Steele’s new study acknowledges upfront that a variety of factors have contributed to the deeply unequal United States we have today, everything from deregulation and a weakened labor movement to the shrinking of our national safety net.
“But taxes,” he emphasizes, “have been a principal engine of worsening economic inequality simply because the wealthy, thanks to their success in Congress, now have more money — to buy stocks, invest in real estate, build megayachts, blast off into space, and make campaign contributions to politicians so the cycle isn’t interrupted.”
Steele’s report adds all sorts of eye-opening detail to a don’t-tax-the-rich story tax analysts have been tracking for years now. Consider his take on the tax treatment of dividend income, a concern few average-income Americans have on their radar screens.
Dividend income, in the decades before the start of the 21st century, faced the same tax rates as wages and salaries. In 2003, the Bush White House and Congress gifted the nation’s rich a new arrangement and chopped the tax rate on most dividends down to 15 percent.
In 2019, Steele points out, this neat little gift saved taxpayers making $1 million or more some $16.2 billion, “the equivalent of the federal income taxes paid by everyone earning $50,000 or less in California, Idaho, Iowa, Kansas, Minnesota, Nebraska, New Hampshire, Oklahoma, Pennsylvania, South Dakota, West Virginia and Wisconsin — combined.”
The corporations rich people run have fared equally nicely under America’s now decades-old don’t-tax-the-rich regime. Major U.S. companies, Steele’s analysis notes, took particularly good advantage of the tax breaks lawmakers bestowed upon them in the 2004 “American Jobs Creation Act.” The tax breaks resulting from this legislation benefited only 4 percent of America’s businesses — mostly giants like Hewlett-Packard, Pfizer, and Merck — and did “little more than enrich corporate shareholders and executives.”
These execs and shareholders so enjoyed how the 2004 American Jobs Creation Act played out that that they went out and convinced Congress to do it all over again with the Tax Cuts and Jobs Act of 2017. The convincing came easy. One reason: Corporations, observes Steele, annually spend “more than 85 percent of the total reported expenses associated with lobbying Congress.” Trade unions “account for less than 2 percent.”
How unequal a nation have dynamics like these created? A just-released report from the Congressional Budget Office helpfully paints a revealing picture. This new CBOstudyon the distribution of American income adds up all the changes “in household income, means-tested transfers, and federal taxes between 1979 and 2019.”
Between those two years, the CBO data show, household income “after transfers and taxes” — and after adjusting for inflation — grew on average by 97 percent among households in the nation’s most affluent 81st to 99th percentiles. In other words, America’s affluent but not super-rich households saw their after-tax incomes about double in the four decades after 1979.
Households in the top 1 percent have fared considerably better. Wealthy Americans in the 99th to 99.9th percentiles — the bottom 90 percent of the top 1 percent — have watched their after-tax incomes nearly triple, rising 193 percent.
Within the rest of our super rich, the top 0.1 percent, we see even more striking leaps. Households in the bottom 90 percent of this top 0.1 percent have had their inflation-adjusted, after-tax incomes shoot up a stunning 367 percent.
And what about those households at the tippy top of our nation’s income distribution? Between 1979 and 2019, average after-tax incomes in the top 0.01 percent of America’s households skyrocketed 507 percent. These top 0.01 percenters averaged $30 million in 2019 after-tax income.
Anybody looking for a 54-room penthouse?
