Firehose-Up Economics

Greg Sargent zeroes in on income inequality in America and finds that while wages for working-class Americans has gone up 50% in 50 years, in those same 50 years the wealthy have gotten massive gifts from lawmakers and the tax code.

The triumph of the rich, which is one of the defining stories of our time, is generally described as largely the reflection of two factors. The first, of course, is the explosion of income among top earners, in which a tiny minority has vacuumed up a ballooning share of the gains from the past few decades of economic growth.

The second factor — which will be key to the 2020 presidential race — has been the hidden decline in the progressivity of the tax code at the top, in which the wealthiest earners have over those same decades seen their effective tax rates steadily fall.

Put those two factors together, and they tell a story about soaring U.S. inequality that is in some ways even more dramatic than each is on its own.

A new analysis prepared at my request by Gabriel Zucman — the French economist and “wealth detective” who has become famous for tracing the hidden wealth of the super-rich — illustrates that dual story in a freshly compelling way.

The top-line finding: Among the bottom 50 percent of earners, average real annual income even after taxes and transfers has edged up a meager $8,000 since 1970, rising from just over $19,000 to just over $27,000 in 2018.

By contrast, among the top 1 percent of earners, average income even after taxes and transfers has tripled since 1970, rising by more than $800,000, from just over $300,000 to over $1 million in 2018.

Among the top 0.1 percent, average after-tax-and-transfer income has increased fivefold, from just over $1 million in 1970 to over $5 million in 2018. And among the top .01 percent, it has increased nearly sevenfold, from just over $3.5 million to over $24 million.
I’m emphasizing the phrase “after taxes and transfers” because this is at the core of Zucman’s new analysis. The idea is to show the combined impact of both the explosion of pretax income at the top and the decline in the effective tax rate paid by those same earners — in one result.

And the Trump Tax Cut scam made it all exponentially worse.  Since 2000, when Bush came in and crashed the economy and left Obama holding the bag, and then Trump came in, wages for the bottom 90% went up maybe 10%, and 20% for the Top 10-1%.

But the wealthiest Americans saw the same income growth as before. the Top 1% up 40%, the Top 0.1% up 50%, and the Top 0.01% saw their incomes rise by 90%, from $14 million to $24 million.

We're headed for disaster, and imminently.