Much has been made, in the last few years, of an apparent increasing concentration of wealth in the hands of a few, while the poor get poorer. One result of this has been a demand that the rich should pay more taxes; they should pay “their fair share.” Another result has been a general objection to the increasing wealth of those who are already wealthy; there should be a general redistribution of their wealth to the poor.
In addition to attempting to define what “their fair share” should be, it’s also useful to explore whether the wealth disparity in the US is really all that bad.
Let’s look first at the question of “fair share.” I’ve written elsewhere that in 1999, the top 10% of Americans, by income, paid 66% of the total income taxes collected by the Federal government, while the bottom 50% paid 4% of the total; in 2008—after the Bush tax cuts that so favored the rich—the top 10% of Americans’ share had increased to 70% of the total income taxes, while the bottom 50%’s share had decreased to 3% of that total. With the richest Americans’ share of the tax burden increasing, already, what is their “fair share?”
Further, when we look at actual income vs. taxes, we see this in 2008—again, after those Bush tax cuts “for the rich;” the disparity is even more startling. The top 1% by income, who earned 20% of the total income in the US, paid nearly 40% of the total taxes paid by Americans. That bottom 50%, who paid those 3%, actually earned nearly 13% of the nation’s total income. Again, what is the “fair share” of the rich? I suggest it’s already been met, and more.
Still, were the concentration of wealth and the associated wealth disparity static, there might be a valid beef, if only from the practical standpoint that such stationarity would contribute to stagnation in our economy, at the cost of continued improvement in well-being for us all. But when we look at income mobility, we see no such stationarity.
When we look at minimum wage earners, for instance, we find that adults who earned at minimum wage levels over the period 1998 through 2006 did so only relatively briefly. Then, rather than losing their income altogether, they moved on to better paying jobs.
We can look at this another way, too. According to the Treasury Department’s “Income Mobility in the US from 1996 to 2005” report, the children of today’s poverty-level family are part of the next generation’s middle class families. Today’s poor young man is tomorrow’s middle-aged middle class man. Indeed, “80 percent of taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile.” Further, the median incomes of those in the lower quintiles increased more than did the median incomes of the higher quintiles. Not only are today’s poor a different group of people than yesterday’s, today’s poor are better off in absolute terms than were yesterday’s poor.
The movement runs both ways, as it must: relative movements are a zero-sum game. Not only is yesterday’s poor man not today’s poor man, because yesterday’s poor man has gotten better off, relatively as well as absolutely, yesterday’s rich man is not today’s rich man: he’s lost ground relatively as well as absolutely. “Among those with the very highest incomes in 1996—the top 1/100th of 1%—only 25% remained in this group in 2005…. [T]he real median income of these taxpayers declined over this period.” It’s broader than that, too: 30% of those in the top quintile in income in 1996 had fallen to the next lower quintile by 2005, and nearly 3% had fallen all the way to the bottom quintile.
It seems that demands for the rich to pay “their fair share” are redundant; they already are. It’s that bottom 50% that seems to be underpaying their “fair share.” Further, demands for the class warfare of wealth redistribution would seem to be aimed at a moving target. Our free market economy already is redistributing wealth, as Americans earn their way out of poverty, or lower middle class, or middle class, and enter those better off groups. Demands to take wealth away from the rich are demands to take property away from those who’ve only just earned it with a lifetime of hard work and sweat. And they are demands to deny that property to the children of these only newly successful.