Disturbing Inequality

America is having some issues, a lot of which stem from the rampant inequality that is causing socioeconomic havoc. Inequality, the gap between the haves and the have-not-as-much and the have-nots, is measured by the “the Gini coefficient, a formula that measures the distribution of income across a population. The closer a Gini number is to 1, the greater the level of inequality; the closer to zero, the closer to perfect equality.”  

In short, the Gini is like golf scores – the lower the better. Sadly, it has steadily trended upward since 1970, with a rapid shift upward after 1981 and another sharp burst in 1993/1994. Behold the data:

gini coefficiant over time

This chart is not good news. The more a society has to deal with inequality among its members, the worse things get for people. Seriously. You can buy books by Nobel Prize winning economists that explain it. If nothing else, the higher that graph goes, the smaller our middle-class shrinks; a smaller middle class is a bad, bad thing.

So what’s causing this mess?

Well, a big part of the problem is that Big Corporations are making the non-rich pay their taxes and then taking that tax money in the form of “subsidies”, AKA “corporate welfare”.

“According to Richard Wolff, professor of Economics at the University of Massachusetts, U.S. corporations, particularly the large ones, “have avoided taxes as effectively as they have controlled government expenditures to benefit them.” Wolff points out that during the Depression and WWII, federal income tax receipts from individuals and corporations were fairly equal, but by 1980, individual income taxes were four times higher than corporate taxes. “Since WWII, corporations have shifted much of the federal tax burden for themselves to the public-and especially onto the middle class,” Wolff says.

The most comprehensive recent study of corporate taxes by professors at Duke, MIT and the University of California concluded “we find a significant percent of firms  that appear to be successfully avoiding large portions of the corporate income over a sustained period of time.”  For example, The New York Times reported that GE’s total tax was 14.3% over the last 5 years, while in 2009 receiving a $140 billion bailout guarantee of its debt from the federal government.”

The tax burden has also shifted from the Mega-Rich to the middle class and working poor. Under Eisenhower, the top tax rate (the thing that would effect billionaires today) was a whopping 91%. He took that money and poured into infrastructure and schools and the public good and America thrived. Yes, we had some serious problems – such as the lack of women’s emancipation and the Jim Crow laws — but as a whole the American middle class was HUGE. Nowadays the Mega-Rich pay less than a third of that and our infrastructure and schools are falling down around our ears.

Let’s look at the richest people in America as an example, the heirs to the Wal-Mart fortune – the Walton Family. They own as much wealth as the bottom 42% of Americans while their workers are paid so little that they need government assistance programs to survive. Whether or not you shop at Wal-Mart, if you pay taxes you are helping them pay their workers salaries. If the Waltons, who are jointly worth $115.7 BILLION, had to pay 91% of their wealth in taxes, like Eisenhower would have made them do, they would still have more than $10 Billion in wealth. I think they could squeak by.

America is also struggling because “real” wages have decreased. A $10 bill in 1960 is equivalent now to $80.37 in spending power. In 1960, the average yearly wage was $4,743 a year. That means the average Joe made $38,120.36 in salary a year in todays dollars. Today the average salary for a US worker is $26,695. That means the US worker made more than $10,000 more a year in 1960 than they do today. How about the “high end” jobs? They are even worse off. In 1960, the average doctor made $39,000 a year, or $313,449.32 in today’s money. Nowadays, the average doctor makes $191,520 a year. They make about 2/3 of what they made in 1960. So who has been getting all the dough? In 1960 the average CEO made 40 times what a worker made, which would be roughly $189,720, or over $1.5 million dollars a year. Nice, right? Today some of them make more than 331 times a workers salary, and they make an average of $10.5 Million.

Combined with the massive loss of manufacturing jobs and the loss of union jobs (which effect the average wage), unless something drastic changes,you are hearing the bells toll for the American middle class, and thus for the USA.

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