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More on inequality

This is an update for my last blog where I provide a brief summary of the state of inequality in American society. Shortly after posting this blog, I accidentally discovered some truly incredible data in Mother Jones magazine.   The charts (found here) do an even better job than Inequality.org. 


Here's what the charts say. To begin with, the huge income growth for the top 1% was helped by the fact that from 1992 to 2007 when their income grew by 392%, their tax rate dropped by 37%.  Because payroll taxes constitute the largest tax contribution for American workers, the result is that "the effective tax rate for people earning more than $370,000 is nearly the same as for those earning between $43,000 and $69,000 a year," according to the Mother Jones report. Also, during the past 50 years revenue from corporate taxes has declined from just under 30% to less than 10%, while revenue from individual income taxes has gone almost exactly in the reverse direction, from about 10% to around 40%.  An example they cite is General Electric.  From 2001 to 2008 their tax rate plummeted from 28% to 5.5%; and then in 2009 it was -10% - meaning they got a huge refund!  In effect GE has paid no taxes during the past five years! 


There are several charts that deal directly with the infamous "1%" of Americans.  To begin with, this group owns about half of all stocks and mutual funds, 60% of all financial securities and more than 60% of business equity. The richest 10% owns about two-thirds of the total net worth. Most of their income is derived from capital gains and thus not subject to much taxing.  One consequence is that their median income in 2008 dollars was $1,137,384 (up from about $400,000 in 1980).  By contrast, the bottom 90% of the population remained stagnant at $31,244 during this time.  The rich have been riding the elevator while everyone else has been walking a straight line!


With a Little Help from their Friends in Congress


The super-rich have made these gains with help of members of Congress.  These are good friends to have. As a reward for passing the huge tax cut legislation in recent years, members of Congress have about a 50-50 chance of being millionaires, compared to a 1 in 22 chance for average Americans. Whereas the median net worth of Americans is around $120,000, for members of Congress it is $912,000 (see this chart). 


Poverty Rises


Another part of the same report in Mother Jones reveals new data on poverty in America, noting first of all that about one-fourth of all jobs "pay less than a poverty-level income."  These are the "working poor" that rarely come to the attention of the mainstream media (but were the focus on Barbara Ehrenreich's best seller Nickeled and Dimed). Officially, 13% of all Americans (37 million) are poor.

According to the National Poverty Center more than one in five (22%) children live in poverty.  Among black children the rate is 38%; for Hispanic children it is 35%.  Black and Hispanic families are about three times more likely than whites to live in poverty (27% vs. 9.9%). 


These facts impact the court system as between 60 and 70 percent of felony defendants are indigent -- meaning they cannot afford an attorney -- according to a recent study (another study found "between 80 and 90 percent of all state criminal defendants rely on indigent defense system for counsel").  Look inside any urban juvenile detention center and you will see nothing but black and brown faces, and kids from single-parent impoverished homes (for example, see studies here and here; also see the study by Elizabeth Brown and Mike Males in the spring 2011 issue of the Justice Policy Journal).  Not to mention the fact that gangs have always been concentrated in the poorest areas of the city, as noted in my forthcoming book on the subject.

Keywords: economy, Randall Shelden

Posted in Blog, Social Justice

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