In several previous commentaries, I have criticized our system of income taxation as being fatally flawed. The primary flaw is that for the people at the top of the economic pyramid, income is usually only a tiny component of their increasing wealth. Generally, the vast majority of new wealth for the ultra-wealthy comes from the appreciation of assets, which are never (and can never) be taxed by an income-based system of taxation.
The ultimate result of an income-tax system is that wealth is relentlessly transferred out of the hands of the poor and middle class – and into the hands of the ultra-wealthy. I have previously illustrated the net result of decades of income taxation in the United States, through some horrifying demographic data.
The top 20% of wealthiest Americans hold an obscene 85% of all wealth. Put another way, the “little people” who comprise the bottom 80% of U.S. society hold only a pitiful 15% of U.S. wealth – the most lop-sided wealth distribution among all Western societies. However, while that data is bad enough, it gets much worse when we focus upon the top 1% of wealthiest Americans. These pseudo-aristocrats hold 35% of all wealth, and 56% of all stocks held by Americans.
Put another way, as the Wall Street Oligarchs crow about the “amazing rally” in U.S. equity markets, 56 cents of every dollar of profit goes to just 1% of Americans. Meanwhile, the “little people”, the 80% of Americans on the bottom hold less than 15% of all stocks – meaning that this Wall Street-manufactured “rally” is doing nothing to alleviate the economic suffering of the vast majority of Americans.
However, some new, economic data out of the U.S. has left me completely flabbergasted. While I was well aware of the Bush-era tax hand-outs to the wealthy, I did not truly understand the magnitude of that windfall. The numbers are totally shocking.
In 1995, during the Clinton-era, the top-400 wealthiest Americans 'earned' an average of $50/million per year in income, while paying an effective tax rate of 30% on those earnings. In 2007, a mere twelve years later, the effective tax rate for the “400” had fallen by 45%, thanks to the Bush hand-outs. What is even more shocking (and despicable), however, was the rise in incomes of the “400”.
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