In a massive new study on global inequality, a team of leading economists show how legislation is creating massive inequality.
According to the 2018 World Inequality Report, the rise of income inequality in the United States is “largely due to massive education inequalities, combined with a tax system that grew less progressive.”
The study also shows how the bottom 50 percent of wage-earners in the United States take in a mere 13 percent of the country’s income, while the top 1 percent take over 20 percent.
Also, the bottom 20 percent of Americans saw their after-tax income rise by only 4 percent from 1980 to 2014, while the top 10 percent saw more than double that over the same period. Even worse, the top 0.001 percent saw income gains of over 600 percent.
Overall, the U.S. economy has transferred eight points of national income from the bottom 50 percent to the top 1 percent.
The U.S. tax code has continuously benefitted the most wealthy Americans since the 1970s. The top marginal income-tax rate fell from 70 percent in 1980 to 39.6 percent in 2017. Taxes on capital gains fell by more than half from the 1970s to the mid-2000s.
Additionally, the price of higher education since the 1970s has skyrocketed, making higher education out of reach for many low-income students.
When comparing these numbers to Europe they become even more shocking. In wealthy nations in Western Europe, the bottom 50 percent earn nearly 22 percent of the income, while the top 1 percent take in just over 12 percent – similar to how things were in the U.S. almost 40 years ago.
The report was written by a team of leading international economists, including Thomas Piketty of “Capital in the Twenty-First Century.”
The new tax overhaul, passed by the Senate yesterday, will only exacerbate the problem.
The bill will cause the top rate of income tax to go from 39.6 percent to 37 percent, benefitting the super-rich while providing massive corporate tax cuts.
The House is scheduled to vote on the bill this afternoon.