working class wages, cutting labor costs makes stock prices soar. One suggestion would be to not make stock tax favored, it has been proven that low capital gains rates doesn't generate new jobs, in fact it suppresses them.
15
Three members of my family work at law firms where the average partner makes well over $1 million a year. Tens of thousands of bankers, consultants, etc. earn that as well. That is exactly the kind of work this article is referring to. So yes, the income disparity is from cash income as well as investment income.
6
Sigh.
I don't quite make it into the 1% but the combined income of this doctor and her husband falls into the top 4%.
I feel sick to my stomach when I see doctors lumped in with hedge fund managers, as was done in this article, when discussing the "rich" people. Yeah, maybe the plastic surgeons from "Botched" are up there, but there are many, many hardworking primary care physicians and pediatric specialists that are not buying oil paintings and cruising on their yachts.
As another commenter also noted, my husband and I pay 40% of our income to taxes (which is my civic duty and I'm OK with it) because I was only smart enough to go to med school and not business school. Please don't put me in the same category as those that are reaping the rewards of this rigged economy.
177
Agreed. The social value/ utility of your services is much more than the typical MBA, who may earn multiples of what you earn. The problem is that the people that pay doctors are from all income levels and many have trouble even paying for the fair salary that you earn. However, for MBA's, they are often working with very wealthy people doing multi-billion dollar deals of which the MBA's get a percentage; so paying these people is usually not difficult.
12
And many, many, many hardworking plastic surgeons who are not from "Botched" and spend their careers caring for burn patients, hand injuries, and reconstructing defects from trauma and cancer. Hard as it may be to believe, some have a hard time meeting expenses.
What a country.
16
The financial sector is the biggest abuser. People who don't create ANYTHING, just push hypothetical money from one artificial "product" to another, and get handsomely rewarded for doing so. More of the US capital is being tied up in offshore accounts (or DaVinci paintings) all the time
24
Immigration and equal rights for women are also driving inequality. Years ago, teachers and nurses were all women and poorly paid. Lawyers and doctors would marry teachers and nurses. Now, high earners marry other high earners. Also, brining in more and more low skilled immigrants drives down salaries for lower skilled people.
4
Not your best set of graphs/charts. Really hard to follow.
3
Nonsense! Capitalism without checks makes the rich richer, Progressive taxation is a check to this. Our taxation has become more regressive and inequality has increased. Duh!
10
I have no problem with my lawyer or my anesthesiologist making $390000/year. It is the Eric Trumps of the world making $400,000/week to do nothing that is the problem.
159
You would care a lot more if you saw how much of of the U.S. treasury goes to pay for unnecessary surgery and other procedures.
4
I do have a problem with a lawyer making 390K a year. Half that sounds about right.
4
Now you need to re-run your analysis to focus on the 1 TENTH of 1 percent - that's where the real shenanigans lies, with the financial expropriators/swindlers like Robert Mercer, not hourly-rate doctors & lawyers
23
"... the richest 1 percent have seen their share of national income ..."
This statement (second paragraph) shows that the author is very sloppy in his analysis and/or writing. "Richest" is about wealth, while "income" is about income. They are different things. Conflating the two, and switching between them as necessary to make a point, is dishonest.
19
I'velong believed that two of the prime drivers of wealth inequality are: (1) overvaluation of the worth of the top 0.1% earners; (2) that such overvaluation is determined by a small elite consisting of that same 0.1% and their hangers on. For example, how many times have we heard of a top executive or financial manager making an egregious blunder costing billions, then receiving an immense golden parachute, only to wind up in yet another top executive job where the compensation remains in the stratosphere? Rather than a walk of shame, the big blunderers are given a walk of wealth and stealth return, all micromanaged by a board of directors (populated by the 0.1% and their cronies), for whom similar soft glove treatment is provided when they screw up. Occasionally a inept 0.1% is thrown to the wolves, e.g., Bernie Ebbers, Ken Lay, or Al Dunlap, but they are the exception rather than the rule. Accountability appears to apply only to people in the lower echelons, and this must stop.
13
I'm in the 1% - barely. I'm a college dropout that has worked 60-70 hours a week for the last 26 years to get where I am today and still do so. I was born in Woodside, Queens; not exactly a bastion of the 1%. My parents never made it past high school. My Dad was a WW 2 vet that worked in the same crappy job for 44 years. I owe $300,000 to private colleges in the Northeast for my 4 children's college education. I was expected to pay full price to these institutions of higher learning. I live in Nassau county in a modest house I bought in 1995 that went up in value. I pay almost 45% of my income in taxes when you take into account state and local. I fund my wife and my retirement. I resent anyone telling me that I should be paying more in taxes? Why should someone that works 40 hours a week tell me I should pay more? Why should some teacher with a lifetime pension and medical benefits tell me I should pay more? I already pay too much; much of it toward an inefficient government. Where's the inequality ? If I work twice as much as you to get what I have - why are you so resentful at me?
33
I agree completely James, my husband and I grew up in S.I.,NY which is also hardly a bastion of the 1%. My husband's parents came from Italy with virtually nothing, my father in law had a 3rd grade education. However, he passed down an ethic of hard work down to his sons. One of his sons and his daughter earned master's degrees and the other two went into the construction field. My father in law died 25 years ago and he was firmly in the middle class, not rich but he had enough to retire on. My dad was a mechanic, btw. My mom was a housewife.
We don't have any debt to speak of because firstly we only have one child who has a disability and was unable to attend college due to this. He works hard at his job but will probably never make nearly enough to support himself. Due to this situation my husband became a workaholic trying to save as much money as possible so that my son would never have to depend on the government for a handout. We want to make sure that he has an income to live on for the rest of his life and have planned accordingly. My husband works to the point of exhaustion due to this. I also have a disability which makes it impossible for me to work at a job, I do the best I can researching how to invest our money by keeping up with our investments. We certainly don't have nearly as much is as recommended by various financial sites to live a life of leisure in retirement.
1
You aren't the problem, it's those who earn much more. However, if you work twice as much as an average professional wage earner, you would be making about 200k a year, not 400k. What are you doing that deserves you the extra doubling of income? I don't necessarily think like this but it's a question I'm sure a lot of people have.
2
I agree that your category of worker/earner is not really the problem, but it does raise questions of the generation gap: the fact that you could drop out of college and work your way into the 1% is pretty great, and it's exactly what young people today feel they'd never be able to do, and why they are drawn to Sanders-style socialism. If the American dream as you lived it were still alive, the issue wouldn't be so muddled, and the young wouldn't have so much resentment toward people in your category (which, again, doesn't really deserve it--it's for the people gaming this system, capitalizing on interest, as others have said). The question now isn't "Why do you hate me for working so hard and honestly making my living" but what your four children will be able to do with their college educations--that's what we should be thinking about as a society.
6
I started working in the early 1980's when computers were just being introduced. Getting one of those early jobs in tech was a path to a good salary with steady raises until after 2001. During that time period housing was affordable here on Long Island with a 60k salary. If a couple wanted to have one stay at home parent to raise their children it was possible without becoming financially crippling.
As the years went by, and especially since the Great Recession, my salary has been slowly going backwards. There were no raises or raises that barely covered the increasing cost of healthcare. Add on the never ending increase in property taxes and I continue my slow slide backwards. While I am not complaining about myself, I can see first hand how tough it is for the newer generation of workers. Unless you have the hottest tech skills or deliver medical care, you are unlikely to have the salary to afford much more then your rent and groceries. Housing prices have skyrocketed, but salaries have not kept even close. Even a two family income is not enough to feel safely in whatever the middle class is today.
I'm not sure what the answer is, but it is only going to get worse as technology starts removing jobs that are now occupied by humans from driver to physician.
14
Very simple. Criminal behavior puts people at the top of the wealth scale. Reuters had an interesting exclusive article about The Con Don and his clan in Panama. Robber Baron heaven. Read for yourself:
https://www.reuters.com/investigates/special-report/usa-trump-panama/
There is not "myth" about Top 1% Global Financial Elite - they are trying to take over governments around the world and put people deeply into debt with them.
WE THE PEOPLE are the only ones who can/will stop them. Start by stopping the U.S. "budget" that will turn 99% of us into indentured servant and peons. Just like the 5th/15th centuries.
10
A lot of commenters are making the point that is was "the lowering of income tax rates" that explains the change in inequality.
But this does not hold water, as the tax rates in the US circa 1980s are virtually the same as they are now.
The main explanation is the self-sorting of US society. Affluent people in the US are now living in clusters, marrying each other, going into business together, forming medical/legal practices together, starting tech companies together. If you are in, your children are in, you prosper. If you are out, your children are out, you stagnate.
Simple as that, and no laws can change that.
1
I don't follow your reasoning re taxes not being a factor. We want an explanation for increasing inequality since 1980. Top tax rates went way down in the early 80s. They have varied somewhat since, but have remained consistently lower than post-WWII, pre-80s levels. The fact that they have been at this low level just during the period in question makes it MORE plausible, not less, that tax rates are a significant contributing factor.
3
I'd want to break out medicine as a unique category here. I suspect that the US has the most expensive, inefficient medical delivery system (including doctors, lawyers and insurance). If nothing else, that may explain much of the difference between the US and other countries. American workers cash income has been stagnant, but the cost of employment for business has been increasing because of medical costs. Workers are being paid more, just not in cash.
10
Are you really being "paid", if your income goes to your doctors and not to you?
If a homeless vagrant receive $1 million worth of medical care, is he now rich?
As comments make clear, Rothwell's article doesn't fit received wisdom. Income inequality should be about hedge fund managers, inheritance getters, golden-parachute execs. Rothwell's most egregious claim is that doctors are tops in soaring to income heights. I've tested this (evidence-based) theory at dinner parties, and it goes over like recommending raw chicken.
In the 1950s the top tax rate was over 90%. After deductions, maybe 70%. I've heard that at dinner parties back then, professionals would boast about how much they paid in taxes. Since then our social contract was eviserated.
Rothwell's point is that the 1% benefit from regulatory capture. Med schools sharply curtail doctor supply, with predictable income results. People point to immigrants. Foreign doctors fill rural hospitals at lower cost, but that keeps urban doctor compensation higher than if enough American MDs were minted.
Yes, focus on regulations. Republicans love to, except they gut environmental ones. Lets do comparisons between countries. Republicans love to, except they dwell on corp. tax rates.
For those who "wouldn't work" if they were taxed 50%, perhaps their peers in other countries could explain that it's not so bad. You still have lots of money.
6
The article focuses on earned income -- salaries paid to different job categories. But didn't Rothwell read Piketty? The income that matters is the return on accumulated wealth. (Other commenters have urged a focus on measuring wealth, but I'm saying something a little different, namely, that even if you measure income, the income that matters is investment income, not earned income.)
22
But the only way to accumulate wealth is by saving out of income. If everyone spent everything they took in, then no one would have any wealth. Maybe your ancestors saved, maybe you saved, but someone had to save.
There is a close relationship with disparities in income and outcomes in health. As the difference between the top income earners and the lowest increases, overall health decreases. The US is off the charts on this one. And it affects everyone and can not be fixed by removing payment capability for health care from the most vulnerable segment of the population.
6
"The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives."
Doctors, sales reps, and managers are not the ones making the big picture decisions that have created the level of income inequality in the USA. The author looks at the 1% forest and ignores the 0.1%, the big trees - the CEO's of huge tech companies and corporations, the hedge funders, the big bank executives, the CEO's of huge insurance companies and gigantic hospitals and massive drug manufacturers. And of course, the 0.001% who are the ones who pull those peoples strings - the Murdochs, the Rockefellers, the Bush and Clinton cartels, and many more that we don't even know about.
When it all comes crumbling down, when there is anarchy, starvation, disease and societal unrest on a global scale, and the planet itself becomes more and more uninhabitable, who will survive? Not the 1%. Not even (probably) the 0.1%.
The 0.001%. And they will look out upon the burned out cinder that used to be Earth and say to themselves "how did this happen?" "It might be the end of mankind, but hey, we sure did build shareholder value back in the day, didn't we!"
33
As comments make clear, Rothwell's article doesn't fit received wisdom. Income inequality should be about hedge fund managers, inheritance getters, golden-parachute execs. Rothwell's most egregious claim is that doctors are tops in soaring to income heights. I've tested this (evidence-based) theory at dinner parties, and it goes over like recommending raw chicken.
In the 1950s the top tax rate was over 90%. After deductions, maybe 70%. I've heard that at dinner parties back then, professionals would boast about how much they paid in taxes. Since then our social contract was eviserated.
Rothwell's point is that the 1% benefit from regulatory capture. Med schools sharply curtail doctor supply, with predictable income results. People point to immigrants. Foreign doctors fill rural hospitals at lower cost, but that keeps urban doctor compensation higher than if enough American MDs were minted.
Yes, focus on regulations. Republicans love to, except they gut environmental ones. Lets do comparisons between countries. Republicans love to, except they dwell on corp. tax rates.
For those who "wouldn't work" if they were taxed 50%, perhaps their peers in other countries could explain that it's not so bad.
4
Actually, the rich paid about 35% in Federal tax in the 50s, based on IRS statistics. There were very many ways of dodging tax, and everyone used them.
While there might be a strong correlation between the ratio of elite incomes to the median worker and income inequality, there is one outlier on that chart that falls well outside the trendline: the U.S. Kind of invalidates the argument the author makes.
Pretty interetsing data especially with the tax bill that just passed the house, which will reduce the tax break enjoyed by the high earner professional. If you think about it, there should be no mortgage interest deduction and state taxes should not be deductible from federal income taxes.
While the author makes an interesting analysis of earnings, he claims he is discussing income. Income includes income from capital, which many other comments allude to, but don’t directly address. It is that capital now enjoys a greater share that is the largest contributor to the rise in both income and wealth inequality, yet this is not discussed at all. There are other methodological errors, like looking at share of income to “labor” when looking at unions, rather than per capita incomes, that makes this analysis rather slapdash.
The professionals who “earn” the most provide services to capital. Lawyers and accountants who provide services to the middle class are also middle class. Our “system” from taxes to regulations favor capital, which is a far greater cause than professional licensing of inequality.
4
While the author makes an interesting analysis of earnings, he claims he is discussing income. Income includes income from capital, which many other comments allude to, but don’t directly address. It is that capital now enjoys a greater share that is the largest contributor to the rise in both income and wealth inequality, yet this is not discussed at all.
The professionals who “earn” the most provide services to capital. Lawyers and accountants who provide services to the middle class are also middle class. Our “system” from taxes to regulations favor capital, which is a far greater cause than professional licensing of inequality.
3
I love the casual comment about paraprofessionals delivering health care. While I certainly do not wish the writer and his family ill, I'll bet that when he or one of his family members is truly ill, he'll expect care from a physician - not from some barely trained person.
Disclaimer: I was in solo private practice for 40+ years - and only I treated patients in my office - no PA, MA, or CRNP. The patients always saw a physician!
3
Now there's is a BIG imaginary gap.... between physicians and "barely trained" individuals. Many non-MD professionals in clinical work environments are in fact trained in-depth.
4
As a pharmacist it is very rare, if ever, to receive a phone call from a M.D. about a drug. With the paraprofessionals it is almost routine.
1
Ok, I didn’t go into this piece thinking about earned income (highly paid professionals) because, frankly, this 1% is really not the problem in terms of macro inequality, is it? It’s really the .01% that is driving the inequality and lack of access to decently paid jobs, healthcare, and education. When so much wealth that could otherwise be effectively distributed to create a more even playing field is being squirreled away into tax havens and the sector that makes money with its money is only taxed at 15%, that would seem to have a greater impact than the 1% of the population that are lawyers, doctors, executives, making $400k- a million. Am I missing something?
10
According to his data, even European coutnries with high social safety nets experienced an increase of concentration of wealt.
1
Interesting you focus on income.
I guess you must if you're writing about the penurious rest of us, but it's the tiniest sliver of wealth among the rich. If there's massive inequality there, it's worse in other areas.
Savings, for example,"perfectly legal" piles stashed in sweaty tropical vaults to "reduce the tax burden"; a burden which falls squarely on poor us, who pay up as the wealthy scuttle off to buy their Leonardos, then home to complain about taxes.
You waste much ink on diversions here. It's a shame. If you want to fix inequality (which you, purveyors of $10,000 pocket books, likely do not), look no further than the market for politicians.
If I sold misbred Cocker-spaniels, one a year, in the darks of Ohio, I would suffer greater legal consequences than Wells Fargo, a rapacious repeat offender.
Can you imagine a rationale for our tax break follies? Other than the Christmas morning rush of "more stuff for me", how is this good even for the rich in the long run?
If you want to figure out America look to a society, from church to school, dedicated to producing a population conditioned to hunger and abuse and a ruling class ensconced for generations.
The proof is in your charts: America is great at conning its people and ignoring its laws while spouting endlessly its glory and its (withering) opportunity.
For all our flamboyant religiosity, ours is a nation of gluttony, greed, and icy indifference to humanity. People at the top have more of that, too.
27
While I have often chanted, "We are the 99%," an economic analysis that concentrates on th 1% without looking at the distribution of income within the the 1% is misleading.
The income cut off for the 1% is $390,000 per year, but the income threshold for the .1% is 1.6 million, and the income threshold for the .01% has a threshold is $9 million. And the .01% has an average income of $27 million.
Another fizzy area in this piece is that income reports of the rich often exclude their capital gains, concentrating on their pay packages.
It is not the doctors that are using their wealth to manipulate markets. It is the to CEOs and financiers that are manipulating markets and the government to keep worker pay flat, while productivity rises exponentially (despite bumps), and keep their taxe rates lower than the rates for workers.
https://www.salon.com/2016/04/14/the_1_percent_are_the_real_villains_wha...
https://www.google.com/search?q=income distribution .01%&num=30&client=ms-android-verizon&prmd=ivn&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi908ez68XXAhUJwYMKHbbICYMQ_AUIEigB&biw=360&bih=559#imgrc=F5UPqh1hMcA1nM:
47
Why should they exclude the capital gains? They're part of the AGI on your 1040, which is where these statistics come from.
1
It is interesting that we've all fallen for the notion that only the people who work should pay a high rate of taxes, and those who invest should not.
In fact, the reference to American taxes being imposed on the "wealthy" is plainly a misnomer; the American tax system is irrefutably based on a tax on those who "earn," and the Republicans propose to eliminate the estate tax (which is the closest thing we have to a tax on wealth) at every opportunity.
No one really thinks that a successful lawyer making in the vicinity of $390,000 (i.e., a "one percenter" in this article) is buying a da Vinci painting for $450M. That price is more money for a single item that properly belongs in a museum than such a lawyer would make in 25 lifetimes.
We can't really discuss the problem till we all agree on just what the problem is.
103
I agree with some of the comments here. Those of us who have two earners, make decent money but pay 45-50% in taxes because wealth is all from income pay dearly. It's the top C-level, SVP, EVP executives from corporate America that make seven or even eight figures when you include bonuses and stock options and then retire with eight figure parachutes even if they are fired, pensions, benefits for life that most of us will never see. Quit punishing those of us who pay our fair share already. When my taxes go up beyond the current 45-50% I am quitting the work force because it won't make sense to have more than half of my income go to someone else. Will take my government subsidy based on my income. It's not the same thing.
17
One question the article does not raise is why do so many lower income white Americans vote Republican? Given that almost half of all taxpayers don't make enough to even have an income tax liability and that 99%+ don't have enough wealth to have to worry about estate taxes, why do they continue to vote against their economic interests? My answer is that they allow their religious beliefs and racial prejudice to overtake their economic interests and the interests of their children. There will be a cost to lower income voters even if they are not directly impacted by the 2017 "tax reforms". My guess is that there will be more fraying of the safety net starting in 2018, as Republicans get back to looking for ways to cut the deficit.
68
Howard, if Trump voters were motivated by racism, how come so many of them voted for Obama, not just once, but twice? Your theory does not work. Consider the possibility that you may be wrong.
3
Hmmm - another question the article does not raise is why do so many higher income white Americans vote Democrat? Although they make enough to pay a lot of income taxes and perhaps even posses enough wealth to have to worry about estate taxes, why do they continue to vote against their economic interests?
My answer is that they allow their religious beliefs, or lack thereof, and racial and intellectual prejudice to overtake their economic interests and the interests of their children.
9
This article outlines what should be the Democrat platform of 2020.
10
Regarding overpaying the "elite professional class": I wish we could stop lumping hedge fund managers and the Goldman Sachs crowd who make MILLIONS a year, own second homes in the Hamptons, and provide no real service to people in with the garden variety doctor, lawyer, and software engineer married couples who both working make $500K, or whatever income threshold it is that sneaks these families into the bottom of the top 1%. This segment of the "elite professional class" represents the best case scenario for most bright and diligent students. If you start punishing these occupations financially, all that is left is the pipe dream of becoming Bobby Axelrod from Billions. I personally want to see these occupations pay handsomely, because I want them to attract top talent. Remember the Harvard professor who sadly opined that years ago the best and the brightest went into medicine, now they all go into finance...we have incentivized this. Scapegoating the "elite professional class" as a whole as the main source of income inequality may sell papers and energize the Bernie crowd, but it vilifies a lot of honest professionals who most of us hope our children will turn out to be someday, if we are being honest.
232
Lumping in the lower part of the 1% with the .01 who make a thousand times more then they do does not excite the Bernie crowd. And we are not against small business people, most of whom are not even in the 1%.
The Bernie crowd is not against professionals. The Bernie crowd is against the fraudsters in finance, fossil fuels, and military contracting who manipulate markets, the media, and the government to control obscene amounts of wealth.
These kind of articles are meant to hide the true injustices and the people who commit them.
The 1% is a convenient slogan, but the Upshot should have a more nuanced analysis.
167
"the garden variety doctor, lawyer, and software engineer married couples who both working make $500K"
Googling I find that the 75th percentile lawyer makes $175k/year. You probably need to get to the 90th or higher percentile for a salary of $250k/year. The average software engineer makes $80k/year, the 90th percentile of a "senior software engineer" is $190k/year.
It's always someone else who is too rich. It's always someone else who is not paying their fair share of taxes. It's always someone else who should be paying more taxes. It's always someone else...
51
Millions have busted into the USA, and billions would like to join them.
They don't seem to mind the 1%, Bernie Sanders, with the $600,000 beach house.
2
Corporate profits are at historic highs in large part because capital is mobile while labor is not. Trade and technology are enablers that don’t necessarily correlate well with patents and trade stats. Moreover it’s the high profits and global reach that drive the high salaries. We would do well to consider Scandinavian policies that support workers to upskill and transition between jobs as opposed to protecting jobs that are no longer competitive and a tax structure that pays for it.
12
Yes, if the threat of moving jobs out of the country is successful in lowering wages, than it doesn't matter how big imports are.
And if the technology is being used to suppress wages, but the patents are being moved to foreign countries for tax reasons then patents are not a good measure.
It is often argued that increased productivity raises wages, but productivity has been detached from wages since the early eighties. Wages are flat while productivity has increased 40% The owners of capital are taking all of the increases as profits, and using the increase in productivity to fire people.
The income from manufacturing is up, but employment in manufacturing is down.
And visas for of tech workers is depressing wages for high tech jobs, lowering the demand for math and engineering degrees.
The upshot needs deeper economic analysis than this.
18
This analysis does not seem to consider or note huge changes since the 1050's in tax rates on high income, dividends and long term capital gains nor the way many can shelter all income in corporate and off-shore tax shelters and appreciated equities. On top of that the US has drastically reduced effective estate taxes - we have created an economic aristocracy in the US with enormous political power.
The current tax reform proposals make it all worse, and is stunningly obvious and ultimately disastrous to the country.
33
The trouble with this analysis:
1. It focuses on the "top 1%," and
2. It focuses on "income inequality," not WEALTH inequality.
The problem with focusing on *income* and not wealth is that those who are truly rich (and not merely affluent) accrue their wealth not from wages but from capital gains. Our economic policy for the past 40 years has prioritized asset inflation above investment in productivity and infrastructure, and with Quantitative Easing since 2009, this has accelerated -- one reason why the stock and RE mkts have boomed while wages have stagnated. Capital gains are taxed at roughly half the rate of personal and corporate income. Property prices in NYC, SF Bay, DC, LA, etc. are up roughly 500% since 2000, and the stock markets have also boomed -- this benefits those who hold these assets in abundance.
So, "income" is the wrong measure. Wealth is the proper measure, especially as wealth (much more than income) is political power in the United States (as it is nearly everywhere).
The problem with focusing on the "1%" is that it obscures the fact that it is the top 0.1% and 0.01% who have seen the most radical gains in wealth. At the bottom half of the 1% are the top earning professionals, like the highest earning physicians, lawyers, salespeople, and execs. To be in the top 1% in high-earning NYC, HH income would be roughly $600K (affluent but not "rich" in NYC). But to be in the top 0.1%, HH income would be more like $20 MILLION -- a radical difference.
227
Exactly!
And these extremely wealthy individuals make more than 90% of all political donations, which is why they control more than 90% of all government policy, like the tax bill being slammed through congress right now.
The people wanted Bernie to solve this, the only viable presidential candidate since at least Eisenhower to talk about our republic turning into an oligarchy, but the Clintons controlled the DNC and used it to squash Bernie, so we got a global billionaire, who stole Bernie's platform to win.
Both parties have been taken over by the global billionaires, with one of them openly threatening on MSNBC to pull support from the Democrats if they don't stop issuing the the word "billionaire."
57
McGloin, change comes from the bottom up, not the top down. And if "the people" wanted Bernie to solve this problem, more of them should have turned out in the Democratic primaries. It's not difficult to affiliate and vote, and it costs nothing. The DNC does not run state primaries, and Obama was able to beat Clinton in the exact same scenario that Bernie faced. I like Bernie's ideas too, but if he couldn't beat the DNC, what on earth makes you think he'd have beaten the much dirtier RNC?
1
And income inequality leads to compounding wealth inequality. I mean, if I make 100K a year, I can save maybe 10 or 15% of that. If I make 200K a year I could save half of that. I don't have to show you the math for how far apart the net worth of those two examples are 10 years from now. (Hint: It's more than what the 100K earner is likely to save over a lifetime)
24
Should look at inequality after government transfers.
2
http://www.politifact.com/wisconsin/statements/2015/jul/29/bernie-s/bern...
This analysis by Politifact factors in the government transfers, but still rates Bernie's claim that the richest .1% has as mush wealth as the poorer 90% mostly true, with about 22% of the wealth held by each group.
8
I read your Politifact article, McGloin and regarding that govt transfer of social security, it has been paid into by workers as a percentage of their earnings up to a maximum limited somewhere above $100,000 for their retirement. Income which qualifies for the carried-interest tax rate and any earned as wages/salary over the $100,000+ social security collection limit does not contribute to social security. Am I correct?
Elites are interesting to follow, but it is the ordinary security of the rest of the population that matters' Home ownership is key, whether it is an actual home or a tiny condo. Everyone needs to own their own home if they are to have income security.
Government policy and laws need to transform to better enable home ownership for all, including modest earners, the poor, those on welfare and the disabled.
1
No, it is inequality that matters. If you are going to make unsubstantiated proclamations, then you must expect to be contradicted.
6
There is an old and proven axiom that says that it takes money to make money. In good times and bad, in different and changing economies, those who have money are presented with extraordinary opportunities to rapidly grow their wealth.
The rich leverage their wealth by "investing" in politicians who will help protect their wealth through all kinds of tax avoidance strategies. Tax reform today is a major redistribution of wealth to the richest people in the world.
Frankly, no one would really care if the rich kept all their money if only there were opportunities for everyone else to make a comfortable and livable wage and have no worries about health coverage, education and training, or retirement funds. But that isn't the case!
Income and wealth inequality is extreme - virtually unprecedented in modern times. In the most prosperous country in the world, millions of people, from babies to senior citizens, are living in misery and facing insurmountable challenges to survive.
The haves in society are so selfish that they don't want to lend a helping hand to the less fortunate because lifting someone out of poverty could be creating competition to their livelihood. In the minds of many, it is better to keep others in their place, oppressed and defeated.
82
Well said. I agree.
Also, it is worth noting that Zimbabwe has a Gini Index of 50.1, whereas the Gini Index for the United States looks like about 47 from the graph presented in this article.
Full Gini Index data is found at https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...
14
How can someone write an article about growing inequality without mentioning tax rates? This is obviously supposed to be an empirical piece, but the correlation of inequality with tax rates is not analyzed. Inequality in the US was decreasing up to about 1965, when personal tax rates were highly progressive. Since then rates on highest incomes have been slashed. Allowing those in control, for example corporate CEO's, to pay themselves more doesn't just change the take-home income directly, it changes incentives for different businesses. It puts emphasis on short-term, speculative operations rather than things which are productive in the long term. This must be a factor in the rise of the banking and finance industries, which are not mass employers in the way that manufacturing is, but where big money can be made quickly.
13
Top marginal tax rates are a good example of the way politics is used to enrich the 0.01%. There are many, many other examples, as you know.
Actually, our current government seems to me to be one big control fraud:
Control fraud occurs when a trusted person in a high position of responsibility in a company, corporation, or state subverts the organization and engages in extensive fraud for personal gain.
22
This is a myth that is damaging. According to the department of labor "financial activities" employed about 8.3m people in 2016. Construction? 6.7m. Manufacturing? 12.3m. Banking and finance employ millions, but they are concentrated in big cities. But they do require more education than manufacturing.
https://www.bls.gov/emp/ep_table_201.htm
The number of JPMorgan Chase employees amounted to 234,355 in 2016
https://www.statista.com/statistics/270610/employees-of-jp-morgan-since-...
Ford employed 201,000
https://www.google.com/search?q=ford+motor+company+total+employees&o...
My general rule on this is that anybody should be able to make as much money as they can as long as the guy at the bottom has a minimum quality standard of living.
We do not have it in this country and something should be done about it.
59
Perhaps you've been looking at the wrong data. Why assume that the 1% have jobs or "earn" money? Rather than employment or labor share of income you need to examine wealth as a whole. Where it comes from and where it's placed.
78
Excellent point by CI. There's two issues - income inequality and wealth inequality.
It's revealing the information presented in the article around income inequality. Doctors, Lawyers, brokers and executives have long been favored culturally in the US - and perhaps legally / accounting wise as well.
But the bigger story I think is how the wealthy are protected. Whether the wealth was obtained via inheritance, selling a business or via income I think this is a real story.
43
In order to build up wealth, you need a pretty high income. You have to live on less than you earn for a long period of time to build up really substantial wealth. Elite doctors, lawyers, and stockbrokers can save hundreds of thousands dollars a year.
Of course, the way to really substantial wealth is to start a company and take it public. Most of the richest Americans are company founders like Bill Gates, Larry Ellison, Jeff Bezos, and Warren Buffett. There are many less rich, but still very wealthy people, who spent their life building a business, and then either went public or sold it outright.
6