America has for many decades witnessed a steady rise in wealth inequality, as incomes of the rich skyrocket – and that of middle class and poor families have stagnated. While the United States is one of the richest countries in the world, it is also one of the most unequal. According to a report published by the World Economic Forum, the U.S. ranks 23 out of 30 developed nations in a measure known as the “inclusive development index,” which factors in data on income, health, poverty, and sustainability.
The unpopular new Republican tax reform legislation, recently signed into law by President Trump, will, according to many economists, exacerbate inequality further with reductions in tax rates for wealthy individuals and corporations, at the same time cuts are made to critical social programs millions of Americans rely on.
A recently published report titled, “Billionaire Bonanza 2017: The Forbes 400 and the Rest of Us,” “exposes the extreme wealth concentrated within the fortunes of the 400 wealthiest Americans and compares this wealth to the much more meager assets of several different segments of U.S. society.” Between The Lines’ Scott Harris spoke with Josh Hoxie, director of the Institute for Policy Studies’ Project on Opportunity and Taxation, who summarizes some of the important findings in this report that he co-authored with Chuck Collins. [Rush transcript.]
JOSH HOXIE: This reports looks at the Forbes 400 which Forbes magazine has been producing for a little over 30 years. Their list of the 400 richest people is the best guess we have at how much wealth is really concentrated at the tippity top of the economic spectrum. And I say best guess because there’s so much money hiding in offshore tax shelters, as recently has come to light that this as much as we’ll know. So, these numbers are almost certainly worse than we have depicted here.
And to compare those numbers to a survey the Federal Reserve puts out every three years, called the Survey of Consumer Finance, which is a statistically representative picture of Americans’ wealth and income and things of that nature. The report compares these two groups and our findings are pretty bleak. And they’ve sort of been getting worse year after year, as this is the second time we’ve sort of done this. We did this last in 2015. So the full Forbes 400 list own as much as the bottom 64 percent of the U.S. population. Which, to put that in context, 400 people in the United States have as much wealth as the entire GDP of Great Britain, which is an insane amount of money.
Part of the disparity in the United States is that while there’s so much wealth concentrating at the top, many, many people at the bottom are struggling. So we looked into what we’re calling “Underwater Nation” which is the population of people who either at zero net worth, or negative net worth, meaning they owe more money than they own in assets. And about one in five Americans fits into that category. Those numbers are deeply skewed by racial numbers. The proportion of black and Latino families who are underwater is about double the proportion that white families are underwater as result of decades of discrimination.
BETWEEN THE LINES: Josh, in this report, you talk about hereditary aristocracy of wealth and power that is now firmly in place in the United States. Tell us a little bit about the unfair economic policies that have played a role in rising income inequality that many conservative political activists ascribe to some kind of supernatural phenomenon or random set of outcomes. But there is a policy link to things that are decided in Washington, right?
JOSH HOXIE: Absolutely. And a lot of folks in this country who have done very economically want to believe that they did it on their own. We have a recurring myth in this country of “pulling yourself by bootstraps.” And for a population of people that’s true – born into poverty and became rich. However, the United States has increasingly decreasing – more and more folks are struggling to get out of poverty.
And the best way indicator of how well you are going to do financially is how well your parents did financially. So, on the one hand, sure, people do work hard and get ahead. On the other hand, plenty of people work just as hard and don’t get ahead because of the lottery of their birth. So when we talk about inherited advantage, we’re talking about that birth lottery, which is to say, you know, one example – How hard did Tiffany Trump work to become the wealthy heiress that she is. Or Paris Hilton, for that matter. And that’s not to begrudge them their status. It’s just to say that you know, as far as the tax code is concerned, I just can’t understand why we’d want to charge people taxes who punch a paycheck every week and not charge taxes to people who, all they had to do is wait for their money because they won it in a genetic lottery?
I mean, even lottery funds are taxed. So why wouldn’t we tax the genetic lottery? It’s sort of absurd if you think about it those terms.
BETWEEN THE LINES: In line with other economists around the world you observed that the levels of inequality that we see that are only skyrocketing are unsustainable – both economically and politically. I wondered if you’d explain.
JOSH HOXIE: I think folks should really get a sense that this is not normal. I mean, what we’re seeing right now of the concentration of wealth at the top has only really happened in the lead up to other not great things. I mean, the first Gilded Age led up to the Great Depression. We don’t really want to see that again. The break up of wealth is going to happen one way or another. I hope it doesn’t happen by war and depression and things of that nature. There’s a much less violent and more pleasant way to do it, to break up wealth and it’s pretty straightforward – taxing the rich and investing in economic opportunity for everyone in the country.
But to your point, yes. We can’t continue like this. There’s only so much folks will accept. And as more wealth hides in offshore tax shelters, any semblance of truth to the idea that wealth is going to trickle down from the top just goes away. I mean, it’s just not true. So, instead, they find ways to buy a 10-foot longer yacht. I mean, really, what’s the difference between a 190-foot yacht and a 197-foot yacht, but that’s honestly the level of where our money is going in terms of how the very, very wealthy are spending their assets when they’re not just watching it move up higher and higher on a computer screen.
For more information, visit the Institute for Policy Studies’ Project on Opportunity and Taxation at IPS-DC.org and view the report titled, “Billionaire Bonanza 2017: The Forbes 400 and the Rest of Us,” at The Institute for Policy Studies at IPS-DC.org.
