THE RICH GET RICHER . . .
A perspective on Tax Day from our resident mathematician, Sinefeld!
Whether you just wrote a big check to Uncle Sam or are expecting a refund, it's just about certain that you paid a higher percentage of your income in taxes than most of the truly wealthy people in our country. The fact that you pay a higher proportional tax than someone whose income is much higher than yours, and have been doing so for decades, is the reason income inequality has reached an historically high level in this country.
How did we get here? Being who I am, I looked for some numbers to explain the situation. The first set I found are captured in this graph.
It shows the average productivity of our economy and the average hourly income since WWII. Increased productivity is what generates wealth. Notice that from the end of WWII until about 1973 productivity and income rose together. The wealth generated by our increased productivity was spread throughout the whole population.
Productivity has continued to increase at about the same rate since 1973 but average income for people who get a paycheck has increased less than 10%. So what happened to all the wealth generated by the increased productivity over the last 40 years? Where did it go? To all the people who don't make their living by getting paychecks. Maybe you've heard of the 1%?
This graph shows the income of the top 1% as a percentage of the total income of the country. It peaked at almost 24% in 1928 (what was it that happened in 1929?), went steadily down until the 1970s and has risen steadily since then to almost its 1928 peak. So what's the mechanism that causes our wealth to be spread evenly or flow mostly to the top?
This graph shows historical highest and lowest marginal tax rates. The highest rate bottomed out about 1929 (that year again), rose steadily until WWII, remained at 70% or above until 1980 (92% in 1952!) and has been much lower ever since.
What these numbers say to me is that capitalism is not a perfect system, even though it may be the best choice we have. Without restraints the rich get richer exponentially. Wealth gets increasingly concentrated at the top and there is no natural mechanism to re-balance the system. Historically, a highly progressive tax rate is the only mechanism that has been proven to work.
The whole system is better when the wealthy pay their fair share of taxes. Bernie probably won't win but he is saying some things that need to be heard.
TODAY'S OTHER TRUTH . . .