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Paul Buchheit
NationofChange / Op-Ed
Published: Monday 3 December 2012
As distorted as the distribution of income may be, our wealth distribution is even more extreme.

Five Facts About America’s Pathological Wealth Distribution

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Most people associate inequality with the income gap. As distorted as the distribution of income may be, our wealth distribution is even more extreme. Americans are beginning to realize that years of preferential tax treatment for the rich, under the guise of "supply-side job creation" nonsense, have bloated the fortunes of the super-rich to a level that would make Rockefeller and Carnegie envious. 

1. We’re close to being the most unequal country in the world.

Among countries with at least a quarter-million adults, only Russia, Ukraine, and Lebanon are more unequal, according to the most recent figures from Credit Suisse Research.

An earlier report by the same research team had indicated that Denmark and Switzerland were more unequal than the United States. While Switzerland is still high in the new data listing, ranking 18th, Denmark is actually rather equal relative to other countries, and received its dubious earlier position due to its own accurate reporting of household debt, as will be noted in Fact 5 below. 

2. Wealth accumulation has been rigged for the rich.

The richest quintile of Americans owns 93% of non-home wealth. For Americans with incomes over $10 million, nearly half of their income comes from capital gains and dividends, on most of which they pay only a 15% tax. From 2002 to 2007, two-thirds of all income went to the richest 1%. Then, in the first year after the recession, a startling 93% of all new income went to the richest 1%.

Massive wealth holdings have accumulated for the richest Americans not only because of their appropriation of income, but also because of their manipulation of the tax code. The 15% capital gains tax is their proudest accomplishment. Other ploys include carried interestperformance-related paystock options, and deferred compensation.

The imaginary 'work' of financial gain gets taxed at a much lower rate than real work. Through the years, as the rich have fattened up on stocks and other financial assets, the stock market has grown three times faster than the GDP. Yet American workers have not benefited from their own productivity. Their wages have flatlined while the fruits of their labor have gone to investors. 

3. As tax rates have gone down, income for the rich has gone up.

Business Insider chart depicts the remarkable - yet reasonable - negative correlation between tax rates and the wealth of the super-rich. Over the past hundred years, every time tax rates have been decreased, the income percentage of the richest .01% has increased, and vice versa. Other sources confirm that changes in the tax rate have little to do with economic growth, and that the top tax rate can - and should - be much higher, up to 83%.

The Reagan-era myth of "higher taxes, less revenue" has been debunked. It's enough to convince any thinking American outside of Congress that our budget problems are rooted in an extraordinary degree of tax avoidance at the top. 

4. “We should all cheer for the stock market” is a big scam.

The mainstream media would have us believe that the whole country depends on a rising stock market. But the lowest-earning three-fifths of Americans—60% of the population—own just .2% (one-fifth of one percent) of all wealth outside the home.

The Heritage Foundation and the American Enterprise Institute claim that wealth inequality has remained steady over the past century, even in the last 30 years. Both organizations cite a paper by Kopczuk and Saez, which shows that the share of wealth owned by the top 1% has decreased from the early 1900s to the early 2000s, possibly because the "democratization of stock ownership...now spreads stock market gains and losses much more widely than in the past."

While it's true that the percentages of net worth and financial wealth for the top 1% barely budged from 1983 to 2007, the percentages for the rest of the richest 5% increased by almost 20%. And the percentages for the poorest 80% of the population DECREASED by almost 20%.

In other words, the share of wealth owned by the top 1% leveled off because the "democratization of stock ownership" spread the wealth among just 5% of the population, those earning an average of $500,000 per year. A few people—5 out of 100—got very rich, but everyone else lost ground. 

5. Debt has masked wealth inequality for 30 years

The authors of the Global Wealth Report state: "Rising household debt...began around 1975. Before this date, the ratio of household debt to annual disposable income within countries remained fairly stable over time and rarely rose above 75%." Today, Americans are burdened with over $11 trillion in consumer debt, including mortgages, student loans, and credit card liabilities. As the very rich have accumulated income and wealth, the middle class has kept up appearances by taking out loans.

However, that's only half the story. Private debt appears to be more manageable when public debt is low. Denmark has the highest household debt to wealth ratio in the world, but its government debt amounts to just 3% of the financial wealth of Danish households. The U.S. is at 32%. And our government debt as a percentage of GDP is 103%, one of the highest percentages in the world. 

Conclusion: Where is all the wealth coming from?

According to the authors of the Global Wealth Report, the world's wealth has doubled in ten years, from $113 trillion to $223 trillion, and is expected to reach $330 trillion by 2017.

The UN definition of wealth includes (1) natural capital: land, forests, fossil fuels, and minerals; (2) physical capital: buildings and infrastructure; and (3) human capital: the population's education and skills.

We need to add a 4th category: the magical creation of wealth by the financial industry.



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ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

We need to push Congress to

We need to push Congress to change the Tax Code to favour the Middle Class, and all those that want to get back into the Middle Class. I propose "20 Tax Brackets to $20Million", with a top marginal rate of 60%. To make sure everyone pays income tax, we should start the first bracket at 3% for income from $0 to $30,000. That should shut up the smart-ass republicans saying 47% don't pay any income tax. These 20 brackets would be as follows: 3% for income from $0-$30K, 6% for $30K-$50K, 9% for $50K-$70K, 12% for $70K-$90K, 15% for $90K-$110K, 18% for $110K-$130K, 21% for $130K-$150K, 24% for $150K-$200K, 27% for $200K-$250K, 30% for $250K-$300K, 33% for $300K-$400K, 36% for $400K-$600K, 39% for $600K-$1Mil, 42% for $1Mil-$2Mil, 45% for $2Mil-$4Mil, 48% for $4Mil-$6Mil, 51% for $6Mil-$10Mil, 54% for $10Mil-$15Mil, 57% for $15Mil-$20Mil, and 60% for income over $20Million. Now that is "Fair & Balanced". This is the only way to bring back the Middle Class. Tax the rich and super rich like they did in the '30's, in order to bring us out of the Great Depression. In 1938 we had 33 tax brackets from 4% for income up to $64K, all the way up to 79% for income over $79Million. That's right, our own Government knew how to tax the rich in order to combat runaway income inequality, which we have today. I say we have to push Congress to change the tax Code, simply because the President is probably going to compromise with these thieving Republicans, and we can push for more, much more than he settles for in compromise. God Bless the Middle Class, and all those trying to get back into it.

How can anyone read this and

How can anyone read this and believe that the recovery will ever reach middle to low income Americans. Why would corporations want to hire American workers when they are making record profits by doing exactly the opposite? Why would stokholders of those corporations want to see American jobs return to America when they are getting wealthy from the profits of corporations that outsource jobs?

Many people wondered why in the world Billionaires spent so much money on supporting Romney and Ryan. Individuals like the Koch Brothers and Adelson spent far more than President Obama's tax plan will cost them if it ever happens. They did it because they knew Ryan and Romney would do nothing to pressure corporations to share the wealth. They feared that the only way the President could get reelected was to promise to tax the rich and to imply a redistribution of wealth downward.

Get used to it folks. The economy as you see it today is all the recovery most of us will ever see. Americans still make enough to set spending records on Black Friday and and that is good enough for corporations right now. As the ability to consume in America shrinks (as it is doing) the ability to consume is growing in China and India and other third world countries.

When those countries develop middle classes that begin to demand a voice in theri governments, fair taxation, fair treatment for labor, fair pay and fair wealth distribution, jobs will begin to return to America. By then Americans will be willing to work for slave wages like the Chinese and Indians are doing now.

Unless Americans force drastic changes in the relationship between government and corporations; unless Americans force drastic changes the the relationship between government and the wealthy elite; and unless Americans force drastic changes in the ideology driving government actions the recovery is over.

If anyone wants to really do

If anyone wants to really do something about it click on or copy and paste into your browser - http://signon.org/sign/take-money-out-of-politics.

The vast gulf of wealth and

The vast gulf of wealth and poverty is being globalized and the multi-national corporations and religions and other organizations are the world centers now. Wars then will become global terrorism by those unable to compete militarily. The layers of cost for security will keep rising until we spend ourselves to death and complex society will be so full of holes it wont even be able to protect itself from its own policemen and soldiers it will not be able to support due to increasingly expensive high techery..

"Pathological" might be the

"Pathological" might be the wrong word for the headline of this article. "Sociopathic" might be more accurate. Sociopath: a person with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience. In my opinion, these individuals have become a flock or a herd. They must be rounded up and their behaviors must be reined in. This isn't about "monopoly." I know of no such term other than Plutocracy to describe what has happened on a global basis. But be careful, the Plutocrats own the armies, the media, the banks, energy, water, food, etc. They are very powerful and they mean to suppress as many as possible through anything but fair play.

MAT, U r right about

MAT, U r right about sociopathic. Why don't unions, or you and I do what Bain does? Doesn't take a genius. Pool our money, hit up the bank to leverage up 10 or 20 times, then smash n grab, slash and burn, and stuff our pockets before declaring bankruptcy. We don't do it because it harms people, the shareholders, employees and investors. It hurts our neighbors and community. Think there is a new book out about psychopaths. Yeah, they definitely qualify. Sociopathic psycho plutocrats. Certa bonum certamen, compadre.

Amerika -- formerly the Land

Amerika -- formerly the Land of the Free and Home of the Brave.

Perhaps it is finally time

Perhaps it is finally time for my "1, 2, 3" tax plan?

1) 1% annual tax on ALL assets above $1million--personal AND corporate (including so-called "charitable" or "religious" because their assets are NOT supposed to accumulate) and without regard as to location and a special added annual tax of 5% on idle money to pay off the debt that will end when the debt is paid off in full. Valuation will be based on purchase price, not appraised or assessed value. Inheritances are included. The only threshold is the $1million amount.
2)2% services tax paid by any who hire others to supplement Social Security and Medicare with the goal of Single-Payer health care for all.
3)3% transaction tax--on everything except foods that have fewer than six ingredients. This tax will be included even on wholesalers and corporations that have multiple divisions that transfer assets or products in process. every transfer will qualify. It will also be applied to stock, bond, option and futures trades as well.
Total repeal of all deductibles, expenses, costs. No other threshold except that $1million amount.

Some other ideas:
How about rescinding all patents of corporations that do not manufacture those products that utilize those patents unless those products are manufactured IN COUNTRY? Why should citizens pay for the research and infrastructure, including defense and banking and education and logistics when the jobs that offer living wages are exported to slave states and communist countries and 90% of the purchase price is profit? Offer the patents by public and open auction to those will use them by creating the jobs here.
Give corporations 24-hours to repatriate profits held overseas or face life sentences on chain gangs and total forfeiture of all assets, personal and corporate.
Re-instate the draft with no deferments with one change in the military--all members will continue to have full Constitutional Rights while in uniform. Just because they are in uniform does not mean they surrender their citizenship. Right?

SPLF

Our wealth distribution is a

Our wealth distribution is a a badge of shame. Few intellectuals have the courage to approach this issue though. Check out what Derek and Sissela Bok say about it in their books on happiness: http://mgpiety.org/2012/11/28/the-idiocy-of-the-ivory-study/

The current situation of

The current situation of wealth/power concentration and Mr. Boehner's line in the sand against any change in the laws to affect the status quo unless it leads to more concentration in the same location gives us a bleak future filled with fire/brimstone and brine leading to rivers of blood to quench the fire and wash off the brine.....No society has survived long egregious perceived injustices. The decision structures have been blinded somehow...

Formula for Revolution -

Formula for Revolution - nasty revolution.

No kidding. And how nasty?

No kidding. And how nasty? 350 million privately held firearms, with ammo nasty. Think the French Revolution with tactical nukes kind of nasty. Gated communities be damned.

SPLF

That's not going to work.

That's not going to work. Look up M1A1 Abrahm's tank, for example. Iraq is another example where guns were everywhere, and still are.

The best way to win is to stop going to work. One week of people stopping work could completely ruin the economy, destroy entire civilizations, and usher in a complete and utterly new social structure. That would be truly revolutionary.

Think about it: A world wide strike where people simply stop going to work. That would probably break the USA's back in less than 3 days--no port activity, no trucks hauling goods, no selling of any sort, no travel, no nothing.

It is worth noting that

It is worth noting that income from interest, profits, rents, etc., are called "unearned income," and, as such, are totally exempt from BOTH social security and medicare taxation. Plugging just those two LOOPHOLES would provide sufficient additional funds to fully fund a single payer national health care system for all Americans with NO NEW TAXES. (This is something that one does not hear even from well paid liberals)

Could you source that

Could you source that information, please? I was not aware that all unearned income was exempt from ss and medicare taxation. If you pay quarterly, aren't you required to pay FICA?

"Earned" income is what one

"Earned" income is what one receives as a paycheck, whether as a wage/hourly or as a salary. It does not include any benefits or bonuses such as health or retirement "contributions" made by the employer even as those amounts are deductible by that employer against revenues for calculating profit/loss for tax purposes. It does not include stock options either even when they get exercised although they must pay income taxes on those profits/gains.
One must remember that the dividends paid and capital gains received from investments are claimed by the beneficiaries as having been "earned" yet they and their legislative slaves (Congress) have declared them to be something other than "earned" when determining any taxes due.
All one needs do to truly understand the reality of the whole thing is spend a few years as a self-employed person in a sole proprietorship business. You soon discover that what most employees think is their portion of Social Security and Medicare "taxes" are only half of what the employee actually earns, all the while being suckered into thinking the employer is footing the other half and is doing so out of the goodness of their hearts. Probably one of the biggest if not THE biggest load of BS the citizens of this country have ever been talked into believing. Those employers are doing nothing of the sort. The half they are supposedly paying is only an accounting trick in that that half does not get included in the amount of income subject to income taxes--before and after any deductions and exemptions.
Next time you hear any corporate or political type bloviating over the employer's half of the F.I.C.A. just remember this little tidbit--each and every employee EARNED the full amount by their own labors, not the labors or kindnesses of any employer.

More and more Progressive

More and more Progressive movers and shakers are writing on the topic of passing a Transaction Tax on Wall Streets profits, a small 1% Transaction Tax on millions of daily computerized Flash Trades alone will bring in Billions of Dollars of revenue Annually and eliminate the need for increasing taxes on individual wealthy people, the Rights biggest issue in there drive to put killer austerity on the backs of average Americans. Ralph Nader has an excellent column this week on all aspects of this subject and he points out that the U.S. had a very tiny transaction tax on investments from the early years of the last century until 1966. Read the entire column at the following link.

HTML://www.washingtonpost.com/opinions/ralph-nader-why-a-tax-on-stock-trades-should-be-part-of-a-fiscal-cliff-deal/2012/11/30/d6a1285e-3a38-11e2-8a97-363b0f9a0ab3_story_1.html

When a person does an

When a person does an "honest" evaluation of the United States, as a country, as a place to live, its commitment to Democracy both here and where we "export" it, to raise a family,freedom of and "from" religion, penal populations, to expect "fair" opportunities in education, marriage, housing, employment, taxes, affordability, etc., what do you get? A disturbingly skewered system overwhelmingly favoring the wealthy (no matter HOW they got it), increasingly poor job availability, massive inequality in educational systems, racism, homophobia, raging nationalism, a prevailing lack of empathy, religious zealotry, a "rigged" process of taxation, an outrageous for-profit health care arrangement, a military basically out-of-control...lots more you could add. But we continue to have the temerity to hold forth that "God blesses America." If true..."wrong God." If not...we sure "lie" with authority.

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