Tuesday, March 5, 2013

Richie Rich for Senate

There is a video swirling around the internet that demonstrates the distribution of (or lack there of) wealth across America.  Besides the very cool graphics of walking stick figures and piles of money, it's fairly informative.

I haven't check all of the sources listed at the end, but I'm going to assume the figures are correct.  Here are the highlights:

Based on $54 trillion of net worth across 311 million Americans in 2009.

The top 1% of America owns 40% of the nation's wealth
The bottom 40% own nothing
The bottom 80% own 7% of the nation's wealth

The top 1% owns half of all stocks, bonds and mutual funds
The bottom 50% owns 0.5% of the investments

1% take home 24% of total income

CEO's get paid more than 300 times the average worker.

So basically the rich are really rich, the poor are really poor and the middle class aren't really in the middle they're poor too.  Let's again assume this is true.  It sounds true and if it's not exactly correct, it's probably pretty close.

Now let's ask how did this happen because 40 yrs. ago the distribution was a little bit flatter.  I'd really like to see how flat and what the distribution looked like through the decades, but it wasn't in the video and I don't have enough time to research all of that information.

So how did this happen?  Part of the reason is the rich get rich with the help of a tax system that greatly favors them.  I can pretty much guarantee that the top 1% have a lower tax rate than the 20% - 80%.  Wealthy folks can generate wealth from sources other than income.  So the income tax that everyone likes to fight about and politicians like to make a big deal about have little impact on the top 1%.  They make money of off real estate, stocks and bonds and weird loan structures.  They do this because they get taxed at a lower rate (15% for long term capital gains) and 0% for loans.  They have firms that are very creative in increasing their net worth while avoiding taxes.  Remember Steve Jobs?  Besides being famous for being the most innovative CEO in America, he was known for his salary of $1.00.  Now obviously he was compensated in other ways and I can bet you that those other ways were at a lower tax rate.  Personally I think he deserved every penny he ever got, but that's just me.

So the taxes on income from stocks and bonds is at a much lower rate than income from actual work. But who owns the stocks and bonds?  Oh yeah, the rich people.

The top 1% owns half of all stocks, bonds and mutual funds
The bottom 50% owns 0.5% of the investments

When a politician is arguing against raising the capital gains tax on stocks and bonds, he's basically arguing that rich people shouldn't be taxed more.

Let's look at another tax that favors the rich.  The estate tax or death tax.  When a person inherits wealth, the wealth is taxed.  The tax rate is pretty high, so the government decided to exempt a certain amount.  That means if dear old grandma leaves you a pile of cash, you get to keep all of it up to a certain amount.  In 2001 that amount was $675,000.  Thanks grandma! But the politicians said hey, that's your money you should keep it.  So they raised the amount. And then raised it again.  And then permanently raised it for evermore. In 2008 it was $2,000,000. 3 years later it was $5,000,000.  Wow!  Thanks politicians for looking out for my best interest.  Wait.  Grandma's not that rich.  I don't know a lot of folks with grandparents worth over $5,000,000 but I'm also not part of the 1%.

So politicians who can't agree on balancing the budget or the fiscal cliff or any other bill that impacts the 99% can readily agree on tax rates that benefit the 1%.  Thanks guys, you're the best!

Oh by the way, 50 senators (50%) have a net worth of $6,210,000 or higher.  So the rich are passing laws that just happen to benefit the rich?  Wow, never would have seen that coming.

The problem as I see it is that the rich are passing laws that favor the rich and increases the poor distribution of wealth.  I don't believe in socialism and everyone being equally wealthy, but I also don't believe in systems that are completely unfair.  A moderately equal distribution of wealth benefits everyone.  It creates a stable society, it fosters creativity and growth.  We as a general rule should strive for a fair tax system.

I also don't believe in bitching without presenting solutions.  I'll outline some of those solutions in my next post.

1 comment:

Anonymous said...

Our tax system is a complete and total joke. A flat tax of maybe 10% in conjunction with a national sales tax (with groceries, power, fuel, etc. being exempt) is the only way to go. No more loopholes. No more hiding of money. No more ridiculously complicated tax codes. Let people control their own money, and ensure that everyone has skin in the game.