The National Nurses United, and other workers protest against financial intuitions in New York City. A new study confirms growing income inequality and a growing concentration of wealth among the rich. (Photo by Spencer Platt/Getty Images)
The findings, presented by the Congressional Budget Office (CBO) to the Savings and Retirement Foundation of Washington, D.C., do not bode well for the nation.
Not only do families in the bottom 50 percent have far less wealth, they also have higher debt, according to the study.
Growing income inequality is a recipe for civil unrest and may explain in part the appeal Donald Trump’s “outsider campaign,” among white workers without college educations, who are bearing the brunt of the disenfranchisement.
The study examined trends between 1989 and 2013. During that time, families in the top 10 percent held 76 percent of all family wealth. Families in the 51st to the 90th percentiles held 23 percent of the wealth, and families in the bottom half held 1 percent of the nation’s wealth, the study found.
What’s more the concentration of wealth has been growing among the richest families and declining among everyone else.
“The distribution of wealth among the nation’s families was more unequal in 2013 than it had been in 1989,” the study notes.
“In 2013, average wealth for families in the top half of the distribution was greater than it had been in 1989. The opposite was true for families in the bottom half,” it states.
In 1989, for example, the top 10 percent of families controlled 67 percent of the wealth. The middle percentile controlled 30 percent of the wealth and the bottom 50 percent of families controlled 3 percent. By 2013, those numbers had changed to 76 percent, 23 percent and 1 percent respectively.
A new chart shows the changes in family wealth over the past 24 years, confirming a growing concentration of riches in the hands of fewer and fewer families. (Source: CBO)
The findings led credence to arguments by Vermont Sen. Bernie Sanders that the economy has been tilted toward the rich at the expense of everyone else. He ran a populist campaign against Hillary Clinton in the Democratic primary. Income inequality was one of his major issues.
Although Trump campaign as a populist outsider, he’s proposed massive tax cuts that will largely benefit the wealthy and are likely to increase income inequality, according to economists.
The centerpiece of the plan is a $4.4 trillion tax cut over ten years that will go mostly to the rich and corporations.
To keep debt from soaring out of control, the plan is predicated on an average 4 percent growth rate, a number that economists call “fairy dust” and “magical thinking.”
The economy hasn’t grown that fast since the post-World War II economic boom when tax rates on corporations and the rich were significantly higher.
Both Reagan and Bush based their massive tax cuts on the same premise, but the trickle-down cuts failed to stimulate growth as promised, causing the national debt to soar.
Corporations would see their tax rates fall from 25 percent to 15 percent, even though corporations are currently sitting on record amounts of cash.
Right now, any estate under $5.43 million per person (effectively $10.86 million for a couple) is already un-taxed. The current threshold is designed to preserve family-run farms and small businesses.
Abolishing the the tax would apply to only the wealthiest 0.2 percent of Americans — roughly 2 out of every 1,000 people who die, according to non-partisan Center for Budget and Policy Priorities.
But the cost to the government would be stiff, according to the Joint Committee on Taxation (JCT). It would cost $269 billion in lost revenue and add $320 billion to deficit when counting additional interest on the national debt.
The roughly 5,400 wealthy estates that owe the tax this year would reap a $3 million tax windfall each, according to the center. The 318 estates, including Trump’s, worth at least $50 million or more would receive tax windfalls averaging more than $20 million each.
Some of the windfall enjoyed by the rich will be offset by Trump’s plan to do away with the “Carried Interest Deduction,” which largely benefits hedge fund managers and high-rolling Wall Street investors, but not average workers.
He plans to cut the number of tax brackets from the current seven to just three, set at 12 percent, 25 percent and 33 percent. But the plan hangs the middle class out to dry.
Trump’s bracket changes would boost middle-class family income by 0.5 per cent or less, according to the conservative Tax Foundation.
Trump’s magical thinking doesn’t end there. He says he’ll enact his tax cut without cutting Social Security or Medicare, while at the same time boosting spending on the military and veterans.
On top of that, his new maternity leave plan for women (men are excluded) would cost at least $2.5 billion, most of which would be borne by businesses through higher state payroll taxes. It would be a big incentive to cut full-time jobs.
Trump also said he would reduce costs for families by allowing a full tax deduction for the average cost of childcare spending. But this provision would disproportionately benefit higher-income households. Most lower- and middle-class families don’t itemize returns.
With military spending and entitlements off limits, Trump’s only alternative to cutting costs is to slash or eliminate agencies like the Food and Drug Administration, the Small Business Administration and the Environmental Protection Agency.
But those savings would be minimal while putting families and children at risk of unsafe food and drugs and increased levels of pollution.
His pledge to cut tax rates for the middle-class and working-poor would be offset by his plans to abolish the federal minimum wage and eliminate most tax deductions, including the home-mortgage deduction, long a target of conservatives.
The move would drive millions of working-poor families below the poverty line without health benefits and a dramatically smaller social safety net because of planned cuts in food programs and Medicaid.
Trump built his campaign on a call for new thinking in Washington, but his economic plan is based policies going back at least 40 years that have been widely discredited during two previous administrations.