From 1970 thru the turn of the century, the United States economy more than doubled, adjusted for inflation, while the population increased less than 40%. For each dollar generated per person in the 1970 economy, about $1.40 was produced in 2001. In spite of that, the average family today does 20 more weeks of paid labor than it did in 1975, and eighty percent of America did not get ahead during the last three decades. A person under 25 years of age at the turn of this century made about $2 less per day, on average, than someone the same age did way back in 1973. (All comparative figures in this column are adjusted for inflation.) Over the last 30 years, the average American salary has just kept pace with the official rate of inflation. So what’s going on? Where did that 40% per capita increase in the U.S. economy, that productivity go?
Let’s look closer at the story behind the overall average. For starters, the average income of the “bottom” ninety percent of American families actually decreased from 1970 to 2000. Furthermore, the “bottom” ninety percent of households received 2/3 of all the income reported by all Americans in 1970. But by 2000 the amount shared by the “bottom” ninety percent fell to only half of the total income. Meanwhile, average income of the “top” ten percent rose 89%. Now look closer at that “top” ten percent.
The share of all reported income going to those with income in the top 90 to 95th percentile remained the same from 1970 to 2000. The share going to those reporting income between the 95 to 99th percentile increased twenty percent. The bottom half of the top 99th percentile saw their share of the national income increase forty seven percent. Are you following this cute upscale trend? Keep looking. Those reporting an income between the 99.5 and 99.9 percentile almost doubled their share of the national income. Those reporting an income between the 99.9 and the 99.99th percentile more than tripled their share. The 13,400 richest reporting households in America … those above the 99.99th percentile … more than quintupled “their share” of the national income between 1970 and 2000. That one-one hundredth of one percent of American households now corners more than five percent of the reported national income! And now you know more about where the 40 % per capita increase in U.S. economic productivity went.
Why did it go there? Why such a change in the distribution of income in the past thirty years? And what happened to the visions of prosperity anticipated by futurists and all Americans in the couple of decades following the Second World War? Government policies have been key in the social engineering causing this increasing disparity of wealth. Federal tax policy since 1980 has been in the forefront of this social engineering.
The major change is a shift of tax burden since 1980 off the super-rich and onto everyone below them. This is largely because access to Congress and the Administration has become a commodity rather than a citizen’s right. Payroll taxes were increased dramatically in 1983, and the resulting huge Social Security and Medicare Trust Fund surplus was and is being used to finance the tax cuts for the super-rich that began in 1981 when Republican Reagan was President and Democrats controlled the House. Those cuts continued in 1997 when Democrat Clinton was President and Republicans controlled the House. They accelerated without restraint in 2001, 2002 and 2003 with George W. Bush as President and a Republican controlled House. Did you catch that? The Social Security Trust Fund surplus has been used for 30 years to bankroll the huge tax cuts for the super-rich, and now they are trying to hoodwink us that the U.S. Treasury Bonds in the Trust Fund are worthless IOU’s. No way! That Trust Fund is our insurance money.
From 1992 to 2000 A.D., the average reported income of the 400 taxpayers that reported the highest income in America quadrupled, while the per-dollar share of their income going to federal income taxes decreased 16%. In that same period, the average per-dollar share of income going to federal income tax for all Americans increased 18%.
The income tax cuts since 2000 A.D. have reduced the per-dollar portion of the reported income going to pay income tax of the richest 400 American families an additional 21%. The 2001 tax package gave more than half of the tax cut to the richest one percent. And now, look at one of the hooks buried in the tax cut propaganda bait.
The Alternative Minimum Tax was established decades ago, ostensibly to capture some taxes from very wealthy individuals who use slick tax lawyers to make, find and exploit loopholes to avoid paying any tax on huge incomes. But it is beginning to operate like a stealth tax increase on middle and upper middle class families, while strangely missing its intended target. In 2003 almost 20% of AMT was paid by households with incomes less than $200K. By 2010, 60% of AMT will be paid by households, many with kids and standard deductions, with incomes less than $200K.
The tax cuts that opened the 21st Century threw a bone to middle and upper middle class families while buying yachts, more mansions and jets for the super-rich, at the expense of working families’ Social Security insurance safety net. Look out. The AMT will take back your bone. And privatization threatens to shred the Social Security safety net and fleece the Trust Fund. A closer look at the “bottom” fifty percent reveals a widening gulf, and a growing and desperate trap of poverty. The tax cuts for the super-rich have also saddled us and future generations with record high and growing structural budget deficits in our federal government, and are driving across the board cuts in basic services like public safety, health care, emergency services, and education. The trickle down is forcing ever deeper cuts in state and municipal government services.
What kind of America will we and will our successors live in if the super-rich and their technicians and wannabe fools prevail in their well-underway social engineering scheme? It will be a country that Dickens would be horrified to recognize. It will be an America that ironically emulates the oppressive, deadly, inherited aristocracies and state religions characteristic of 16th through 19th century Europe that drove a desperate population to rise in bloody revolution both in Europe and in America to seek freedom and equality and opportunity and health and sustenance for themselves and for their children. “The peasants have no bread?” said the Queen. “Then let them eat cake.”
A revolution is no day at the beach. Do you really want to bank your family’s long-term future on your and their chances to be among the upper one tenth of one percent, or one of their minions? Do you and they really want to live in such a society built on grasping greed and desperation? Let’s come about now, while the helm is still in reach, and chart a better course to a future that honors the American dream.
August 4, 2005 (Reference: Perfectly Legal, by David Cay Johnston, Pulitzer Prize winning investigative tax reporter for the New York Times.)