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." Peter Weber
At a House Financial Services Committee hearing Wednesday, freshman Rep. Katie Porter (D-Calif.) grilled JPMorgan Chase CEO Jamie Dimon on how a JPMorgan employee named Patricia who earns $16.50 an hour — or $35,070 a year — should manage her family's budget. On Thursday, Porter told CNN that the job and the numbers were real but "Patricia" was a composite of a lot of her constituents. "There are thousands and thousands, and tens of thousands of Patricias out there," Porter said.
This Patricia has one 6-year-old daughter, with whom she shares a one-bedroom apartment in Irvine, California. After accounting for bare-bones living expenses, Porter calculated, Patricia was $567 in the hole at the end of each month.
"How should she manage this budget shortfall while she's working full-time at your bank?" Porter asked Dimon. Learning this was a starting position, Dimon said, "You can get those jobs out of high school, and she may have my job one day." "She may, but Mr. Dimon, she doesn't have the ability right now to spend your $31 million," Porter shot back. When pressed for his advice on what Patricia should do, Dimon repeated, "I don't know, I'd have to think about that." Porter said she appreciated his "desire to be helpful, but what I'd like you to do is provide a way for families to make ends meet."
Porter was focusing on income inequality in her grilling of a Wall Street chieftain, but on Thursday's Daily Show, Desi Lydic focused on another Wall Street problem: "Bro culture" and its paranoid, woman-quashing reaction to #MeToo. You can watch that below. Peter Weber
The income gap keeps growing. Chief executives at 350 of the largest companies in the U.S. now make 312 times more than their average employee, research from the Economic Policy Institute found.
Compensation for CEOs keeps growing, The Hill reported Friday, while employee compensation stagnates. In 2017, CEOs made an average of $18.9 million, a 17.6 percent increase from the year before. Meanwhile, the wages of average workers increased just 0.3 percent.
The think tank said that pay for CEOs has grown at a much faster rate than stock prices or corporate profits at these major companies. Executive compensation has risen nearly 1,000 percent since 1978, which continues to push the CEO-to-worker pay ratio wider. In 2016, the ratio was 270-to-1, while in 1995 it was 112-to-1. Back in 1965, the ratio was just 20-to-1.
"CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pay," the institute report said. "Higher CEO pay does not reflect correspondingly higher output or better firm performance. Exorbitant CEO pay therefore means that the fruits of economic growth are not going to ordinary workers." See more results at the Economic Policy Institute. Summer Meza