Is Inequality Growing in America? (Civics 101/Part5)

Is it really true that in America the rich are getting richer and the poor are getting poorer?  Yeah, basically.  Here’s some information that paints a grim (but not hopeless) picture.

Income Inequality:   We now have the worst income ineaquality since 1929, and average wages have not increased in 50 years.  (All charts sourced here. See Chart 6 for avg wage growth.)

Wealth Inequality:    The difference in wealth (house values, stocks, other investments) between the rich and everyone else is soaring.  This matters a lot, because families with a lot of wealth use it to give their kids a leg up on the basic building blocks of a middle class life, like money for college or a house downpayment,  Poor and, increasingly, middle class families, can’t do this and the American dream of class mobility is at a standstill.

You’ve read that right.  The top 10% of housseholds hold 2/3 of total wealth, and the bottom 50% hold less than 3%!

Government:  But, our liberal welfare state corrects most of that, right?  Wrong.  Just a little bit.  Here’s how taxes have changed recently for people at different income levels.

Yeah, yeah.  The rich still pay about 80% of federal income taxes, but the income taxes we’ve spent this month fretting over is only one tax at one level of government.  Overall, the top 1% pay about 30% of total taxes (federal, state, and local).  And their share of pretax income has been rising sharply in the last decade, so they can afford it more even as their income tax rates have been slashed.  (See source various charts for details)

Overall, the United States redistributes income from rich to poor by only a little — and by far less than any other industialized country.  

Whether this a good thing or a bad thing:  Well, that depends on one’s point of view, I guess.  But the growth in inequality is very real, is today’s Civics 101 lesson.

Update:  You’re not going to believe this.  In California, the poor pay higher taxes than the rich.  The poorest fifth of the state’s non-elderly families, with an average income of $13,200, spent 11.1 percent of their income on state taxes.  The wealthiest one percent, with an average income of $2.2 million, spent 7.8 percent of their income on state taxes. 



3 responses

  1. Yes, and just as striking is the disparity between the wealthiest countries in the world, and the poorest. Moreover, it is
    mostly the latter which are experiencing explosive population growth.

    Thus, by mid-century, baring catastrophe, we
    shall probably see a large army of destitute
    in the “south” confronting the wealthy countries of the north. Probably, they will not attack the “north,” probably, they
    will attack each other. Nonetheless, one
    can’t look forward to such a situation with
    much optimism.

  2. And they will be fighting to a great extent over shrinking resources, like water, gas, timber, and metals. I recently read that they expect Yemen to literally run out of fresh water in as little as 5-10 years. Was it the Mayans that ran out of water due to climate changes? Yemen has at least one big internal rebellion laready — and it border Saudi Arabia and already is a base for Al Qaeda.

  3. […] don’t forget these old posts of mine on taxes, but especially this one, Who Pays For […]

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