Beyond Outrage

Have you ever wondered why, despite the fact that the American economy has grown consistently over the last three decades, your wage hasn’t changed a bit?

In fact, the average American worker’s monthly pay has grown by only $280 in thirty years. We have to ask ourselves, who is benefitting from all of this economic growth?

While the working and middle classes have seen very little change in their wealth, the rich have enjoyed the lion’s share. Indeed, over the last few decades the gap between rich and poor has grown at a terrifying rate.

In the ‘60s and ‘70s, the top one-percent earned somewhere between nine and ten percent of the total income nationally. In 2007 that number had more than doubled at 23.5 percent. Even more frightening is the fact that the wealthiest 400 Americans are now wealthier than the 150 million lowest earners put together!

Moreover, the average wage of CEOs has gone from being “only” 40 times that of their average workers to 400 times over the same 30 year period.

So what caused this startling rise in inequality? In essence: tax cuts that mainly benefit the wealthy.

The United States saw several tax cuts for the rich under both the Ronald Reagan and George W. Bush administrations. Looking at the period between 1958 and 2008, you notice that the average effective tax rate, i.e., the rate people actually pay after all the tricks and loopholes have been exploited, has dropped from from 51 percent to only 26 percent for the top one percent.

What’s more, the rich also earn a great deal of their income in the form of capital gains, that is, profits that come from stocks, bonds or real estate. Capital gains are taxed at only 15 percent instead of the 35 percent for wages in their tax bracket.

Meanwhile, the income tax on the average middle-class worker has increased from 15 to 16 percent.