Understanding American wealth distribution
I’ve written some of this information elsewhere before, though this is certainly updated.
I’ll start with a question:
If we were to divide the American population into fifths (called quintiles, 20% chunks) by wealth, what do you think the distribution of wealth by quintile should look like? If you’re a communist, you say the percentage of America’s wealth by quintile should be the same as the percentage of population. But capitalism doesn’t work like that. Come up with an ideal distribution you think makes sense. This question applies to everyone, including Republicans.
If you ask this question, even Republican answers aren’t as skewed as reality. I’m going by figures that are about eight years old; by now, the figures should if anything be more skewed. Here’s about how the numbers looked:
Richest quintile ca. 84%
2nd richest quintile 11%
Middle quintile 4%
2nd poorest quintile 0.2%
Poorest quintile 0.1%
That’s right, the poorest 40% of America’s population has less than 1/3 of 1% of America’s wealth. Right now for the poorest quintile I was generous because they’re actually in debt for more than they’re worth. Their percentage is negative. We keep on looking at the One Percenters. We should start on the other end of the scale, at the 0.3 Percenters (of wealth, not population).
What does this really mean? What does it look like? To answer that question, I’m going to use a form of measuring wealth I used in a post years ago. The problem with looking at wealth is that we don’t have a sense of scale: one …illion just seems like the next …illion. But they’re not. To give you a sense of scale, I want to compare money to something you understand vast differences of scales in. I’ll use time because we all understand a minute and we all understand a decade. So, the equation is one second = one dollar. A reasonably expensive meal is about a minute a person, 60 seconds. A day has 86,400 seconds. The median price of a house in the US is just under three and a half days, mortgaged of course. A million seconds is at just over 11 1/2 days.
And then it gets interesting. If a million seconds is 11.57 days, a billion seconds is roughly 11,570 days. Let’s express that in years: about 31 2/3 years.
The average American lives in mortgaged house worth about 3 1/2 days (median US house value). What’s the richest American, Jeff Bezos, worth? If we measure his time into the past, it takes us past the beginning of recorded history. If we measure it into the future, it takes us roughly to the year 8100 CE. He’s worth about 6,100 years. (If you don’t trust me, he’s worth about $195 billion. You can do the arithmetic yourself.) Bill Gates’ number would only take us back as far as Abraham. For Elon Musk, add about eight centuries to that.
When you understand that they pay lower tax rates than we do, you begin to understand one significant reason we run huge federal deficits. Not only do they pay lower tax percentages, the Republicans would like to do away with inheritance taxes altogether. This would be a great way to create American royalty or at least American nobility, understanding that I’m talking about class, not nobility in a personal sense. Think about the prospect of Don jr. and Eric being worth maybe 50 years apiece. What exactly have they accomplished? Not only would it be a great way to stratify and ossify class, it would be a great way to make the United States Government poor.
We’re not talking about their objecting to a particular size of inheritance tax, we’re talking about their objecting to its existence at all. How necessary is this for the preservation of wealth among the very wealthy? For that I’ll use the late David Koch as an example. He had a wife and three children.I don’t know that this is true, though it probably is, but let’s assume that the estate was divided into four equal parts. Now, just for the Hell of it, let’s get extreme and pretend that the inheritance tax was effectively 99%. This is a ridiculously high number that I do not advocate anything like and that we‘ll never get close to, particularly given strategems to get around paying a lot of it, but let’s say for this example that the rate was a real enforceable 99%. How destitute would Mr. Koch’s heirs be left?
They’d inherit roughly $125,000,000. One hundred twenty-five million dollars. Does that sound like their lifestyle would be excessively limited?
That hundred twenty-five million figure might be a bit ambiguous, so I’ll clear up the ambiguity:
That’s one hundred twenty-five million dollars each. That’s the leftovers after taking 99% of it. And Republicans want us to take Zero.
That pretty much says they don’t want America to be for Americans but for a few of their donors.
And, by the way, this would be terrible for business. The more money is concentrated, the less it gets spent at American businesses, the fewer people they hire, the less they order, the less taxable profits they generate. That’s a longer post and one I’ve already written, possibly multiple times.
Ron Powell
06/15/2021 @ 2:05 pm
The So called graduated income tax is the biggest scam ever perpetrated on the American population.
Taxing in some at any rate is going to be higher than taxation of wealth.
Even the founding fathers new that accumulated wealth would be the bane of democracy.
Ron Powell
06/15/2021 @ 2:07 pm
CORRECTION:
Even the founding fathers knew that accumulated wealth would be the bane of democracy.
koshersalaami
06/15/2021 @ 3:32 pm
The graduated income tax used to work. The idea was to tax higher income at higher percentages. The problem is that there are too many ways around it. The first is to tax investment income at lower rates than earned income. A second has to do with working with deductions that the law allows that help the wealthy. A third has to do with stock options – they aren’t counted as income (from what I understand) until they’re sold for cash, so the way around that is to borrow against them at low rates and that cash isn’t taxable.
Jonna Connelly
06/15/2021 @ 5:25 pm
When you sell the stocks doesn’t the proceeds become capital gains? … wearing an Elizabeth Warren t-shirt as I read ….
Jonna Connelly
06/15/2021 @ 5:26 pm
my point being capital gains are taxed at a lower rate than income generally and go ahead and change the tenses of the previous comment as needed for it to make any sense.
koshersalaami
06/15/2021 @ 6:20 pm
Yes. That’s investment income rather than earned income. That’s one way in which the wealthy are taxed lower. Information has recently come out, apparently information that was supposed to be confidential, that the wealthiest Americans don’t pay a lot of taxes.That’s a serious problem because of the amount of money involved and it has zero to do with affecting anyone’s lifestyle. Seriously, if you’re a billionaire and your taxes triple what house can you not afford? What vacation can you not afford? What cars can you not afford? What restaurants can you not afford? What entertainment can you not afford? Where can’t you afford to send your kids to college? What medical care can you not afford? What private jet can you not afford?
Ron Powell
06/15/2021 @ 8:54 pm
“The graduated income tax used to work.”
For whom?
The idea that the graduated income tax worked at all is the illusion that was shrouded in euphemisms like “equity” and “fairness”.
The tax code doesn’t have as many so- called “loopholes” as it has gaping “vacuums” and floating “black holes”.
The Tax Code specifies that gross income includes income from any source not specifically exempted by statute. This makes the law flexible enough to encompass all sorts of ways of earning money that the code’s drafters could not have foreseen.
“Section 61 of the Internal Revenue Code (IRC 61, 26 U.S.C. § 61) defines “gross income,” the starting point for determining which items of income are taxable for federal income tax purposes in the United States. Section 61 states that “[e]xcept as otherwise provided in this subtitle, gross income means all income from whatever source derived [ . . . ]”. The United States Supreme Court has interpreted this to mean that Congress intended to express its full power to tax incomes to the extent that such taxation is permitted under Article I, Section 8, Clause 1 (the Taxing and Spending Clause) of the Constitution of the United States and under the Constitution’s Sixteenth Amendment.[1]”
—–Wikipedia
What a joke!
Can you say lobbyist?
koshersalaami
06/16/2021 @ 10:31 am
It worked in the fifties. Wealthy people paid a lot more taxes then.
Ron Powell
06/29/2021 @ 2:43 pm
While the tax and economic policies may not be seen as being racially motivated, it is clear that there are consequences that can be identified and characterized as racially orientated in terms of outcomes and impact…
“It worked in the fifties. Wealthy people paid a lot more taxes then.”
I believe that if one were to track the lack of equity in the United States Tax Code since the Supreme Court decision on Brown v Board of Education in 1954, one might be able to discern a negative correlation between gains in Civil Rights and the disparities in income and wealth distribution which is exacerbated by inequities in economic and tax policies…
koshersalaami
06/29/2021 @ 11:54 pm
What graduated income tax was initially designed to do was increase equitability. How it’s developed since then has more to do with getting around the graduated income tax than the concept itself.
Ron Powell
06/30/2021 @ 4:51 pm
“How it’s developed since then has more to do with getting around the graduated income tax than the concept itself.”
Which accelerated the income and wealth disparities between white and black people.
koshersalaami
06/30/2021 @ 5:05 pm
But that’s not due to the graduated income tax.It’s due to working the details to avoid paying taxes. The “graduated” is graduated to increase the burden on wealthier people.
Ron Powell
07/01/2021 @ 1:25 am
“The “graduated” is graduated to increase the burden on wealthier people.”
Perhaps this is true in theory.
However, the more well off the taxpayer is, the number and value of loopholes and deductions are exponentially increased to the point of rendering the US Tax Code regressive in application and enforcement…
koshersalaami
07/01/2021 @ 10:20 am
But none of that is about graduated income tax, it’s about getting around graduated income tax. Graduated isn’t the problem.
Ron Powell
07/02/2021 @ 4:56 am
“Graduated isn’t the problem.”
You’re right!
‘Graduated’ isn’t the ‘problem’.
‘Graduated’ is the illusion!