8
Income gap widening rapidly
A fight over money
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Kai Ryssdal: President Obama made the rounds of Parma, Ohio today talking economy. The White House and congressional Republicans are arguing over -- well, they're arguing over many things, to be honest with you. Today, it was whether to end the Bush tax cuts, those are the ones geared mostly toward Americans earning more than $250,000 dollars a year. The figure you hear is that that's about 3 percent of the country, and a quarter million dollars is a lot of money. But the tax debate, and maybe the tax structure itself, doesn't capture how rich a small slice of that 3 percent group really is.
Our senior business correspondent Bob Moon reports.
Bob Moon: It used to be Americans had a clearer idea of what it was to be rich.
Theme song from "The Donna Reed Show"
In the 1950s, the wealthiest Americans paid taxes of up to 90 cents on the dollar. But historians say the gap back then, between rich and poor, was smaller.
At the American Enterprise Institute, economic policies director Kevin Hassett says the rich started pulling further ahead in the 1970s, and recently, that's accelerated rapidly.
Kevin Hassett: Income distribution got much more skewed over the last decade towards the top.
By some estimates, in the five years leading up to the recession, the incomes of the top 1 percent of Americans grew almost 10 times faster than everyone else -- accounting for the bulk of the nation's increased wealth.
Stephen Rose is a labor economist at Georgetown University. He says the income tax system hasn't changed while that wealth shifted, and many wage-earners that Uncle Sam classifies as rich pay the same high tax margins as the super-rich.
Stephen Rose: Income taxes are somewhat targeted for the upper middle-class, and less targeted for the super-elite.
Rose says there's been no groundswell as yet to create a higher tax rate for those Americans. But a Quinnipiac University poll out this year did find strong support -- including among Republicans -- for a tax on millionaires. If that happened, Rose says the richest of the rich would still be better off than they were not so long ago.
Rose: As recently as the Reagan era, the tax rate on people who made the equivalent of a million dollars a year was much higher than it is today. So we really would only be going back.
Rose says defining who's rich, though, isn't an issue for economists, as much as it is a political challenge.
I'm Bob Moon for Marketplace.
@Johnathan
"They do it too and more so." doesn't help the argument much. All that saying "democratic rich people don't pay much in taxes" does is cause the reply of "Well, tax them too." If my neighbor is overweight and I am overweight, then we BOTH need diets.
The second part is a bad logic insinuating that "if we tax people, we'll lose everything we made in the past 60 years."
First off, the logic doesn't make sense since much of those years had the same high taxes and the nation grew. Note that the BIG DEBT and recession/bubble cycles only started to hit full steam in the 80s..when we started with the ideas you speak about.
Lastly, you're throwing out hyperbole. We didn't have widespread poverty and no one who's rich during the 70s with a 70% maximum tax, and very few are even thinking of going back to those days. If we didn't go to "everyone in poverty" then at 1970 tax levels, then we won't go back there by just going back to 1999 levels (the last time we didn't have run a deficit)
"$250k/yr....Is it really fair to call us rich (a seemingly derogatory term these days) and soak us with taxes?"
Yes, that is rich. Even in SF.
$93,400 is the median in SF. $250,000 is 2.6x the median.
by soaking you mean going back to what you paid in 2000. when we had a budget surplus. that could have paid down the debt.
"Would you rather have everyone in squalid poverty, or most people living in luxury while a few live in vastly more luxury?"
If you've heard or read this article, then no, neither case exist.
"By some estimates, in the five years leading up to the recession, the incomes of the top 1 percent of Americans grew almost 10 times faster than everyone else -- accounting for the bulk of the nation's increased wealth." -- from the article.
We will never fix anything until we fix the tax code. We need a flat tax and transparency. This way no one gets special treatment. With a flat tax we could set a lower limit to assists those at the bottom of the income scale.
The rich have never made enough to float the economy. We had trickle down from the upper middle class which has been killed for numerous reasons. If we are going to fix this mess we have to get rid of special interest payoff via the tax code and reinvigorate the middle class. However, the chances for doing this a slim. Too many tax lawyers, accountants, and politicians will be against the move. Because one way or another the tax payer already pays the bill. We have evolved to the point where we have a free market in name only.
There's a big difference between "those with the highest taxable income" and "the rich." The truly rich tend to pay little or no taxes at all, and tend to be heavy Democratic donors. But in any case, by 1950s standards, *everyone* in America today is rich beyond all dreams of avarice. Would you rather have everyone in squalid poverty, or most people living in luxury while a few live in vastly more luxury?
I'm disappointed at the obviously anti-wealthy slant of this story and how misinformed the leading premise is.
According to a Bloomberg Business Week article in July, keeping the Bush tax cuts for those who earn above $250k/yr will cost $55 billion per year, while keeping them for those earning less than $250k/yr will cost $255 billion per year. How is it then that you can claim those tax cuts are mostly for the rich when clearly the overwhelming benefit goes to those under the so-called rich/poor demarcation of $250,000?
Where I live, in the San Francisco Bay Area, $250k/yr doesn’t stretch all that far and can hardly be called rich.
And just considering someone’s income in any given year doesn’t tell the whole story. My partner and I invested in a struggling manufacturing company 9 years ago during the last recession. We took a risk and invested money that we might never get back. For five years, we didn’t make a dime and even invested more money into our company. In the last 9 years we have gone from 25 to 70 employees.
Now, having turned the company around, we make good income, but it was a struggle and a risk to get here, and there is no guarantee that next year will be as good. Is it really fair to call us rich (a seemingly derogatory term these days) and soak us with taxes?
Furthermore, my partner and I are looking for other manufacturing opportunities to invest in, companies to rebuild and improve. Guess where this money comes from? If you guessed our income, you are right. We continue to invest the majority of what we bring home (after the governments already hefty cut) into other opportunities and every dollar that goes to the government is capital we can’t spend on investment.
It is time to drop the us-vs-them mentality that benefits only politicians. Being wealthy in this country means that you are living the American dream, as does being middle-class. If the gap between wealthy and poor is widening, we need to improve education and opportunities for people to be successful, not tax those that have been successful more.
Great story that is quasi accurate -fun to read - and in typical MarketPlace.org overt slant -socialist in general.
Gee Kai -in your opening statement -do you mind explaining how -as you put it "the Bush tax cuts, those are the ones geared mostly toward Americans earning more than $250,000 dollars a year" is even remotely accuratre? You remember those tax cuts -the ones that dropped the top tax rate from 39.7% to 35%, but dropped the lowest rate from 15% to 10%. The same cuts that reduced upper income taxpayers Dividend tax to 155 -but ELIMINATED it for the lowest ratepayers. Yeah those -I suppose if we COMEPLETELY repealed these cuts -you would argue that the RICHEST Americans would be hurt the most, and the poorest won't notice the 50% increase in their taxes?
All in all the story is fun -it talks about income distribution in America. But it skews it as though government should play a role in HOW income is distributed in America. I don't believe most Americans believe it is the role of government to EQUALIZE incomes. People come to America, Americans BELIEVE in AMerica -as the land of opportunity -not the land of "You can bre like everyone else".
