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Huge Income Disparity In U.S. Indicates That A Fair Tax System Should Seek To Redistribute Wealth
Rick is bothered that 50% of wage earners pay no income tax — but, what is bothersome is the fact that the reason so many wage earners are not required to pay income tax is because they have little income.
We should all be bothered enough to attempt an answer to this question: How should a wealthy nation, with a representational democracy form of government, respond to this fact that many of its citizens have insufficient income, while a few of its citizens have enormous income?
It makes sense, to me, that one purpose of our tax system should be to bring more income fairness to the average person, that one purpose of our tax system should be to redistribute wealth. If not through the tax system, then how?
Timothy Noah of Slate reports, “The richest 1 percent account for 35 percent of the nation’s net worth; subtract housing, and their share rises to 43 percent. The richest 20 percent (or “top quintile”) account for 85 percent; subtract housing and their share rises to 93 percent.” Noah cites a Harvard study that shows most Americans are unaware of the enormity of this income inequality. But income inequality is a huge and growing issue in our democracy and should be a matter of in-depth discussion and analysis.
Here is a chart that shows that the U.S., in comparison with other countries, does a poor job of wealth redistribution:
Conclusion: History has shown that when societies get too unequal bad things happen. They either become economically inefficient or they become subject to social unrest. In many cases both happen simultaneously. The banana republics of South and Central America are a good example. For hundreds of years a small ruling oligarchy has run things. Things are even pretty good for these people. However, the societies as a whole have not prospered. They have been subject to continual poverty and revolution and much of the development that has taken place is in the hands of foreign investors. The wealth of the few has been maintained at a high cost to the majority.
As new societies arise which are more equal and more efficient, the oligarchical societies will fall ever further behind. The peasant class that kept things going, inefficiently, will no longer be enough. The capital needed for growth will not be present and the expertise needed to deal with modern technology will not be in place. We can see such failed societies in parts of Africa.
We in the US need to decide if we are going to slip into an inefficient oligarchy, risk civil unrest or redirect our resources and wealth into more equitable avenues. No society is perfectly egalitarian, but when we have reached a point where the top one fifth in Manhattan makes $350,000 and the bottom fifth makes $7,000 we are probably near an economic tipping point. How we deal with the coming challenge is up to us.
Moral: A just society is an equitable society, an equitable society is a just society.