Wealth disparity just hit a couple of new milestones in America. The Census Bureau reported in late September that U.S. income inequality, as measured by the Gini Index, hit its highest level in more than 50 years. A new book by two economists at the University of California, Berkeley, offers an explanation and another jarring data point: For the first time in U.S. history, America's 400 richest families paid a lower effective tax rate last year than any other income group, including the working class.
Economists Emmanuel Saez and Gabriel Zucman detail in The Triumph of Injustice that — based on federal, state, local, corporate, and "indirect taxes" like motor vehicle licenses — the top 400 billionaires in the U.S. paid an effective tax rate of 23 percent in 2018, down from 47 percent in 1980 and 56 percent in 1960, Christopher Ingraham reports in The Washington Post. The bottom 50 percent, meanwhile, paid an effective tax rate of 24.2 percent, as it has more or less since 1960.
"The relatively small tax burden of the super-rich is the product of decades of choices made by American lawmakers, some deliberate, others the result of indecisiveness or inertia," Ingraham paraphrases. "But the tipping point came in 2017, with the passage of the Tax Cuts and Jobs Act," President Trump's biggest legislative achievement.
"Saez and Zucman portray the history of American taxes as a struggle between people who want to tax the rich and those who want to protect the fortunes of the rich," dating back to the 17th century, David Leonhardt writes at The New York Times. The tax-cutters have carried the day since the 1950s, and we've discovered again that "the American economy just doesn't function very well when tax rates on the rich are low and inequality is sky high," he argued. "Which means that raising high-end taxes isn't about punishing the rich (who, by the way, will still be rich). It's about creating an economy that works better for the vast majority of Americans."