TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, March 27, 2012

NY Times: The Rich Get Even Richer

New York Times op-ed, The Rich Get Even Richer, by Steven Rattner:

New statistics show an ever-more-startling divergence between the fortunes of the wealthy and everybody else — and the desperate need to address this wrenching problem. Even in a country that sometimes seems inured to income inequality, these takeaways are truly stunning.

In 2010, as the nation continued to recover from the recession, a dizzying 93% of the additional income created in the country that year, compared to 2009 — $288 billion — went to the top 1% of taxpayers, those with at least $352,000 in income. That delivered an average single-year pay increase of 11.6% to each of these households. Still more astonishing was the extent to which the super rich got rich faster than the merely rich. In 2010, 37% of these additional earnings went to just the top 0.01%, a teaspoon-size collection of about 15,000 households with average incomes of $23.8 million. These fortunate few saw their incomes rise by 21.5%. The bottom 99% received a microscopic $80 increase in pay per person in 2010, after adjusting for inflation. The top 1%, whose average income is $1,019,089, had an 11.6% increase in income.


The only way to redress the income imbalance is by implementing policies that are oriented toward reversing the forces that caused it. That means letting the Bush tax cuts expire for the wealthy and adding money to some of the programs that House Republicans seek to cut. Allowing this disparity to continue is both bad economic policy and bad social policy. We owe those at the bottom a fairer shot at moving up.

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That's a relatively minor prescription for what's diagnosed as a horrendous problem. If the disparity is so horrible, we ought to hear calls to tax capital gains at 50% or more, calls for the top marginal rate to hit 80%, and a massive estate and gift tax to swoop in, as well as some sort of asset tax to hit the idle rich and the beneficiaries of wealthy trusts.

Or maybe the fact that such a huge disparity is met with relatively mild amelioration suggests that it's more a point of rhetoric than a true threat to the continuation of the republic.

It feels like this proves significance but not harms. Okay, there are lots of people with high income. How does that affect the rest of us? Significance and harms are separate; something can be harmful but insignificant or significant but harmless. We need something to explain why disparity is bad. It seems like absolute poverty, not relative poverty, is far more meaningful - and by every measure absolute poverty has been substantially improving every generation.

The left is as obsessed with the existence of rich people as the right is obsessed with the existence of gay people. Gay marriage doesn't undermine my marriage and wealthy people don't undermine my wealth.

Posted by: NL_ | Mar 27, 2012 11:47:36 AM

How does a enriching the government, by taking with force from those who have worked, saved and invested and done nothing illegal or immoral benefit the rest of us?

What is the evidence that the government can allocate resources more beneficially than the free market? Or that income equality leads to more goods and more services for more people, at an affordable cost, raising the standard of living for all.

And what is the morality of the government's taking money, coercively, from private citizens who have done nothing illegal or immoral. Only the government or a thief can take your money without your consent. It may not be the best idea to enrich the government further.


Posted by: Bob Guzzardi, Ardmore Penna. | Mar 28, 2012 5:17:53 AM