Because Congress is debating tax reform, I’m republishing this article to again raise the issue of inequality.
Rising income and wealth inequality leads to political inequality and threatens our democracy. A Washington Post article concluded that People have no idea what inequality actually looks like, and that caused me to respond and to enhance this article, which was published here two years ago. It features some disturbing videos that help us understand the corrupting influence of big money in politics and the direct relationships between:
- Special interest lobbying and policies resulting in a widening of income & wealth gaps,
- Between the widening wealth gaps and poverty,
- Between Poverty and obesity,
- Between obesity and diabetes and other chronic illness,
- Between chronic illness and rising healthcare costs, and
- Between rising healthcare costs and our economic problems.
Highlights from the video above
- Our Perception of wealth distribution is far from our Ideal but not even close to Actual distribution.
- The top 1% has more of the nation’s wealth than 90% of us think the top 20% Should have.
- The top 1% has 40% of all of the nation’s wealth and takes home almost 25% of the annual income.
- The top 1% own half the country’s stocks, bonds and mutual funds.
- The bottom 50% live hand-to-mouth, don’t invest, and own just 0.5% of stocks.
- Do CEOs really contribute 380 times more than the average worker (not lowest, but average)?
- UPDATE: CEOs now make almost 1,000 times more, according to this billionaire. While the video compares wealth of the top 1%, we should now be looking at the top 0.1% & 0.01% and craft tax policies accordingly.
- The Average worker needs to work more than a Month (>2 months) to make what the CEO makes in one Hour.
After seeing the Washington Post article and browsing Netflix for a good movie, I noticed and watched Inequality for All. It’s a 2013 documentary featuring economist and former Labor Secretary Robert Reich, who served under three presidential administrations — Ford (R), Carter (D) and Clinton (D) — and offers important and expert insights. The film is described as “a game-changer” in our national discussion of income inequality, but only if people watch it. After watching the trailer below, I encourage you to watch the full version and even host a Watch Party, inviting your friends and discussing the issues raised. It’s a great way to better understand the impact that inequality has had on the nation’s poor and middle-class and the economy in general, or healthcare in particular, watch the full version that follows.
Reich starts with a discussion of just how wide the wealth gap has become and how the top 1% can’t even spend what they earn, even with lavish lifestyles. They can’t buy “that” many homes or cars or pillows or jeans. Such extreme wealth doesn’t really contribute much to the economy or jobs, he argues. He then describes some of the causes, including:
- The accelerating pace of tech innovation, and
- The growing influence of big money in politics.
His recommendations are hard for some people to swallow, a bitter pill if you will, including:
- Get big money out of politics,
- Fix the tax system,
- Invest in education,
- Raise the minimum wage,
- Strengthen worker’s voices, and
- Reform Wall Street.
Inequality for All — Trailer
Inequality for All — Full-length Version (1.5 hr)
Now you can watch his full-length version online for free with the password “bernie2016”. Please learn, comment, and share.
Bill Moyers interview
RELATED DEBATE: Are The Rich Already Taxed Enough?
This 1.5 hr video shows both sides of the tax reform debate, considering three factors discussed include: Fairness, Sufficiency, and Efficiency. In the end, 30% of the audience agreed that the rich are taxed enough, while 63% were convinced that the rich are NOT taxed enough compared to the rest of society.
SOLUTIONS: Tax Reform and Raising the Minimum Wage
As the Republican Congress considers tax cuts for the wealthiest individuals and corporations, the rest of us worry about automation (income from capital) replacing jobs (income from labor). It’s important to understand what’s behind the current and trending wealth & income inequality. While one benefit of our capitalist form of government is to encourage risk-taking, investment and innovation among those with capital to do so, that same system also causes the capitalists to seek profit by almost any means. That includes either replacing workers or augmenting their performance with skills training, automation, AI and robots. Over time, those capital investments and the accelerating pace of tech innovation has helped to dramatically increase worker productivity, but the benefits have primarily to the owners, not the hired workers.
New skills developed by workers to keep up with technology doesn’t necessarily result in higher wages. There’s an economic supply & demand reason for that. When demand for workers with a needed skill is high but supply is low, wages rise. But when supply is high and demand is low, wages fall or stagnate. That means training grape-pickers to become app developers both lowers the wages of app developers and raises that of pickers. That’s a simplistic way of looking at things. I prefer to step back with a wider perspective that considers both economic growth and improved lifestyles.
Government can encourage economic growth by helping to develop a healthy, skilled, and productive workforce through public education, lifelong learning programs, and universal healthcare. But government also has a role in providing a safety net and a hand up for those impacted by illness, injury, or just being born into the wrong family – again with the objective of improving the productivity of our nation, and our GDP and global competitiveness.
To do these things requires strategic investments in education, research, infrastructure, healthcare, and wellness & social programs, among others. But who pays for that? It makes no sense to put a heavy tax burden on workers when they don’t actually profit from the productivity increases extending from those public investments. No, most of the burden should come from those who profit the most, and that’s why I support raising the minimum wage and adding new tax brackets.
MINIMUM WAGE — The video infographic shows that the bottom 50% of the population live hand-to-mouth and don’t invest. They own just 0.5% of stocks, and because they spend almost all of what they earn on living expenses, any extra money they get goes directly into the economy, creating increased market demand for goods and services that mostly benefit those at the top.
Henry Ford apparently understood that, because he shocked the country by announcing plans to pay employees $5.00 a day. That was over twice the average wage for automakers back then. He also reduced the work day from 9 hours to 8 hours. That was a significant drop from the 60-hour industry average.
Why did Ford do all of that? He obviously saw employees as his company’s best asset, and his best customers if only they could afford to be. He famously said the higher wages improved productivity and helped retain the good workers. It just made good business sense then, and I argue that it still does.
An alternative to raising the mandatory minimum wage could be incentives for doing that by lowering the tax burden of companies who keep a low ratio between the highest incomes and lowest. That ratio should include executive wages, stock options, and other forms of compensation to make it more difficult to “game” the system. I also recommend giving shareholders greater say in determining executive compensation, because with “interlocking directorates,” CEOs tend to sit on multiple boards of directors and vote for each other’s compensation.
TAX REFORM — Today’s top tax rate is 39.6% for income above $415,050, with just one tax bracket that includes both small businessmen and billionaires. So without raising taxes on 99% of Americans, we could generate considerably more revenue by adding more tax brackets for the top 1%, 0.1%, and 0.01%. Given the widening income & wealth gaps, progressive tax reform should also tax income from capital the same as income from labor, or more. Income above $2M/year could be taxed at 50% without hurting 99% of the nation. Income above $20M could be taxed at 65%. And income above $200M could be taxed at 85%. Note that a billionaire would only be taxed at the highest rate on the portion of his income that was over $200M, so don’t look at the higher rates a disincentive to work hard or invest, because it’s not. Also, raise or remove the cap on Social Security tax, close tax loopholes, and tax capital gains the same as ordinary income.
I’m careful to not position these progressive tax reform suggestions as a form of punishment for the wealthy. It’s just that they improve tax fairness, sufficiency and efficiency. But the Republican proposal would shrink the number of brackets, instead of adding more to accommodate widening wealth gaps, and although it’s touted as a middle-class win, it directly benefits the wealthy and President Trump himself.