Author: Bob Moore, Economic Justice Subcommittee Member
Contributors: Sharon Shea, Immigration Justice Subcommittee Member
John P. Dougherty, Environmental Justice Subcommittee Member
Terry Cavanagh, Economic Justice Subcommittee Chair


The following are our observations, findings and suggestions about the
current state of income inequality in America. We welcome dialogue with
any others who believe that the status quo is unacceptable.


The United States is a rich country, and yet, the average American does not
share in the wealth. Since 1970, wages of American workers have stagnated
while our economic growth has soared. Almost all of the gains from that
growth have gone to the top 10% of Americans, most specifically, the top
1%. 1


The statistics are striking. In the 1950s, CEOs rarely made more than 20
times their median employee’s salary. Now, those CEOs make about 300
times more. The richest 1% own half the value of all stocks, and the richest
10% own 92%. 2 No other country is so unequal.


The argument that high net worth individuals earned their big slice of the
pie does not hold up under scrutiny. After all, much of that wealth is due to
the labor of others who are often underpaid. When examining household
wealth, the inequality is even more striking. Household wealth includes the
value of all financial assets, including housing. Many people in the top
economic tier did not “pull themselves up by the bootstraps.” In fact, 40%
of all household wealth comes from inheritance. 3

In the last 50 years, inheritance taxes have been watered down to a level of 1/7th the rate of tax on income and savings.


At present, the United States has the highest level of wealth inequality in
the world. For Black and Hispanic people, the disparity is particularly
acute. Black people receive 26 times less per capita than white people do in
inheritance earnings. In addition, the median household wealth for Black
people in America is 9% that of their white counterparts. This is not solely
about money, although money is necessary for a high quality of life. It’s
what that money can translate into – greater equality of opportunity.
An argument is often made that we cannot afford to address economic
inequality. However, to put things in perspective, Baby Boomers (1946-
1964) and the Silent Generation (1928-1945) hold $84 trillion in wealth.
Recently, the United States has allocated a little more than $2 trillion to
deal with the economic impact of Covid-19. 4 America can surely afford to
pay more to address the distressing problem of economic inequality and
poverty.


One might ask about the deficit and the future of Social Security and
Medicare. Let’s look first at Social Security. Payment into the system is
currently capped at the first $137,000 of salary or wages. By eliminating the
cap, we could deal with the problem of running out of funds without
reducing Social Security benefits. 5
 
While Medicare faces larger projected deficits, this is due to the many
deficiencies of our current health care system, which is in dire need of
reform. It is the most expensive and among the least effective in the entire
industrialized world. Consultants, billing clerks, and administrators vastly
outnumber medical professionals. 6 Our employer-based insurance system
is a relic of World War II and does not suit the needs of the day. Changing
to a single-payer system or one with a robust public option would allow us
to reduce costs, expand coverage, and improve medical outcomes.
Incidentally, our current system is already heavily subsidized by the federal
government through taxes.

Our system of taxation fosters inequality. The tax cuts of 1981, 2001, and
2017 transferred money to the wealthy. At the same time, our system could
not find money to address our infrastructure, medical, and educational
needs. Recently, a survey found that 40% of Americans could not afford an
unexpected $400 expense, such as a car repair, without selling personal
assets or going into debt. 7 Even the life expectancy of Americans has begun
to decline in recent years.


Since 1970, when Milton Friedman advocated a change in corporate
mentality to favor owners and shareholders as opposed to other
stakeholders such as workers, customers, suppliers and community
members, the United States has moved in the direction of inequality. Tax
laws were revised to favor the wealthy. Stock buybacks and other gimmicks
have increased the value of executive portfolios at the expense of workers.
Zoning laws have kept poor people out of their neighborhoods and schools.
Unions have been under attack; their jobs have been sent South and then
overseas.


What can be done? The most effective response would be at the national
level, though there is room for action locally. Here are some suggestions in
no particular order:

  1. Issue housing vouchers for those in need. These vouchers would cost
    less than the value of the mortgage interest deduction which primarily
    benefits wealthy homeowners more than the average person.
  2. Prohibit single-family zoning restrictions to address the lack of
    affordable housing.
  3. Eliminate the employer-based health care system or move toward one
    which does not discriminate against the poor. Take steps to recognize
    health care as a human right.
  4. Establish a national minimum wage of $15 per hour and index it to
    increases in the cost of living.
  5. Curtail the use of private contractors to avoid paying benefits to
    workers.
  6. End stock buybacks so that more money could be given to workers.
  7. Invest heavily in infrastructure such as transportation to create
    employment and position our economy to become more productive.
  8. Implement a carbon tax and fund efforts to deal with climate change.
    Carbon tax revenue could be sent back to households as lump sum
    payments, offsetting any increases in energy prices and reduce
    inequality.
  9. Invest in international climate change mitigation efforts, particularly
    in the global south, which bears a disproportionate burden despite
    producing far fewer emissions. 
  10. Change tax laws to meet the needs of the poor for better health care,
    education, and economic security.
  11. Double the Earned Income Tax Credit which will help raise money
    received by workers.
  12. Fund programs that are proven to end homelessness. One might
    start by targeting support to veterans who are experiencing
    homelessness.
  13. Fund universal pre-K education, universal Head Start programs, and
    childcare that provides parents who are struggling the most an
    opportunity to find meaningful work outside the home.
  14. Make the tax system more progressive, which will transfer wealth
    from the rich to the poor. Since 1981, the system has become more
    regressive, giving more to the rich.
  15. Create a federal savings account for every newborn child.
  16. Increase inheritance taxes and institute a carefully designed wealth
    tax to reduce wealth inequality and prevent the formation of a
    permanent aristocracy. 
  17. Tax capital gains as ordinary income for those making more than
    $250,000.
  18. Require all employers to provide sick leave and family leave
    insurance.
  19. Pay reparations for the economic damage caused by slavery and its
    aftermath.
  20. Eliminate some of the barriers to forming unions. Since the 1950s,
    private sector union participation has fallen from 35% to 6%.

1 https://www.pewsocialtrends.org/2020/01/09/trends-in-income-and-wealth-inequality/
2 https://finance.yahoo.com/news/the-richest-1-own-50-of-stocks-held-by-american-households-
150758595.html
3 https://www.bls.gov/osmr/research-papers/2011/pdf/ec110030.pdf

4 https://home.treasury.gov/policy-issues/cares
5 https://www.investopedia.com/ask/answers/081514/why-there-cap-federal-insurance-contribution-
fica- tax.asp
6 https://www.nytimes.com/2020/06/29/opinion/sunday/coronavirus-medicare-for-all.html

7 https://www.cnbc.com/2018/05/22/fed-survey-40-percent-of-adults-cant-cover-400-emergency-
expense.html