By Jay Davis, Digital Director, Americans for Tax Fairness
If it feels to you like it’s harder and harder to get by in America, that’s because it is — unless you are already wealthy.
Two of the world’s most revered economists — Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics — have been tracking how American incomes have changed over the past three decades. They study whose incomes are increasing the most, using the tax returns people file each year.
According to their latest study, released earlier this month, the change in incomes for the top 1 percent and the rest of us over the past couple of years look something like this:
Yep: 95 percent of the growth in incomes since the start of the economic recovery went to the top 1 percent — the people who need it least. The bottom 99 percent saw an income gain of about 0.4%.
The top 1 percent — or people who made more than $394,000 or more before taxes — broke records in 2012 by earning 20 percent of all U.S. income. And don’t worry about the top 10 percent. They are doing fine, too — those who earned $114,000 or more before taxes took home a little more than half of all U.S. income in 2012.
Put in the very simplest of terms: The rich keep on getting richer. The rest of us are stuck in neutral.
This is why we need tax reform that requires the wealthy (and big corporations, too) to pay their fair share of taxes. Piketty and Saez have long advocated for increasing taxes on those who can most afford it, and they’ve proposed income tax rates for the wealthiest Americans that range from 50 percent to as high as 90 percent. (The current top income tax rate is just 39.6 percent.)
We needn’t look any farther than our own borders for examples of how to get it done. After all, 50 percent was the income tax rate for the wealthiest Americans during the Reagan era.
That was also the tax rate paid on capital gains — income from stocks, property sales and other investments. The tax rate on capital gains today is just 20 percent. And this is where the rich earn most of their income. Remember Mitt Romney’s 14 percent tax rate? That’s how he did it.
In the words of Mr. Piketty:
“The United States is getting accustomed to a completely crazy level of inequality. People say that reducing inequality is radical. I think that tolerating the level of inequality the United States tolerates is radical.”