What Would I Do About US Wealth Inequality

Well there is a robust debate about US inequality going on thanks to Thomas Piketty’s fine book “Capital in the 21st Century” that I am reading, and will review in due course. In a recent exchange on line, someone asked if those concerned about inequality were suggesting we go back to the top income tax rate of 90% of the 1950s. And here was my response. Piketty has got me into the idea of using real numbers or at least his good estimates, from which I draw the numbers used below.

No I think top end 90% income tax rates is going too far. On income I would be fine with all income being treated the same at current rates, with no special rates for capital gains and no shelters. Indeed if we made sure there was far less evasion by the rich, we could even reduce the rates somewhat.

On wealth the 340,000 people who constitute the top 1% have 35% of all the $80 trillion of US wealth (compared with US GNP of $16 trillion). So they have around $28 trillion including an estimated $8 trillion in offshore tax havens on which they have paid no tax (see evasion comment above).

I am in favor of a wealth tax that took perhaps 3% of said $28 trillion wealth each year or around $840 billion and spent it on scientific research and education and on improving our crumbling infrastructure so there was a societal pay back, a time adjusted rate of return of perhaps 10 or 15% on such money with society as a whole receiving the pay off in terms of more competitive business, more efficient roads and rail, more resilient electricity grid and water supply or whatever. So we would be taking wealth and making more wealth from it not short term handouts. 

Though, of course, if we gave every one of the 140 million wage earners in the other 99% an equal share of the $840 billion it would give each $6000 a year which could be a tax rebate, pay some of our healthcare costs, or go towards school fees, whatever. Not bad but I think spending the money on capital improvement would be better in the long run and by making the economy more prosperous that would pay for social security, Medicare and other long term programs that need better funding as well as waste reduction.

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About creativeconflictwisdom

I spent 32 years in a Fortune Five company working on conflict: organizational, labor relations and senior management. I have consulted in a dozen different business sectors and the US Military. I work with a local environmental non profit. I have written a book on the neuroscience of conflict, and its implications for conflict handling called Creative Conflict Wisdom (forthcoming).
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5 Responses to What Would I Do About US Wealth Inequality

  1. TonyGee says:

    This sounds like a thread from your post on April 20th titled, “Effective Remedies for Thomas Piketty’s Inequality”

    I find it interesting that many have this idea that inheritance needs to be taxed at a high rate and family taking care of family is in general a bad thing. What is so bad about family wanting to take care of their children?

    We have so many examples that all walks of life benefiting from inheritance. I am a believer that wealthy people give back, some do it for recognition and other prefer to be anonymous. The Kennedy clan from Massachusetts or the Rockefeller, Gates, Walton’s are some of the most prominent family’s in America. Look at these family members who have given back to society. There are so many more who don’t make the “prominent list” because they did not do it for recognition, but for the love of God and fellow Countrymen or is it more politically said, County-people’n. Sorry I’m wanting to be politically correct it just comes off bad….(By the way I have most likely discussed my view on, “being offended” what a joke, if not I will at some point on your blog I will share my personal journey of growth into maturity out of “the offence” mentality, I’m sure many will testify too) but I digress.

    Back to the point….Is it not the parents and/or family members to raise their children in the community? Is it not life and death in how that family lives and dies (big picture speaking). Don’t anyone go off on a rabbit trail ALL citizens (except for that weird religious folks from Waco or Jamestown kind of cults less then 1% or-so wackos) believe we need to take care of the widows and orphans.

    Are, “we the people” so dysfunctional that we need an outside force to take care of us?….So if I understand correctly we have a group of people who feel Very Strongly to take care of their own by creating wealth, and we the people should forcibly take away from those families. Then give it to those they do not know and who don’t believe like they do, nor have been taught like they have which is to be poverty free, but to give to those who in many cases have this poverty mentality. Are We sure that Government should have this great power, to take and give. There is so many unintended consequences, for one, once government has the power to take from the wealthy you give them power to take from YOU and Me the less wealthy. Whats the old saying…’You can take the people out of ______(in this case poverty area) but you can’t take the ______ (poverty mentality) out of the people,’ something like that. They will be poor until they chose not to be.

    At what point in history would some suggest, If government shall take from the wealthy in money should not the government take from the wealthy of the womb? If we the people using the power of Government to dictate that wealth is not to be used for taking care of its own family members, but to be used for the poor. Then why not take from the wealthy in children and to give to others who are less fortunate in children. If family, “X” has more money then they need or should have, then Take it away (tax) them in the form of money. Likewise, family “Y” who has more children then they need or should have, then take away (tax) them in the form of children. These will say, We can take from both sides of the problem, those rich-bastards with too much money and those poor-bastards with too much children. By definition if your wealthy you have to much and more then you should have.

    I can picture in the very near future people saying, Should we not all agree with attacking the issue from both sides? Take from the older wealthy and the young and poor. We need to Tax the Hell out of both sides to solve the problem. Soon All would agree we can then build the infrastructure from the wealth of the rich and give the poor a second shot of getting out of poverty by having less financial burden because of the children they have.

    Here’s another thought, Why is it we need to raise the income? If the problem is high salaries and prices then lower the pay on the executives to $20 a hour and same with doctors, lawyers, engineers, all the sports figures, news anchors and the over-paid workers unions and the bosses. The prices of goods and services would go down and all could afford things….right….in theory as in the theory to tax the wealthy and raise the poor income and raising the minimum wadge so they could get the things…….right it makes just as much sense…..

    Unless of course there is a different Motive in TAXING only one side…. Do I really need to explain…..

    I think I can in just a few lines…..It keeps the power in the DC and if the politicians can keep us at each-other then they win…because those of us who don’t realize this game that the politicians are playing only think they (who are really pawns) are getting their political agenda, ideologue or in some cases keep giving me stuff, how kool is that. What is really happening is the pawns just keep taking each-other out, while the Kings and Queens are protected and in the Capitals are ruling and soon with a heave hand. I am not conspiracy theorist I just don’t have blinders on and hope to get others to see. Stop and remove the prism in which you view the situation and look, fight the resistance to only see it your way. Look at the big picture of control, who is in control, who is pitting who, where is the money flowing. When I see BIG Company giving donations to both sides of the political isles, Ya just Gotta ask yourself…..WHY? and then listen….. AND PLEASE……Stop…….Pause……STOP LOOKING threw your own personal filter and look…..observe with your filter off…..Many intellectuals will let their intellect get in the way, but fight and resist …… A good exercise would be to watch listen to both sides….It is very enlightening as the scales fall from your eyes and you start to see what they mean and not what they say…..Both sides will say or do the same thing specially when it comes to power like ‘The Nuclear Option’ ….the republicans threatened to use it. Boy were the democrat pissed off and said all kinds of nasties about the republicans back years ago. Now the demarcates are using it, watch some of the republicans you know they are salivating because when they get in power they can use it because the demarcates has set the precedence. I’m waiting for the day a Republican has the “Nancy moment” and say, We need to vote for and pass the bill to find out whats in it. Sick just sick!

    This may all be Mute to the reader who wants the US to be like Europe. To that I can only say, I love this country my grandparents came over from the oppressed Sicily in the early 1900. Coming to the US was all opportunity, failure was not an option. Ya it sucked being a foreigner ya it sucked really bad having 11 children ages spanning 3-20 years of age and then their father dies from a brain aneurysm. They were treated like dirt, but simulated and every one of the children moved out of East Cleveland down on Murry Hill known by all as “Little Italy” and moved to the suburbs. One never married lived with Mom, Five raised their own family’s, Two adopted and Three married but never had children. Not one died in Poverty they lived in poverty as youngsters but NEVER had that Mentality, Never once believed their lot was poverty. Not one had children out of wedlock, all of them helped each other get ahead in life and then helped others whether it was having a family or helping in the community. That my friends is the Poverty Free Mentality. Today many have the poverty mentality of selfish acts and self destruction that is self-defeating and ends up back in the pig pen in the mud of poverty. Those folks need to get out of the self-destruction but we have people saying NO NO you must be all inclusive and except that lifestyle. I can agree to lifestyles, but not to the point of giving out free-bees only to insure they stay in the lifestyle of poverty. We must give only to change the their mentality and the poverty culture. To that lets all celibate with YES YES let us all embrace a real poverty free nation and a Poverty Free Mentality. Now that is Truly something to Calibrate

    • @TonyGee. Good thoughts. I will read more thoroughly than I have time for today and respond. Piketty has raised issues for me that I think it will take years for us to find good solutions that don’t simply create more problems. But at least he started the debate with lots of interesting data. Thanks Tony.

    • @TonyGee. I think my difference with you comes from where the great wealth arises. To me all the real wealth of the country is created by working people growing food, building cars, working in mines, on oil rigs, in plants, in hospitals, and providing needed services. Now for this to happen, there indeed need to be managers who help create the wealth production processes. And there need to be people who take the risk and set up a business. These folk do deserve more money. The issue is how much more. And also once a company gets big, it is allowed to create monopolies and destroy other businesses by loss leaders? Is is it allowed to buy the politicians to either pass laws that suit it, to give subsidies (corporate subsidies are around $100 billion a year equal to the cost of unemployment pay) and to make sure no laws are passed the corporations don’t like.

      Now I have no problem with the average family saving up and creating wealth for their kids. But above a certain level this wealth snowballs through no further effort. People make $100 million a year via capital gains and so pay (if anything) $15 million in tax. They maybe live on $5 million so then each year they are worth $80 million more. And this is wealth that came from those who worked for them in the main in the first place. So all I was suggesting is a way to give back to working people some of this wealth, not as a handout, not as something they can spend but as their own nest egg of $6000 per year per full time worker per year they work full time. Not for the unemployed or anyone else but for workers. And they could not touch it until they were 65 when they can do with it as they wish. The money would be in the Stock Market so it would be being used and the beneficiaries would have a stake in that on a much wider basis than today.

      I too am an immigrant to the US though I came already educated and with some money. I am wanting a much more level playing field so wealth does not end up in a few hands. On current trends the top 1% will have 45% of all wealth by 2030 and the top 10% 80% of all wealth. Forget the bottom 50% for a moment. If this happens, the middle 40%: the middle class would only have 15% of national wealth. This sucks. I think this is totally unacceptable and would make the rest of us, the 90% of middle class and poor into serfs of a new feudalism where everything was owned by a few and if automation comes, all the benefits of automation would go to this small group and basically the rest of us would be worthless and have no income except from the government. This is on the way and why it is vital that we address the inequality issue now, not wait until we have such a top heavy society that it topples over in some sort of revolution. I dislike revolutions; they don’t work, so much better to reform the system before that become inevitable. And a wealth tax on the very rich (those worth over say $3 million) and not give that money to the government but distribute directly into 401k for all those who work seems a good step to me.

  2. TonyGee says:

    I think if a strong debate was aloud to happen when Bush 43 was striving to change SS, in the beginning of his second term, we could have had much better success. Would you agree?….Unfortunately and regrettably he was laughed out and became a lam-duck President and now that’s well behind us, all because of political reasons and for the gain of power in the house for Nancys sake. No debate happened because the left used the opportunity politically to set up the next election to take the house. I know the right does it too I will be the first to remind you and myself our problem is with the politicians. We The People can debate this but they who hold the purse can’t nor do they want to….It is My belief those in DC want us to become what you fear and think …,’is totally unacceptable and would make the rest of us, the 90% of middle class and poor into serfs of a new feudalism where everything was owned by a few and if automation comes, all the benefits of automation would go to this small group and basically the rest of us would be worthless and have no income except from the government.’ Creative they, those in Washington want nothing more to have us at each other so they can play power and control. As I have said before, Politicians are self-serving and want to remain in power and control the money they will say and do whatever-it-takes to get our vote then once elected or re-elected VOTE for themselves when it comes to the bills they pass….Sadly I to think a revaluation is not the best solution either….And I certainly Know, I do not trust them in creating regulations only to have the non-intended consequences to make matters worse. Then to have the politicians only to come up with another solution that will only make matters horrible….We can’t trust them we need real servants in office not self-serving ones.

    I will give you an example; I would love to see a real leader step up and put his reputation on the LINE. He/she could say something like, ‘I demand this administration to release all documents from the Benghazi issue, or it could be “fast and furious”, or the the IRS scandal,’ or what ever-else is on the questionable behavior debate….and continue with… ‘ to the bye-partisan panel and if nothing is found to be linked back to the administration in way of cover-up or involvement, then I will resign. Who among me on both sides of the Isle would like to stand with me with your reputation? Republicans you stand with me? Demarcates will you put your reputation up and stand with this administration? If so then stand apposed and put your reputation on the LINE.’

    That is leadership. I think their might be one or two on the right who might do it, but I really don’t think any on the left would. We need precedence setting debate like this to stop the madness of self-serving representatives. I would like very much if it was a Democrat who would stand first and demand all documents to hand over to a bye-partisan panel….WOW that would be a revolution of the political-elites! That would be awesome as well as political suicide, either way it shows leadership and the new way of doing the peoples business!

    • @TonyGee. I am fine with the first part of what you say, but I have just posted my views on the Benghazi issue which I personally see as minor compared with what I call Insurgency-gate. I also don’t see much issue around the IRS. I want the IRS to investigate the tax exempt status of all groups as it is our money that is at stake. In the Bush era liberal groups were investigated. Now it is alleged and is probably true, conservative groups were investigated. My problem with this is only that both liberal and conservative tax exempt status should be investigated continuously.

      I think you have it in for President Obama reflecting the continuous drum beat of hostility almost from the day he was elected. I don’t think he is a great President but he is way better than George W Bush and probably comparable to the previous Bush: professional, sensible and often doing the right thing but not a great leader like Eisenhower or FDR. The people throwing rocks at him (not you but many of the rest) are biased and don’t apply the same standards to both sides. I think the State Department made a mistake over Benghazi and was ten days late in admitting that the killings were not the work of a mob but organized terrorism. I don’t actually see much consequence from this or much cover up. But then I admit I may be biased. Are you?

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